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Drug Testing Firm Ameritox To Close at End of Week, Aegis Acquires Substantial Assets

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NEW YORK (360Dx) – Urine-based drug testing company Ameritox, which bills itself as the nation's leader in pain medication monitoring, is planning to cease operations this week, according to company officials.

The company has stopped accepting urine samples and its last day of operations will be Friday, May 4, according to George Athas, director of marketing and product management.

Some of the company's assets have been sold to Aegis Sciences, Athas said, but he was not familiar with the specifics of the transaction.

Aegis Sciences spokeswoman Stephanie Protz confirmed in an email that the company has acquired "a substantial portion of Ameritox's asset," but she declined to specify which assets were acquired or provide terms of the transaction.

It is unclear when the decision was made to close the company, but employees were informed in March, Athas said.

"We were notified March 4 or 5 that this was transpiring," he said.

Athas could not provide specific reasons for the company's decision to close, but suggested that market conditions could have been a factor.

"Being familiar with medication monitoring, I think that over the last 18 months there has been a tremendous amount of consolidation and I think this is just a natural series of events that is really a function of part of that consolidation," Athas said. "I think that regulation and reimbursements were probably all strong factors in the shifting and the consolidation of the industry and I think those positioned with more resources and more economies of scale and size are best positioned to weather those types of storms," he said.

The company, whose corporate offices are located in Columbia, Maryland, conducts testing at its lab facility in Greensboro, North Carolina, Athas said. He estimated that the company has approximately 300 to 350 employees in total between corporate headquarters and the Greensboro lab. At its peak the company may have had 500 employees, he estimated.

A Worker Adjusted and Retraining Notification, or WARN notice, that was filed with the North Carolina Department of Commerce on March 5 stated that Ameritox planned to lay off 113 employees through the closure of the Greensboro facility. The notice listed the reason for the closure as "an asset sale of tangible assets and a closure of all company operations and facilities."

When the opening of the Greensboro lab was first announced in late 2009, company officials said they expected to hire 228 employees by 2010, according to an announcement on the North Carolina Department of Commerce site.

There have been a number of closures among pain medication monitoring labs over the past three years, according to Lale White, executive chairman and CEO of Xifin. The closures have resulted, in part, from the changes to drug testing reimbursements that occurred with the creation of the "G codes," which were first introduced by Palmetto GBA in 2015 and adopted by Medicare in 2016.

The use of G Codes, which grouped drug tests together into panels by drug class, resulted in far lower reimbursement rates than drug testing companies had received before G Codes were introduced, according to White.

"Medicare had some significant cuts in 2016 that were very dramatic — 70 percent to 80 percent cuts with the creation of G Codes — and the definitive drug pricing was slashed below cost for all intents and purposes," she said. "That drove a lot of pain labs out of business."

While many smaller pain labs were impacted by changes to reimbursements, Ameritox is one of the larger and more significant players in the space to close, White acknowledged.

Over the past few years, when pain labs have closed, volume shifted to other pain labs.

"We didn't see a decrease in lab testing volume, but we saw a huge decrease in the number of labs, mostly through closings, but there were some consolidations as well," she said.

The testing volume of closed labs generally shifts to other specialized pain labs rather than large national labs that offer drug testing among other services, White said.

"Companies that specialize in drug testing and pain management actually do a fair amount of R&D because synthetic drugs are being introduced in the market all the time on the street level," she said. "They constantly do R&D and incorporate those trends into panels, which is why I think they continue to survive — they are trying to keep up with what's going on in the real world and make sure that their testing is appropriate."

Ameritox is also facing an improper claims lawsuit from Humana, according to court records, although it was unclear how much of a factor the suit may have been in the company's closure.

The suit, filed in 2016 in District Court for the Middle District of North Carolina, where Ameritox's lab is located, is currently scheduled for trial in 2019, according to court documents.

The suit claims that that Ameritox has billed Humana for millions of dollars of unsupported claims since Sept. 1, 2014, according to the complaint. The suit does not provide an exact value for the total of unsupported claims. Humana alleges that deceptive billing practices affected Humana's commercial plans, as well as Medicare Advantage (Medicare Part C) and Medicaid plans.

The suit alleges that Ameritox submitted medically unnecessary quantitative testing, duplicative screening testing, and testing that was not ordered by the treating provider or was not supported by required documentation. According to the suit, Humana met with Ameritox numerous times to discuss continued submission of improper claims, but Ameritox did not change its policies or refrain from sending the types of claims in question.

The suit accuses Ameritox of fraud, unjust enrichment and negligent misrepresentation. Humana is seeking actual, consequential and punitive damages, as well as declaratory and injunctive relief and attorney fees, according to the complaint.

A Human spokesperson said the company does not comment on pending litigation. Ameritox could not be reached to comment about the suit.