As I discussed in the last piece of this series, the urine drug testing (UDT) industry is one that has seen exponential growth in the past decade but at a price. While insurances continue to pay for testing in urine, once called “Liquid Gold,” the profits are nowhere close to what they used to be. Historically this market has seen such a surge in profits that lab sales went from 800 million in 1990 to upwards of 3 billion in 2015. As a result, many of the major players in this niche market seemingly had a lower-than-normal risk threshold in making business decisions. Back then, with fierce competition driving labs to gain some advantage over others, the industry saw a flurry of whistleblower suits and allegations, such as defamation and unfair market practices, being flung from one major lab to another. This caused agencies that regulate the industry to enforce a more finite and arbitrary compliance model. A once thriving industry became laden with claims of anti -kickback statute violations, false marketing, false advertising, and the purported reckless over-billing of Medicaid and Medicare.

Most of the labs that helped the reshaping of this market suffered financially. Some paid the hefty settlements to the government, while others have been forced out of the market completely. A select few got away with violations but changed names and acquired other labs to show the government they are legitimate business entities with a re-directed focus on patient care. Despite sustained profitable growth, these labs lost business and credibility from paying heavy legal fees, tarnished reputations, and being forced out of Medicaid/Medicare programs. Here are a few examples of major players in the market who made these high-risk business decisions that backfired:

• Millennium Health—In October of 2015, Millennium reached a settlement to pay $256 million dollars, including $10 million for False Claims Act allegations and $19.2 million to the Centers for Medicare and Medicaid Services (CMS).
• Calloway Labs—In May 2014, Calloway Labs agreed to pay $4.7 million for submitting false claims to Medicare and West Virginia’s Medicaid.
• Calloway Labs—In March 2012, Calloway Labs reached a settlement to pay $20 million for a Medicaid fraud operation.
• Ameritox—In November 2010, Ameritox agreed to pay $16.3 million for a False Claims lawsuit, which claims they ran a kickback scheme for physicians.
• Willow Labs—In 2007, Willow Labs agreed to an $8 million dollar settlement for improperly submitting Medicaid claims.

These million dollar private drug testing lab settlements have reshaped the industry. It is why CMS has capped the amount of reimbursements labs can capture from performing a screening or confirmation test. It is why no forms of free testing, free services, free or discounted office space, or free staff can be provided to physicians. It is why feds don’t like labs to “package” or “bundle” test protocols, and instead allow doctors to choose what each patient needs tested. Most importantly, it is why doctors and labs must choose only the type and frequency of the testing, so that it is considered medically necessary to the patient.

Empirically, there is a need to to perform drug testing, specifically in the pain management field. A study of 800 patients receiving opioid prescriptions who were given a UDT showed that 19.5 percent of the patients tested positive for an illicit drug/unreported opioid and that 22.5 percent tested negative for the prescribed drug. Another study of 83,000 patients, revealed that 12 percent of patients tested positive for an illicit drug, 13 percent tested negative for the prescribed drug, and 27 percent tested positive for prescription drugs that were not prescribed by their doctor.

Clearly, drug testing serves an important purpose when utilized and billed appropriately. Doctors need to know what’s in their patient’s system to learn which of their patients are compliant, non-compliant, diverting their meds, or simply abusing an illicit drug so the best medical decision can be made. Such a risk stratifying type of testing protocol is the very function of a lab, to protect both the physician and the patient from an ill-fated prescription decision. Labs should be used to remove liability, not present it.

Today’s private drug testing market is substantially different from a decade ago and one main reason is a more level playing field: no one lab can gain an unfair market advantage over the other because the government is watching. Labs are trying to stay afloat two ways: One is by being creative with their billing model and structure to most maximize the codes that they submit to insurances. Being in network with national payers and enrolled into government programs can certainly increase a lab’s average specimen reimbursement, but using different codes, that satisfy CMS’ guidelines, has been a recent strategy to drive ROI.

Another way is by diversifying service lines. Two examples of this are pharmacogenetic testing and cancer genomics testing, both of which look at a patient’s DNA to categorize him or her into a clinical category/sub-category for a specific clinical outcome. Pharmacogenetic DNA testing can tell the provider how the patient will metabolize certain classes of medications (such as opiates) and thus, which ones may or may not be clinically efficacious or may cause toxicity.

Cancer genomic testing looks for mutations that are causally linked to cancers and can tell a patient if he or she has such mutations. Both of these tests can be done by collecting DNA from the inside of the cheek. Since DNA should never change, patients can use these results to help prevent certain cancers or can request the best medication. Insurances believe in the DNA movement and are starting to reimburse quite well for such tests.

As the opiate epidemic in this country continues to soar, costing more health care dollars and lives, it is the drug testing labs that can best help curb this epidemic that are coming under attack. The “Liquid Gold” era is certainly not as lucrative as it once was but remains to be the cheapest and most effective method to monitor narcotic use in pain management or illicit drug use in rehabilitation programs. The private toxicology lab industry might just get back to its liquid gold status by restructuring the way it bills under CMS’ new fee schedules and by pushing new DNA-based testing that empowers patients to control their clinical outcomes.

Samuel A. Thomas holds a medical school degree (M.B.B.S) and a master’s degree in Health Communication (MsHC) and is an active toxicology consultant on the GLG council. In the past 10 years, he has worked as a medical consultant, technical representative, chief certifying officer, and most recently as a sales director in the private toxicology market. Samuel deals with the business and sales side of toxicology lab testing day to day but also serves as a health communicator dealing with sociological and epidemiological impacts of prescription drug abuse. Samuel has an insider’s look at both the science and technology of drug testing, as well as it’s societal effects as a growing epidemic in the United States.