San Diego’s ResMed will pay $37.5 million to settle federal claims that free services, loan guarantees and other incentives it offered to customers amounted to unlawful kickbacks to induce sales of its sleep apnea machines.

The U.S Justice Department announced the civil settlement Wednesday, which ends probes that stemmed from whistleblower complaints starting in 2016.

ResMed announced in July that it was in advanced talks with federal officials to resolve the investigation. At the time, it set aside $41.2 million to cover the looming settlement.

The company settled without admitting wrongdoing. The sales tactics targeted by government investigators have not been used by the company in years, according to a spokesman.


The agreement shelves five lawsuits originally brought by whistleblowers under provisions in the False Claims Act, which allows private citizens to sue on behalf of the government. The whistleblowers collectively will receive $6.2 million under the agreement.

ResMed faced a series of allegations related to its sales efforts for sleep apnea devices. They included that it arranged and guaranteed third party, no-interest loans for medical device suppliers to buy its sleep apnea machines; provided free or below cost sleep apnea gear to sleep labs for use in diagnosing patients; installed these diagnostic machines at no charge; gave doctors who were not sleep specialists free home-testing machines; and offered free call center and other services to medical device suppliers for re-ordering of sleep apnea masks and other consumables for their clients.

“Paying any type of illegal remuneration to induce patient referrals undermines the integrity of our nation’s health care system,” said Assistant Attorney General Judy Hunt in a statement. “When a patient receives a prescription for a device to treat a health care condition, the patient deserves to know that the device was selected based on quality of care considerations and not on unlawful payments from equipment manufacturers.”

ResMed said it acted in good faith with patients and customers, did not violate any laws and cooperated with investigators.


”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,” the company said in a statement.

This settlement does not impact ResMed’s ability to sell sleep apnea products or for patients to get reimbursement from Medicare or other federal health care payment programs, the company said.

On top of the settlement, ResMed entered into a Corporate Integrity Agreement with the federal Department of Health and Human Services’ Office of Inspector General. It requires the company to tighten controls around its product pricing and sales, as well as conduct additional monitoring of referrals.

“The government contended ResMed provided free goods and services to companies in order to sell more medical equipment bought by taxpayers,” said Derrick Jackson, special agent for the Office of Inspector General. “The OIG’s integrity agreement with ResMed is designed to ensure such alleged behavior will not be repeated.’


ResMed’s shares ended trading Wednesday up 35 cents at $158.72 on the New York Stock Exchange.

