Pharmaceutical Manufacturer Agrees to $900 Million Dollar False Claims Act Settlement to Resolve Kickback Claims

On July 20^th, on the eve of trial, Biogen Inc. agreed to pay $900 million dollars to settle claims that the company violated the False Claims Act (FCA) by allegedly paying improper consulting and speaker fees and providing lavish meals and entertainment (in violation of the Federal Anti-Kickback Statute (AKS)) to medical providers to induce them to prescribe its multiple sclerosis drugs Avonex, Tysabri, and Tecfidera.  The qui tam (or whistleblower) suit was filed in the District of Massachusetts in 2012 by former Biogen employee Michael Bawduniak and merged with multiple suits with similar allegations. The settlement is extraordinary in size, particularly in light of the United States’ decision declining to intervene in the suit, and highlights the risks associated with pharmaceutical and device manufacturers hiring providers as consultants and conducting speaker programs.

Bawduniak and his co-relators claimed that Biogen paid hundreds of healthcare providers to participate in expansive (and allegedly sham) consulting and speaker programs for which the company had little demand or use, and that providers were selected as consultants based on their prescribing volume rather than their expertise or speaking ability.  Once the United States declined to intervene in 2015, the relators’ cases were unsealed and merged, and in 2018 their Complaint survived Biogen’s motion to dismiss.[1]  Biogen argued inter alia that that the consulting and speaker programs were personal services contracts protected by a safe harbor to the AKS.  However, Judge Indira Talwani concluded that the relators had sufficiently pled the claims, pointing to allegations that Biogen’s expansive consulting and speaker programs exceeded those which would reasonably be necessary to accomplish the company’s business purposes.  For example, the Complaint alleged that Biogen did nothing with the “consulting product” generated by its hundreds of paid consultants, and that speakers often presented to only a single person. Biogen also argued that the claimants failed to specifically plead a specific payment to a prescriber as a quid pro quo in exchange for prescriptions. The court rejected this argument as well, stating that “[i]t is sufficient to show that [Biogen] paid kickbacks to a physician for the purpose of inducing the physician to prescribe specific drugs, and that the physician then prescribed those drugs, even if the physician would have prescribed those drugs absent the kickback.”[2]

The settlement was agreed upon only five days before jury selection was set to begin. The settlement is one of the largest FCA settlements ever and represents a significant percentage of average annual FCA qui tam-related recoveries in recent years.  For example, the $900 million dollar figure is over half of the FCA qui tam-related recovery totals for each of 2020 and 2021.  It is somewhat unusual for a relator in an FCA qui tam case declined by the Government to succeed in a recovery—between 2010 and 2020, more than 80 percent of Government-declined cases ended in no recovery.[3]  Beyond overcoming these steep odds, as suggested by Bawduniak’s counsel in a statement announcing the settlement, an FCA recovery of this size in a declined qui tam case is unprecedented: “this settlement represents the largest recovery in over 150 years of False Claims Act cases to be secured by a whistleblower without the intervention or participation of the United States.”

Biogen’s $900 million dollar settlement underscores the need for not only pharmaceutical and device manufacturers, but also participating providers to carefully consider the value, design and implementation of consultant and speaker programs.  The Department of Health and Human Services Office of Inspector General issued a Special Fraud Alert on speaker programs in late 2020 (the “OIG Special Fraud Alert”) warning of the fraud and abuse risks associated with pharmaceutical and medical device companies conducting speaker programs.[4]  The OIG Special Fraud Alert raised concerns that speaker programs often lack any real educational value about the drug and device products at issue and that there are many other ways for healthcare professionals to learn about such products.  The OIG Special Fraud Alert also made clear that parties involved in speaker programs, including the speakers that are paid to present and the attendees that may receive remuneration in the form of lavish meals and alcoholic beverages, could be subject to increased scrutiny.  Industry groups representing pharmaceutical and device manufacturers (Pharmaceutical Research and Manufacturers of America (PhRMA) and Advanced Medical Technology Association (AdvaMed)) have recently updated their voluntary codes of conduct regarding interactions with healthcare providers to incorporate and provide guidance on many of the points raised by the OIG Special Fraud Alert.

In light of these changes and the Biogen settlement, it is important for pharmaceutical and medical device manufacturers to take a fresh look at their policies and procedures governing payments to and interactions with prescribers.  Pharmaceutical and medical device manufacturers should ensure they have robust policies and processes in place to carefully analyze and document the legitimate business rationale for each consultant or speaker program and to appropriately structure each program  under the AKS and the FCA.

About McGuireWoods’ Government Investigations & White Collar Litigation Department
McGuireWoods’ Government Investigations & White Collar Litigation Department is a nationally recognized team of more than 80 attorneys representing Fortune 100 and other companies and individuals in the full range of civil and criminal investigations and enforcement matters, including litigation and action under the False Claims Act. Our False Claims Act team includes former federal prosecutors, and experienced civil and white collar criminal litigators with experience in this unique area of law. We also tap attorneys from the firm’s other practice groups and our subsidiary McGuireWoods Consulting LLC. Strategically centered in Washington, D.C., our Government Investigations & White Collar Litigation Department has been honored as a Law360 Practice Group of the Year and earned the trust of international companies and individuals through our representation in some of the most notable enforcement matters over the past decade. For more information on our False Claims Act practice, download our brochure: False Claims Act Investigations, Litigation and Enforcement.