ResMed Announces Tentative Agreement to Settle DOJ Investigation for Anti Kickback Call Center Services

01ResMed, Inc., announced that it has reached a tentative agreement with the US Department of Justice (“DOJ”) to settle an investigation into various business practices related to ResMed’s durable medical equipment (“DME”) sales. ResMed said that it has earmarked $39.5 million to cover the payment, and an additional $1.7 million for the associated legal and administrative costs.

ResMed sells DME products to treat sleep apnea, chronic obstructive pulmonary disease and other chronic diseases. ResMed sells the ApneaLink Air, and its associated software platform AirView, which together function as an in-home sleep testing device. ResMed also provides various DME-related support services, including ReSupply, an automated system that notifies patients when they need to replace their DME supplies.

ResMed noted that the DOJ investigation, which began in 2016, related to how ResMed made the automated ReSupply program available on a trial basis, the availability of the ApneaLink system, as well as to marketing and financing issues.

Commenting on the tentative settlement agreement, David Pendarvis, ResMed Chief Administrative Officer and Global General Counsel noted that ResMed is not going to be required to admit wrongdoing, and that they resolved the matter on a “consensual basis” because it was the best resolution for their customers and patients, and the company. Then he added, “we believe that we’ve handled ourselves appropriately … [and] going forward, we don’t expect any significant changes to the way we do business ….” ResMed noted that its best estimate of the finalized agreement timing is the end of the calendar year.

While negotiating a settlement agreement with the DOJ, ResMed was no doubt aware of another, similar case DOJ brought against Respironics, Inc., a unit of Royal Philips, NV. In 2016, the DOJ announced that Respironics agreed to pay $34.8 million to resolve alleged False Claims Act (“FCA”) violations for activities relating to its call center services to DME suppliers.

Specifically, the DOJ alleged that Respironics used free call center services to pay kickbacks to DME suppliers that bought its products for sleep apnea patients. Respironics allegedly provided these services at no charge as long as patients were using Respironics masks; if not, the suppliers “would have to pay a monthly fee based on the number of patients who used masks manufactured by a competitor of Respironics.”

The ResMed and Respironics cases highlight compliance issues surrounding product support services. In the 2003 publication, entitled Compliance Program Guidance for Drug Manufacturers, the OIG discussed product support services which “may include billing assistance tailored to the purchased products, reimbursement consultation, and other programs specifically tied to support of the purchased product.”

The guidance indicated that “standing alone” these services, “have no substantial independent value to the purchaser [and] may not implicate the anti-kickback statute.” However, in spite of this guidance the DOJ has frequently asserted that such product support services violate the Antikickback Statute (“AKS”) and FCA. This is particularly true in cases where the support services are comprehensive, involve the use of false clinical information, are likely to cause the submission of claims for off-label uses, and mislead payers as to the identity of the organization providing support.

Thus, while some limited product support services may not violate the AKS, compliance professionals should not conclude that product support services generally fall into some sort of compliance safe harbor simply because of the 2003 guidance.