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Biogen Inc (NASDAQ: BIIB) agreed to pay $22 million to settle a lawsuit alleging it committed unlawful conduct involving its multiple sclerosis drugs, Avonex and Tysabri.

According to the U.S, Department of Justice (DOJ), a whistleblower sued the Massachusetts-based pharmaceutical company for allegedly violating the False Claims Act by engaging in an illegal kickback scheme,

Biogen allegedly used two foundations as a channel to pay the copays of Medicare patients taking Avonex and Tysabri. The pharmaceutical company’s conduct caused those patients to buy Medicare-reimbursed Avonex and Tysabri prescriptions.

As part of the scheme, Biogen identified certain patients for Advanced Care Scripts (ACS) in its Avonex or Tysabri free drug program, The pharmaceutical company and ACS worked together to transfer these patients to the foundations.

Biogen gave the foundations contemporaneous payments and then paid the costs of Medicare copays for most or all of these patients. Medicare paid the patients remaining costs for Avonex or Tysabri.

The pharmaceutical company allegedly committed the illegal kickback scheme in the first quarter of 2011 for certain Avonex patients and in the second and third quarters of 2012 and 2013 for certain Tysabri patients.

The $22 million settlement resolves Biogen’s alleged violation of the False Claims Act.

Biogen undermined Medicare’s co-pay structure

Acting Assistant Attorney Jeffrey Bossert Clark of the DOJ’s Civil Division said, “The resolution announced today, like prior settlements concerning similar misconduct, demonstrates the government’s commitment to hold accountable companies that pay kickbacks to undermine important constraints on rising drug costs. Drug companies that illegally manipulate charitable patient assistance programs to subsidize copays for their own products will be held accountable.”

On the other hand, First Assistant United States Attorney Nathaniel R. Mendell commented, “Biogen coordinated with ACS to game the foundation system by timing its payments to two foundations with its transfer of financially needy free drug patients, all so that Biogen could obtain significant financial rewards. By treating the foundations simply as conduits to pay the co-pays of its own patients, Biogen violated the anti-kickback statute and undermined Medicare’s co-pay structure, which Congress intended as a safeguard against inflated drug prices.”

The whistleblower or qui tam, provision of the False Claims Act allows private parties to file fraud charges on behalf of the government and to share in any recovery.  The law also allows the government to intervene in such cases, as the government did in this action.  The whistleblower will receive approximately $3,960,000 from the settlement.