Alere And The Terrible, Horrible, No Good, Very Bad Day

One of Friday's hot-button stocks was Alere Inc ALR, which plunged about 16 percent at one point in time. There are two predominant reasons for such a sharp reaction from investors.

Why The Drop?

One catalyst for the negative stock movement is the results miss and the other one is even bigger: the removal of its Medicare status. The latter of which will have a wider ramification.

According to a report on CNBC, the Centers for Medicare & Medicaid Services charged the subsidiary of Alere, Arriva Medical, of false claims. The center of the attention is the claims on the 211 deceased patients in the last five years. In a filing, the company claimed that CMS identified 47 of the claims.

Another possible factor that came into play was Abbott Laboratories ABT filing a breach of contract suit against Alere.

Alere Responds

In response to the allegations, Alere issued a statement to Benzinga, commenting, "We are confident that the Medicare claims in question were submitted in response to what were understood to be valid refill orders from Medicare beneficiaries or their caregivers, and that Arriva has not received or retained improper reimbursement for these claims. We believe this matter is a consequence of the lag in timing between when Arriva processes reimbursement requests and when the CMS system updates patient status.”

Alere pointed out that Arriva processed close to 5.8 million total claims in the last five years. The company indicated that it continues to work through the appeals process. The objective is Arriva's enrollment status should be “reactivated retroactively to November 4.”

Following the negative news, the stock plunged 16 percent before recovering somewhat modestly. However, the stock continued to trade more than 10 percent down.

During the day, the stock ranged between $35.41 and $43.32. At the close, Alere was down 14.52 percent at $36.10.

Posted In: BiotechCNBCNewsLegalMoversMediaTrading IdeasInterviewGeneralArriva MedicalCenters for Medicare & Medicaid ServicesCNBC
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