COLUMBIA, SC, Jan. 15, 2020 – ResMed Inc., a medical equipment manufacturer, has agreed to pay a total of $39.5 million to the federal government and certain states to settle five whistleblower lawsuits, including one filed by Phillips & Cohen LLP on behalf of a former ResMed sales representative.
Phillips & Cohen’s “qui tam” (whistleblower) case alleges ResMed paid kickbacks in the form of free “resupply services” to hospital and home health companies that sold its equipment to treat sleep apnea, a sleep disorder. The company charged service fees to those who sold competitors’ equipment.
Free resupply services were an incentive for hospitals and home health companies to steer patients to buy equipment from ResMed, the whistleblower complaint alleged.
“Improper kickbacks don’t always involve bags of cash or free trips to Hawaii,” said Stephen Hasegawa, a whistleblower attorney and partner at Phillips & Cohen LLP. “Services provided by vendors also can be kickbacks if they have some value to customers.”
Phillips & Cohen 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.
Baker’s lawsuit alleged that ResMed violated the Anti-Kickback Statute and the False Claims Act.
ResMed, based in San Diego, California, manufactures and sells machines and related parts that provide continuous positive airway pressure (CPAP) therapy for sleep apnea. Medicare, Medicaid and private insurance, which will pay for CPAP therapy, generally will cover the patients’ costs to resupply parts for their CPAP machines, such as tubes and masks, which can be needed several times a year.
Resupply services involve tracking patients’ adherence to their CPAP therapy regimen, identifying the maximum replacement frequencies permitted by the patient’s insurance (Medicare, Medicaid or private insurance), monitoring the patients’ resupply cycles and communicating with patients to obtain all necessary approvals and orders for supplies.
“Resupply is an important part of a CPAP equipment provider’s business,” Hasegawa said. “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.”
Under the terms of the settlement agreement, ResMed will pay $37.46 million to the federal government and more than $2 million total to various states to settle the five whistleblower cases, including Baker’s. (See DOJ’s press release.)
The False Claims Act allows whistleblowers who know of fraud against the government to file qui tam lawsuits against entities committing the fraud and recover funds on the government’s behalf. The law protects whistleblowers from job retaliation and rewards them a share of the money that the government recovers as a result of the case.
If the government joins the qui tam lawsuit, the whistleblower is entitled to 15 percent to 25 percent of the recovery. In this case, the whistleblowers will share a reward of more than $6.2 million.
Baker and Hasegawa thanked Daniel Spiro and John Ponyicsanyi of the US Department of Justice and Jennifer Aldrich of the US Attorney’s Office for the District of South Carolina for their work on the case.
“Steve Hasegawa, Phillips & Cohen and the team at DOJ have been wonderful to work with,” Baker said. “All are truly knowledgeable experts, supportive and dedicated.”
Read Baker’s qui tam complaint, United States, et al., ex rel. Baker v. ResMed, Inc., et al., Case No. 3:16-CV-00987-MBS (D.S.C.)
About Phillips & Cohen
Phillips & Cohen is the nation’s most successful law firm representing whistleblowers. The firm’s cases have helped federal, state and local governments recover more than $12.3 billion in civil settlements and criminal fines. Phillips & Cohen represents whistleblowers in qui tam lawsuits as well as cases brought under the whistleblower programs of the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Internal Revenue Service.