This article has been updated with comments from ResMed.
ResMed (NYSE:RMD) has agreed to pay more than $37.5 million to settle five whistleblower lawsuits claiming the company paid kickbacks to doctors, sleep labs and medical equipment suppliers to obtain customer referrals, according to the U.S. Department of Justice.
Federal prosecutors alleged that San Diego-based ResMed:
- Gave durable medical equipment (DME) suppliers free telephone call center services and other free patient outreach services so the companies could reorder sleep apnea supplies.
- Provided sleep labs with free and below-cost positive airway pressure masks and diagnostic machines, and installed the machines for free.
- Arranged for and guaranteed the payments on interest-free loans that DME suppliers acquired from third-party financial institutions to buy ResMed equipment.
- Provided non-sleep specialist physicians free home sleep testing devices referred to as “ApneaLink.”
In July, ResMed revealed it had it set aside $41.2 million to cover the the settlement and any legal and administrative costs to resolve a three-year probe into its resupply business. The justice department subpoenaed ResMed in 2016 for information on its “industry offerings of patient resupply software to home medical equipment providers,” the company said at the time.
Federal anti-kickback law prohibits companies from paying or providing goods or services to anyone in order to land referrals for services or goods paid for by Medicare, Medicaid or TRICARE.
“Paying any type of illegal remuneration to induce patient referrals undermines the integrity of our nation’s health care system,” said assistant attorney general Jody Hunt of the Department of Justice’s civil division in a news 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.”
“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,” added U.S. Attorney Richard Donoghue for the Eastern District of New York.
ResMed also agreed to better control pricing and sales and monitor its arrangements with referral sources. The whistleblowers will share about $6.2 million of the settlement. The company admitted no wrongdoing.
“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,” ResMed said in a statement. “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,” the company added. “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.”