Sleep specialist ResMed (NYSE:RMD) was ordered to pay $37 million to settle a lawsuit with the Department of Justice over kickback allegations made in five whistleblower lawsuits. The civil lawsuits alleged that the company had violated the federal False Claims Act and Anti-Kickback Statute. 

The DOJ claimed that ResMed,  a leading provider of medical equipment for patients who suffer from sleep apnea, was providing free or under-cost equipment and services to sleep labs, and the company would charge more if the sleep lab was using competitor's equipment.

"When companies give free equipment to doctors for the sole purpose of generating business and increasing their bottom lines, federal health insurance programs should not foot the bills. This case rights that alleged wrong by ResMed," said U.S. Attorney Richard P. Donoghue for the Eastern District of New York. "We will continue to work with our law enforcement partners to hold accountable companies that put profits before patients." 

CPAP device

Image source: Getty Images

Settling the dispute

ResMed continues to deny any wrongdoing, but has agreed to settle the case to resolve the issue. "ResMed has not violated any laws," the company said. "(I)ts business practices are conducted in full accordance with U.S. laws and regulations. That said, we are pleased to put this matter behind us and avoid the expense, inconvenience, and distraction it would cause to gain the favorable outcome we deserve." ResMed is also paying more than $2 million in settlement fees to resolve state litigation over this matter.

Under provisions of the False Claims Act, citizens can file so-called whistleblower complaints against anyone defrauding the government. And the whistleblowers are allowed to share in any reward. In this case, the five whistleblowers will split an estimated $6.2 million taken from the settlement.

ResMed had announced in the company's fourth quarter conference call that the company was going to settle the lawsuits for $39.5 million.  As the market was not surprised by this final settlement, the stock was up slightly for the day.