Pharma, whistleblower lessons learned from $900M Biogen settlement

“It’s a wake-up call to companies that they need to remain diligent in their compliance in this area,” said David Colapinto, partner at whistleblower law firm Kohn, Kohn & Colapinto.

Last month, Biogen finalized settlement of the lawsuit, after years of litigation by former employee Michael Bawduniak. Bawduniak, represented by boutique law firm Greene, alleged the company paid illegal kickbacks to doctors to induce them to prescribe Biogen’s multiple sclerosis drugs.

In 2012, Bawduniak filed the suit, alleging Biogen submitted hundreds of millions in false claims to Medicare, Medicaid, and other federal and state government programs between 2009-14.

Bawduniak will receive approximately $266.4 million—believed to be the largest whistleblower award under any government program in a single settlement.

“I’m sure it will encourage some would-be whistleblowers, and that’s not a bad thing,” Danielle Pelfrey Duryea, director of Boston University’s Compliance Policy Clinic, said of the record payout.

Under the qui tam provisions of the FCA, Bawduniak was entitled to a 15 to 30 percent share of the federal government’s portion. His 29.6 percent share was at the high end of the range because the government in 2015 declined to intervene in the case.

The case could have fallen apart at that point, but Bawduniak and Greene persevered. One week away from trial, the case was “settled on the courthouse steps,” Colapinto said.

“I know the type of effort it would take without government participation, and it is a tremendous effort. Not everyone is able to do that,” he said. Companies like Biogen “devote millions” to their defense.

Big Pharma can often easily afford the cost of defense—and the cost of settlements. Biogen agreed to pay $900 million, but it earns an average of $10 billion a year, Colapinto noted.

Industry lessons

The Biogen settlement should serve as a reminder to pharma companies to review the way they relate to physicians, said Asha Scielzo, director of the health law and policy program at American University Washington College of Law.

“We’ve had guidance for more than 20 years about this,” including a special fraud alert about speaker fees two years ago from the Office of Inspector General at the Department of Health and Human Services, said Scielzo, who leads the healthcare compliance certificate program at American University.

“Compliance shouldn’t assume violations of the anti-kickback statutes are a thing of the past.”

David Colapinto, Partner, Kohn, Kohn & Colapinto

“This was a big clue” government enforcement offices were still seeing this kind of fraud and planned to scrutinize it more closely, she said of the alert.

“Compliance shouldn’t assume violations of the anti-kickback statutes are a thing of the past,” Colapinto agreed. Cases are not as common as they once were, but “it is not a practice that has been cured,” he said.

Kickbacks in the healthcare industry remain “pernicious,” according to the Department of Justice.

A driver of kickbacks is the current healthcare system, Pelfrey Duryea said. Pharma profits can be huge and competition for them so intense that companies or employees are incentivized to engage in illegal referrals, she said.

“I’m confident that as long as there are speaker programs there will be either individuals or whole companies looking for ways to maximize their use for promotional purposes rather than for scientific education,” Pelfrey Duryea said. “It would perhaps take a real shake-up in our health system to fix the misalignment,” of incentives, she said.

Further to this point, there were high-profile FCA cases settling at the time Biogen was allegedly engaging in its risky conduct that didn’t stop the firm.

“One would think during that time the big settlements would have had a preventive effect,” said Pelfrey Duryea. “I hope that, over time, through the combined effect of enforcement and internal compliance and ethics, we can put an end to the explicit use of those (speaker) programs as kickbacks.”

Before he filed the lawsuit, Bawduniak tried to get the attention of Biogen’s compliance professionals and management but was ignored, according to his representatives at Greene. That is all too common a mistake, Colapinto said.

“When we represent whistleblowers, we’ve heard the hostility and arrogance they receive in response to raising these issues internally,” he said.

Companies need to create a “true speak-up culture” that encourages employees to report concerns internally, Scielzo said. “Whistleblowers play a vital role in your compliance program. You want them to know they will be heard,” she said.

“It’s a call for companies to remember compliance is there to keep them out of this kind of trouble,” Pelfrey Duryea said. “You have a compliance function for a reason.”

In fiscal year 2021, there were 598 qui tam lawsuits filed. Settlements and judgments in these and earlier suits totaled $1.6 billion of the $5.6 billion for all FCA settlements during the year, according to the Justice Department.