A Philips subsidiary agreed to pay more than $24 million to settle allegations it paid kickbacks to medical equipment suppliers to push its products ahead of other brands that are provided to patients of federal health programs.
Philips RS North America, formerly known as Respironics, manufactures durable medical equipment (DME) to aid breathing, including ventilators and CPAP machines. The Department of Justice (DOJ) alleged from November 2014 through April 2020, the illegal inducements Philips provided caused suppliers to file false claims to government programs, including Medicare; Medicaid; and TRICARE, a health program for military families, according to the settlement.
The inducements were in the form of data about physician prescribing behavior, called health market science data, information which is highly valued by marketing teams of medical equipment suppliers and that Philips salespeople provided free of charge to the suppliers, according to the complaint.
The DOJ found Philips violated the federal anti-kickback statute and the False Claims Act (FCA).
Philips signed a five-year corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services as part of the settlement. The company must create and maintain a “robust” compliance program that includes a review of arrangements it has with referral sources and monitoring of its sales force. The inspector general’s office will select an independent monitor to review Philips’s compliance procedures for effectiveness.
The settlement grew out of a 2019 whistleblower lawsuit filed under the qui tam provisions of the FCA in U.S. District Court for the District of South Carolina by Jeremy Orling, a former Respironics employee, and about 30 states.
The company will pay $22.62 million to the United States and $2.13 million to the states whose Medicaid programs were impacted by the alleged false claims. Orling will receive about $4.3 million of the federal settlement amount.
“Paying illegal remuneration to induce patient referrals undermines the integrity of our nation’s healthcare system,” said Principal Deputy Assistant Attorney General Brian Boynton in a press release Thursday. “To ensure that the goods and services received by federal healthcare program patients are determined by their healthcare needs, rather than the financial interests of third parties, we will pursue any individual or entity that violates the prohibition on paying kickbacks, including DME manufacturers.”
This is the second time Philips has settled with the DOJ concerning alleged kickbacks to DME suppliers. In March 2016, the company agreed to pay $34.8 million and signed a corporate integrity agreement pledging to halt any kickback activity.
“In direct contradiction of those obligations, Respironics was engaging in the kickback scheme alleged [in the new complaint] in 2016, at the time of the corporate integrity agreement,” the DOJ said.
Philips did not admit wrongdoing by agreeing to the most recent settlement.
“Settling this claim allows us to put this matter behind us and maintain our focus on our customers and the patients they serve,” a spokesman said in an emailed statement. “We maintain a comprehensive compliance program, and we will work with the relevant authorities to satisfy the terms of the settlement. This agreement should have no impact on our customers or the patients they serve.”