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Catch of the Week: ResMed Pays $37.5 Million to Settle Five Qui Tam Cases Alleging Kickbacks

Posted  January 16, 2020

Sleep apnea equipment manufacturer ResMed agreed to pay $37.5 million to resolve allegations that it violated the False Claims Act and Anti-Kickback Statute by providing unlawful remuneration to durable medical equipment distributors, sleep labs, doctors, and other healthcare providers.  It seems that ResMed’s kickback schemes struck many people as wrong: the settlement resolves five separate cases brought by whistleblowers, who will collectively receive $6.2 million of the settlement paid by ResMed.

ResMed’s Unlawful Kickback Schemes

ResMed manufactures and sells a range of equipment used to diagnose and treat sleep apnea and respiratory disorders, including continuous positive airway pressure (CPAP) devices and the accessories that are required by CPAP users.  As we have previously written about fraud related to sleep disorder diagnosis and treatment, CMS has identified sleep apnea and CPAP prescription and marketing as an area “more amenable to fraud and abuse than some other items and services,” making enforcement in this area a priority for the federal government.

According to the DOJ press release, ResMed engaged in a number of different practices that resulted in unlawful kickbacks.  The Anti-Kickback Statute prohibits payments – including the provision of free goods or services or any other type of remuneration – that are intended to induce the referral of services or items that are paid for by a federal healthcare program such as Medicare, Medicaid, or TRICARE.

Kickbacks do not have to take the form of cash payments in exchange for referrals; any type of remuneration to induce patient referrals can be unlawful.  Here, ResMed is not alleged to have made direct payments as kickbacks.  Instead, ResMed is alleged to have violated the Anti-Kickback Statute through the following financial arrangements:

  • ResMed provided DME companies with free call center support for their customers;
  • ResMed provided sleep labs and physicians with free equipment, ranging from face masks to diagnostic equipment, as well as free installation and technical support; and,
  • ResMed arranged for and guaranteed no-interest loans for the purchase of ResMed equipment.

Multiple Whistleblowers and First-to-File Issues

The ResMed settlement resolves five lawsuits brought by whistleblowers under the qui tam provisions of the False Claims Act.  The different whistleblowers filed their cases in four different district courts between 2015 and 2017.

The False Claims Act contains a “first-to-file” rule providing that if multiple whistleblowers file related actions, only the first whistleblower can proceed.  Barring later-filed suits reduces parasitic follow-on cases and encourages individuals with knowledge of fraud to file promptly, lest another whistleblower beat them to the courthouse.

The first-to-file rule may limit the recoveries of some of the later-filing ResMed whistleblowers.  However, the rule only bars later-filed actions that are based on the same “facts underlying the pending action.” 

As detailed above, ResMed allegedly engaged in a wide range of different unlawful kickback schemes.  Later-filing whistleblowers who report different unlawful activity can argue that their later-filed actions are not based on the same facts, and therefore are not barred by the first-to-file rule.  Different individuals will have knowledge of different facts, and can provide the government with new information that permits the government to investigate a different fraud.

Here, DOJ states that the whistleblowers will collectively receive a relator’s share of $6.2 million. Dividing a recovery up among multiple whistleblowers can require a careful analysis of the claims and damages alleged in each of the different actions.  The settling parties may have to determine how much of the recovery is attributable to each of the different fraud schemes alleged. Experienced whistleblower attorneys play a critical role in advocating for their clients in negotiations and, potentially, litigation, to determine and allocate a relator’s share.

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Tagged in: Anti-Kickback and Stark, Catch of the Week, FCA Federal, Healthcare Fraud, Medical Devices and DME, Multiple Whistleblowers and First-to-File, Whistleblower Case,