ResMed Corp has agreed to pay more than $37.5 million to resolve False Claims Act violation allegations. ResMed denies that it violated the law. The US Department of Justice (DOJ) alleged that ResMed paid kickbacks to durable medical equipment (DME) suppliers, sleep labs, and other health care providers.
The Anti-Kickback Statute prohibits the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal healthcare program, such as Medicare, Medicaid, or TRICARE. Claims submitted to these programs in violation of the Anti-Kickback Statute give rise to liability under the False Claims Act.
The settlement resolves allegations that ResMed (a) provided DME companies with free telephone call center services and other free patient outreach services that enabled these companies to order resupplies for their patients with sleep apnea, (b) provided sleep labs with free and below-cost positive airway pressure masks and diagnostic machines, as well as free installation of these machines, (c) arranged for, and fully guaranteed the payments due on, interest-free loans that DME supplies acquired from third-party financial institutions for the purchase of ResMed equipment, and (d) provided non-sleep specialist physicians free home sleep testing devices referred to as “ApneaLink.”
ResMed chief administrative officer and global general counsel David Pendarvis says in a statement, “Today, ResMed resolved a civil dispute with the US government with terms first announced in July 2019. ResMed has not violated any laws; its business practices are conducted in full accordance with US laws and regulations. That said, we are pleased to put this matter behind us and avoid the expense, inconvenience, and distraction it would cause to gain the favorable outcome we deserve.
“This settlement—the broad terms of which were disclosed in ResMed’s Q4FY19 earnings statement four months ago—is in the best interest of ResMed’s customers, investors, employees, and most important, millions of patients worldwide whose quality of life relies on the products and services ResMed provides.
“This settlement does not impact our ability to sell products in the United States, nor does it impact the reimbursement of our products by federal health programs. We have always acted in good faith with patients and our valued customers, and we do not expect this to impact our relationship with either.”
“Paying any type of illegal remuneration to induce patient referrals undermines the integrity of our nation’s health care system,” says Assistant Attorney General Jody Hunt of the DOJ’s Justice’s Civil Division, in a release. “When a patient receives a prescription for a device to treat a health care condition, the patient deserves to know that the device was selected based on quality of care considerations and not on unlawful payments from equipment manufacturers.”
Lance Crick, Acting US Attorney for the District of South Carolina, says, “This settlement represents another example of our district’s commitment to prosecuting violations of the False Claims Act and the Anti-Kickback Statute. Medical decisions should be based on what is in the best interest of the patient and not based on financial incentives and related schemes.”
Katherine L. Parker, Civil Chief, U.S. Attorney’s Office for the Southern District of California, says, “Medical decisions should always be made without outside influence caused by cash payments, free goods, or other types of illegal remuneration, and we will continue to take action to prevent attempts to induce medical decisions through illegal kickbacks. We applaud the whistleblower for coming forward and notifying the United States.”
U.S. Attorney Peter E. Deegan Jr. for the Northern District of Iowa, says, “This settlement is another sign of our office’s dedication to fair and full enforcement of the False Claims Act.”
“When companies give free equipment to doctors for the sole purpose of generating business and increasing their bottom lines, federal health insurance programs should not foot the bills. This case rights that alleged wrong by ResMed,” says U.S. Attorney Richard P. Donoghue for the Eastern District of New York.
Contemporaneous with the civil settlement, ResMed entered into a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General. The CIA requires, among other things, that ResMed implement additional controls around its product pricing and sales and that ResMed conduct internal and external monitoring of its arrangements with referral sources.
The agreement resolves five lawsuits originally brought by whistleblowers under the qui tam, or whistleblower, provisions of the False Claims. The False Claims Act permits private citizens with knowledge of fraud against the government to bring a lawsuit on behalf of the United States and to share in the recovery. The whistleblowers will collectively receive a roughly $6.2 million share of the settlement.
This settlement was the result of a coordinated effort by the Civil Division of the United States Department of Justice; the U.S. Attorney’s Offices for the District of South Carolina, the Southern District of California, the Northern District of Iowa, and the Eastern District of New York; the Department of Health and Human Services, Office of Counsel to the Inspector General and Office of Investigations; the Defense Criminal Investigative Service; the Defense Health Agency Office of General Counsel; the Federal Bureau of Investigation; and the National Association of Medicaid Fraud Control Units.
The lawsuits resolved by this settlement are captioned United States, et al., ex rel. Ameer v. ResMed, Inc., et al., Case No. 2:15-CV-04842-MBS (D.S.C.); United States, et al., ex rel. Baker v. ResMed, Inc., et al., Case No. 3:16-CV-00987-MBS (D.S.C.); United States, et al., ex rel. Ross v. ResMed, Inc., Case No. 16-CV-1988-W (JLB) (S.D. Cal.); United States ex rel. Meyer v. ResMed, Inc., et al., Case No. 17-CV-12-MWB (N.D. Iowa); and United States, et al., ex rel. Ottavio, et al. v. ResMed, Inc., Case No. CV 17-5734 (E.D.N.Y.).
Phillips & Cohen LLP Perspective
Phillips & Cohen LLP represented Thomas Baker, a former sales representative for ResMed in Michigan, in his qui tam lawsuit. The case was filed in 2016 in federal district court in Columbia, SC. The federal government investigated the allegations, then joined Baker’s case and four other whistleblower lawsuits that made similar charges. “Improper kickbacks don’t always involve bags of cash or free trips to Hawaii,” says Stephen Hasegawa, a whistleblower attorney and partner at Phillips & Cohen LLP, in a release. “Services provided by vendors also can be kickbacks if they have some value to customers.”
The claims resolved by the settlement are allegations only, and there has been no determination of liability.