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In one of the largest settlements ever secured by a whistleblower under the False Claims Act, the multinational pharmaceutical corporation Biogen agreed to pay $900 million in order to end a lawsuit related to an illegal kickback program.

Attorney Thomas M. Greene, who represented the Biogen whistleblower, described the settlement as the “largest recovery in over 150 years of False Claims Act (FCA) cases to be secured by a whistleblower without the intervention or participation of the United States [government].”

Michael Bawduniak started working for Biogen in 2004. He was the interim director of regional marketing for Biogen between 2009 and 2011. In February 2011, the corporation demoted him to “thought leader liaison” after he attempted to halt kickback payments to physicians.

The False Claims Act empowers private citizens like Bawduniak to bring whistleblower lawsuits against companies that are involved in schemes to defraud taxpayers. US Justice Department (DOJ) prosecutors may intervene and pursue the lawsuit, or they may decline to intervene and allow a whistleblower to seek a settlement without their support.

According to a press release from Greene’s law firm, Bawduniak informed the DOJ of Biogen’s kickback program. The DOJ and the FBI asked Bawduniak to “record conversations with Biogen employees that would substantiate his allegations.”

“These recordings confirmed that Biogen deliberately provided substantial monetary and non-monetary compensation to some of its most important prescribers to influence their prescribing and to ensure that they remained loyal Biogen customers,” the release added.

The “massive” kickback scheme resulted in hundreds of millions of dollars in “false and fraudulent Medicare and Medicaid reimbursement claims.”

Specifically, the lawsuit filed in 2013 [PDF] alleged that Biogen provided “financial rewards” to physicians in order to ensure that they prescribed the corporation’s multiple sclerosis treatments, Avonex and later Tysabri.

In early 2008, Teva’s multiple sclerosis drug Copaxone surpassed Avonex in sales in early 2008. To reclaim the position of market leader, Biogen allegedly took advantage of the multiple sclerosis market, which they recognized was limited to a “relatively small number of prescribers.”

Over 90 percent of prescriptions for multiple sclerosis drugs were being written by just 6,000 doctors. Biogen developed a two-pronged strategy: retain physicians who were their top prescribers as “consultants” and hire the doctors as “speakers” to talk with other physicians about Avonex and Tysabri.

The strategy was intended to evade an increase in government enforcement against kickback schemes by pharmaceutical corporations.

“The scope of the kickback scheme was staggering,” according to the lawsuit. “In 2009 alone, Biogen paid 820 physicians a total of $8.8 million to speak or consult, $10,600 per physician. Faced with the market entry of the first oral treatment for MS, Gilenya, Biogen expanded these programs in 2010.”

In 2010, Biogen paid $9.1 million to 1,200 physicians for “speaking” or “consulting.” The meetings were frequently redundant and trainings had an “excessive number of unnecessary speakers.”

On September 2, 2010, while Bawduniak was interim regional director for marketing, he received a list of fifty doctors who were deemed “at risk” of adopting Gilenya.

Bawduniak recognized that having a list of “completed and anticipated payments to major prescribers who the company had identified as priority accounts would constitute evidence of unlawful payments for the purpose of obtaining prescriptions.”

A senior executive in Biogen’s compliance department confirmed to Bawduniak that requesting information about the physicians would constitute evidence that the corporation was trying to influence a doctor to prescribe Biogen products.

Bawduniak informed two Biogen executives that if he compiled information on the doctors it would “make it clear that Biogen was making payments for prescriptions.” Still, one of the executives who had asked for the information pressed on with their requests and eventually obtained it from other sources.

In February 2011, Bawduniak was demoted to “thought leader liaison” and no longer directly received reports on “at risk” doctors.

The press release further details the staggering fraud. “Biogen inflated the amounts paid to most of its speakers and consultants by automatically adding three hours for travel time to their compensation, even when Biogen knew the customers whom it paid did not have to travel or only traveled a minimal distance.”

“And many of Biogen’s events were held at sumptuous resorts and restaurants, where Biogen treated its speakers and consultants to lavish meals and free alcohol.”

Twenty-five to thirty percent of the federal funds recovered through the settlement will be awarded to Bawduniak.

Mary Inman, an attorney and partner at the law firm Constantine Cannon who has represented whistleblowers in False Claims Act cases for 25 years, said the massive settlement was a “testament to the strength” of the FCA. It is a “really important release valve.”

“Increasingly what we’re seeing is that the government just doesn’t have the resources to intervene in all these cases because there’s been such an increase in the number of cases and the quality of them,” Inman added. “So oftentimes they will decline to intervene when they have faith that the whistleblower and their counsel have the wherewithal to continue with the case.”

The DOJ does not always decline to intervene or take up a case because of political reasons, such as if the fraud exposed makes prosecutors look bad for missing the corruption. But of course, that happens.

In the case of the Biogen whistleblower, Inman noted the government has pursued a lot of these types of cases involving kickback schemes defrauding Medicare or Medicaid in the past.

The US Supreme Court agreed in June to hear a lawsuit that could determine whether the government has the authority to dismiss a lawsuit and effectively prevent a whistleblower from pursuing their case under the False Claims Act.

If the Supreme Court were to rule that the government may decline to participate in cases and then turn around and stop a whistleblower from challenging fraud, it would be another example of the court catering to corporate power. It would fundamentally alter what has been settled law for over 30 years.

Kevin Gosztola

Kevin Gosztola

Kevin Gosztola is managing editor of Shadowproof. He also produces and co-hosts the weekly podcast, "Unauthorized Disclosure."