Philips Respironics Settlement Results in $24.8M Payment To Resolve Kickback Claims

The settlement by Philips Respironics resolves allegations raised in a whistleblower lawsuit brought by an employee.

Philips Respironics will pay more than $24 million to the U.S. government, to resolve allegations that it was involved in an illegal kickback scheme involving durable medical equipment (DME), which defrauded the Medicare, Medicaid and other health programs.

The U.S. Department of Justice issued a press release announcing the Philips Respironics settlement earlier this month, following a whistleblower lawsuit brought over violations of the False Claims Act, which alleged the company provided illegal inducements to medical equipment suppliers to get them to submit insurance claims for CPAP and other breathing assistance devices.

In addition to the kickbacks, the company was accused of giving suppliers physician prescribing data for free, to help them market their products to other doctors.

The settlement agreement comes as the company faces an ongoing Justice Department investigations into last year’s massive Philips CPAP machine recall, which impacted millions of sleep apnea devices sold for years with a toxic sound abatement foam, which has been linked to reports of cancer, lung damage and other respiratory symptoms. However, the company has been accused of attempting to hide or downplay the scope of the problem, while continuing to profit off of the defective machines.

“Paying illegal remunerations to induce patient referrals undermines the integrity of our nation’s health care system,” Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s civil division, said in the press release announcing the Philips Respironics whistleblower lawsuit settlement. “To ensure that the goods and services received by federal health care program patients are determined by their health care 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.”

The settlement calls for Respironics to pay $22.62 million to the federal government and another $2.13 million to various states also affected by the kickbacks. The company has also entered into a five-year Corporate Integrity Agreement which requires independent monitoring of the company’s compliance systems, a review of arrangements with referral sources and monitoring of the company’s sales force.

The settlement came as the result of a whistleblower lawsuit filed by Jeremy Orling, a company employee, who will receive about $4.3 million as a reward for uncovering the fraud, under the qui tam provisions of the False Claims Act.

Philips CPAP Investigation and Litigation

The Philips Respironics settlement does not address or resolve potential liability the company is expected to face following the recall of CPAP, BiPAP and ventilators that contained a polyester-based polyurethane (PE-PUR) sound abatement foam, which is now known to break down and degrade inside the breathing machines, releasing toxic chemicals and particles into the air pathways and users’ lungs.

In addition to a DOJ investigation into the Philips recall, thousands of former users are also seeking settlements from the company.

The FDA has been very critical of Philips handling of the CPAP recall, indicating that the company failed to properly address problems and did not take sufficient steps to make consumers aware of the serious health risks associated with the continued use of the machines, indicating earlier this year that it would require a new plan from Philips for handling the CPAP machine recall, including a requirement to refund, repair or replace devices.

Since the first recall, the FDA has received more than 69,000 reports of problems from the Philips CPAP foam, including at least 168 deaths.

Reported Philips CPAP symptoms linked to the PE-PUR foam have ranged widely, including pneumonia, asthma, infections, headaches, coughing, dyspnea, dizziness, chest pain and other respiratory symptoms.

It is expected that billions in settlements will need to be paid by the company to resolve individual Philips CPAP lawsuits brought by former users diagnosed with cancer and other injuries, as well as class action complaints that seek reimbursement and medical monitoring.