UPDATE 1-Bayer Healthcare in $97.5 mln kickback settlement

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WASHINGTON, Nov 25 (Reuters) - Diabetic supply maker Bayer Healthcare, a unit of Bayer AG BAYG.DE, has agreed to pay $97.5 million to settle allegations that it paid kickbacks to several diabetic suppliers and caused them to submit false Medicare claims, the U.S. Justice Department said on Tuesday.

Bayer agreed to enter into a corporate integrity agreement -- which allows companies to continue in the federal Medicare program while requiring steps to safeguard against fraudulent behavior -- as part of the settlement, the department said.

The settlement resolves allegations that Bayer paid 11 diabetic suppliers to convert their patients to Bayer products from competitors' products. It pertains to Medicare claims submitted by the companies from 1998 to 2007.

The department said Bayer allegedly paid Liberty Medical Supply Inc about $2.5 million between 1998 and 2002 to convert its patients to Bayer. It also allegedly paid kickbacks of about 375,000 to 10 other diabetic suppliers.

"Paying healthcare suppliers to place a particular brand of device with Medicare beneficiaries violates the law and will not be tolerated," said Gregory Katsas, assistant attorney general for the department's civil division.

(Reporting by Randall Mikkelsen; Editing by Doina Chiacu)