McKesson under fire for alleged Medicare kickback scheme. Image Source: Associated Press

The U.S. Department of Justice (DoJ) has intervened in a lawsuit against several companies, including McKesson, alleging that they submitted false claims to Medicare arising from illegal kickbacks and the establishment of sham durable medical equipment (DME) suppliers.

The companies are McKesson, McKesson Medical-Surgical MediNet, GGNSC Holdings, Golden Gate Ancillary, Beverly Enterprises, CERES Strategies and CERES Strategies Medical Services (CSMS), according to the DoJ.

The government alleges that McKesson, through its subsidiary MediNet, structured arrangements that ensured that its supplies were used by Beverly nursing facilities. The suit further alleges that McKesson promised Beverly facilities, now Golden Horizons in Fort Smith, Ariz., significant profits  for making it appear to Medicare that it was Beverly—not McKesson or MediNet—that was supplying the DME equipment and supplies.

According to the DoJ, MediNet set up and managed a purported DME supplier, CSMS, which was affiliated with Beverly, but actually managed by MediNet.

The government’s complaint alleges that MediNet’s management allowed the entity to bill Medicare and retain millions of dollars in Medicare payments for services and supplies that actually were supplied by MediNet, not by CSMS. In exchange for accepting the arrangement that enabled Beverly to retain the profits, the DoJ alleges that Beverly agreed to seek its DME supply needs from McKesson.

A spokesman for McKesson said that the company has been cooperating with the government's investigation for several years. "We continue to believe the case is without merit, and we will vigorously defend against it," he told the Wall Street Journal.

The case originally was filed by a private citizen under the qui tam provisions of the False Claims Act in the U.S. District Court for the Northern District of Mississippi.

The investigation has been handled by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Northern District of Mississippi and the Office of the Inspector General at the Department of Health and Human Services.