ResMed to Pay $39.5M to Settle Kickback Allegations

The kickbacks took the form of free 'resupply services' for provider-customers who pushed their CPAP products.

ResMed Inc. has agreed to pay $39.5 million to settle whistleblower allegations that the San Diego-based medical equipment maker paid kickbacks to providers that sold its continuous positive airway pressure (CPAP) therapy machines, the Department of Justice announced Wednesday.

The settlement, the terms of which were first announced in July, 2019, stems from allegations made by five whistleblowers, including former sales reps for ResMed. The company will pay $37.46 million to the federal government and more than $2 million total to various states to settle five Medicaid-related cases. The whistleblowers will share more than $6.2 million.

The kickbacks took the form of free "resupply services" for provider-customers who pushed their product. ResMed charged service fees to those who sold competitors' CPAP machines.

Resupply services track patients' adherence to their CPAP therapy, identify replacement frequencies permitted by insurance, monitor patients' resupply cycles, and get patients permission to order new supplies.  

“Improper kickbacks don’t always involve bags of cash or free trips to Hawaii,” said Stephen Hasegawa, a whistleblower attorney for former ResMed sales rep Thomas Baker.

"Services provided by vendors also can be kickbacks if they have some value to customers," Hasagawa said.

"Resupply is an important part of a CPAP equipment provider’s business," said Hasegawa, a partner at Phillips & Cohen LLP. "Customers who use resupply services tend to increase their resupply orders, so it benefits both the entities that sell to patients as well as those who manufacture sleep apnea equipment."

In a statement, ResMed said it had "not violated any laws" and that its "business practices are conducted in full accordance with U.S. 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," the company said. "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."