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Tuesday, November 25, 2008
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Bayer Healthcare to Pay U.S. $97.5 Million to Settle Allegations of Paying Kickbacks to Diabetic Suppliers

WASHINGTON - Bayer HealthCare LLC (Bayer) has agreed to pay the United States $97.5 million plus interest to settle allegations that it paid kickbacks to a number of diabetic suppliers and caused those suppliers to submit false claims to Medicare, the Justice Department announced today. The settlement resolves allegations that Bayer engaged in a cash-for-patient scheme through which the company paid 11 diabetic suppliers to convert their patients to Bayer’s products from supplies manufactured by its competitors.

The Tarrytown, N.Y.- based company manufactures diabetic self-testing supplies, including glucose monitors and testing strips. Bayer contracts with direct-to-patient diabetic suppliers who market and sell these products to beneficiaries and submit claims for reimbursement to Medicare.

Between 1998 and 2002, Bayer allegedly paid Liberty Medical Supply Inc., one of the largest direct-to-patient diabetic suppliers, approximately $2.5 million to convert its patients to Bayer supplies. The alleged kickbacks were based on the number of patients that Liberty successfully converted to Bayer supplies and were disguised as payments for advertising. In addition, Bayer allegedly paid kickbacks of approximately $375,000 to 10 other diabetic suppliers to convert patients to Bayer supplies.

"If medical device manufacturers want to serve Medicare beneficiaries they must follow the law," said Gregory G. Katsas, Assistant Attorney General for the Civil Division. "Paying healthcare suppliers to place a particular brand of device with Medicare beneficiaries violates the law and will not be tolerated."

The settlement resolves claims submitted to Medicare by the 11 suppliers for Bayer supplies from 1998 through 2007. Under the terms of the settlement, Bayer agreed to enter into a corporate integrity agreement with the Office of Inspector General for the Department of Health and Human Services (HHS).

"Device manufacturers who pay illegal kickbacks should expect to be held accountable," said Daniel R. Levinson, HHS Inspector General. "OIG's compliance agreement with Bayer includes specific requirements for the board of directors and management that will enable OIG to closely monitor company practices affecting Federal health care programs and beneficiaries."

The investigation was referred to the Justice Department’s Civil Division, Commercial Litigation Branch, by the FBI and the Criminal Division of the U.S. Attorney’s Office for the Southern District of Florida, in West Palm Beach, Fla.