A subsidiary of Dutch medical device maker Philips has agreed to pay over $24 million to resolve alleged false claims over respiratory-related medical equipment. Philips & Co was founded in 1891 in Eindhoven, the Netherlands, by Frederik Philips and his son, Gerard.

Philips RS North America LLC, formerly known as Respironics Inc., a manufacturer of durable medical equipment (DME) based in Pittsburgh, Pennsylvania, has agreed to pay over $24 million to resolve False Claims Act allegations that it misled federal health care programs by paying kickbacks to DME suppliers.The affected programs were Medicare, Medicaid and TRICARE, which is the health care program for active military and their families.

The settlement resolves allegations that Respironics caused DME suppliers to submit claims for ventilators, oxygen concentrators, CPAP and BiPAP machines, and other respiratory-related medical equipment that were false because Respironics provided illegal inducements to the DME suppliers. Respironics allegedly gave the DME suppliers physician prescribing data free of charge that could assist their marketing efforts to physicians.

The Anti-Kickback Statute prohibits the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal health care program, such as Medicare, Medicaid or TRICARE. Claims submitted to these programs in violation of the Anti-Kickback Statute give rise to liability under the False Claims Act.

The settlement provides that Respironics will pay $22.62 million to the United States, and in addition, will pay $2.13 million to the various states as a result of the impact of Respironics’ conduct on their Medicaid programs, pursuant to the terms of separate settlement agreements that Respironics has, or will enter into, with those states.

The settlement resolves a lawsuit originally brought by Jeremy Orling, a Respironics’ employee, under the qui tam or whistleblower provisions of the False Claims Act. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. As part of this resolution, Orling will receive approximately $4.3 million of the federal settlement amount.

This settlement was the result of a coordinated effort by the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the District of South Carolina with assistance from the HHS-OIG and HHS Office of Investigations; DCIS; the Defense Health Agency Office of General Counsel; and the National Association of Medicaid Fraud Control Units.  

And Philips has had other problems with government DME sales during the pandemic.

In April 2020, the United States Department of Health & Human Services (HHS) entered into a contract with Philips Respironics for 43,000 bundled Trilogy Evo Universal ventilator hospital ventilators. This included the production and delivery of ventilators to the Strategic National Stockpile – about 156,000 by the end of August 2020 and 187,000 more by the end of 2020. During the COVID-19 pandemic, beginning in March 2020, in response to an international demand,

Philips increased production of the ventilators fourfold within five months. Production lines were added in the United States with employees working around the clock in factories producing ventilators, in Western Pennsylvania and California, for example.

In March 2020, ProPublica published a series of articles on the Philips ventilator contract as negotiated by trade adviser Peter Navarro.

In response to the ProPublica series, in August, the United States House of Representatives undertook a “congressional investigation” into the acquisition of the Philips ventilators. The lawmakers investigation found “evidence of fraud, waste and abuse.” The deal negotiated by Navarro reportedly had resulted in an over-payment to Philips by the US government of “hundreds of millions.”