Bayer to Pay $97 Million to Settle Federal Kickback Charges

A subsidiary of Germany-based Bayer AG will pay $97.5 million to settle U.S. Justice Department charges that it paid kickbacks to American medical device distributors.

Tarrytown, N.Y.-based Bayer HealthCare LLC agreed to a pre-suit settlement Nov. 25 to "avoid the time, uncertainty and expense of litigation," according to a company statement.

The deal says the payments violated the federal anti-kickback statute and made the distributors' subsequent billings to Medicare false claims under the False Claims Act.

The government allowed Bayer HealthCare to settle the case without admitting any liability.

"We are eager to move forward, focus on our current business and, most importantly, continue to be a valued and respected health care provider," Chairman Arthur Higgins said.

In addition to the money settlement Bayer HealthCare said it signed a corporate integrity agreement with the Department of Health and Human Services to beef up its compliance with laws governing federal health programs.

"Device manufacturers who pay illegal kickbacks should expect to be held accountable," HHS Inspector General Daniel R. Levinson said in a statement.

He said the agreement calls for his office to closely monitor Bayer HealthCare's business practices and related compliance procedures.

Federal prosecutors alleged that Bayer HealthCare paid kickbacks to 11 mail-order medical device distributors from 1999 to 2002 as part of a "cash-for-patient scheme."

They said the kickbacks compensated the distributors for sales of Bayer HealthCare's diabetes self-testing devices to Medicare beneficiaries instead of similar devices made by competitors.

For example, prosecutors said, the company paid Liberty Medical Supply Inc. $2.5 million to convert Medicare diabetes patients to the Bayer products. The kickbacks allegedly were disguised as advertising payments.

"If medical device manufacturers want to serve Medicare beneficiaries, they must follow the law," Assistant U.S. Attorney General Gregory G. Katsas said in a statement. "Paying health care suppliers to place a particular brand or device with Medicare beneficiaries violates the law and will not be tolerated."

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