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Bayer Healthcare to pay $97.5M to settle kickbacks case

Bayer HealthCare LLC has agreed to pay $97.5 million plus interest to settle allegations that it paid kickbacks to a number of diabetic suppliers and caused them to submit false claims to Medicare, according to the Department of Justice.

Bayer had been accused of engaging in a cash-for-patient scheme through which the company paid 11 diabetic suppliers to have their patients use Bayer's products instead of those manufactured by competitors.

"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."

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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.

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 will also enter into a corporate integrity agreement with the Office of The Inspector General for the Department of Health and Human Services.

"Device manufacturers who pay illegal kickbacks should expect to be held accountable," said HHS Inspector General Daniel R. Levinson. "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 healthcare programs and beneficiaries."