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Durable Medical Equipment Company’s Pricing Structure Violates Anti-Kickback Statute

DMEDurable Medical Equipment (DME) manufacturers can face serious fines for violating the Anti‑Kickback Statute (“AKS”). In a recent settlement, Respironics, a manufacturer of sleep therapy products, agreed to settle allegations that its bundled pricing structure for sleep apnea masks violated the AKS. Since violations of the AKS give rise to fines under the False Claims Act, DME manufacturers can face trebled damages and fines up to $10,000 per violation.

According to Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, “The payment of illegal remuneration in any form to induce patient referrals threatens public confidence in the health care system. Americans deserve to know that when they are prescribed a device to treat a serious health care problem, the supplier’s judgment has not been compromised by illegal payments from equipment manufacturers.”

Respironics, Inc. provided call center services to DME companies at no cost so long as the patients ordered Respironics masks. DME companies had to pay a monthly fee based on the number of patients who used masks manufactured by Respironics’ competitors. According to the U.S. Department of Justice, this made suppliers more likely to use Respironics masks. Respironics has since changed the pricing structure of its call center services.

A South Carolina pharmacists recognized that the arrangement likely violated the AKS and filed a qui tam (whistle-blower) lawsuit. The U.S. Justice Department intervened along with 29 other states and the District of Columbia.

Respironics agreed to pay $34.8 million in order to settle the lawsuit even without admitting wrongdoing, and the company continues to maintain that its pricing structure fit within the discount Safe Harbor. However, this settlement serves as a powerful reminder that companies must be aware of potential AKS violations. Respironics’ “good-faith belief” that the arrangement met a Safe Harbor did not save it from AKS scrutiny or a multimillion dollar settlement.

If you have any questions or need assistance with healthcare regulatory issues, Jeyaram & Associates attorneys can help. Contact DJ Jeyaram at or 678.325.3872.

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