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Biogen’s $900 Million False Claims Act Settlement: Kicking the Can Down the Road While Creating Great Case Law for Whistleblowers and the Government

Biogen Inc. (Biogen), the Massachusetts-based pharmaceutical company, recently agreed to pay $900 million to resolve a ten-year-old qui tam case in which the whistleblower, Michael Bawduniak, alleged that Biogen paid a variety of kickbacks to induce physicians to prescribe Biogen’s expensive multiple sclerosis drugs. The settlement is notable not only because of its size – it is the largest-ever settlement in a qui tam case that the government declined to handle itself – but also because Biogen’s strategy of delaying its day of reckoning almost certainly cost it (and its shareholders) hundreds of millions of dollars and resulted in the creation of excellent case law for plaintiffs in False Claims Act cases predicated on violations of the anti-kickback statute (AKS).

Mr. Bawduniak, a former Biogen sales representative, filed his qui tam case in 2012. The government investigated Mr. Bawduniak’s allegations for three years, and then, in 2015, filed a notice that it was declining to intervene in the case. At that point, Biogen was represented by a team from Skadden Arps, one of the nation’s largest and most prestigious law firms. In April 2018, the court denied Biogen’s motion to dismiss Mr. Bawduniak’s complaint. Shortly thereafter, a team of lawyers from Ropes & Gray, a prestigious Boston law firm, entered the case for Biogen. Then, in late 2019, Biogen added yet another huge law firm, New York-based Cravath, Swaine & Moore, to the host of lawyers defending it against Mr. Bawduniak’s allegations.

Members of the Cravath team previously had represented Novartis Pharmaceuticals in a similar qui tam case that lasted almost a decade and involved allegations of kickbacks to physicians. For Novartis, the Cravath team took the case to the verge of trial and then reached a $678 million settlement. For Biogen, Cravath appears to have employed a similar strategy, again taking the case to the verge of trial and then agreeing to an astronomical settlement.

Why do pharmaceutical companies and their lawyers do this? A cynic would say that the answer for the lawyers is obvious: because defense lawyers bill by the hour, they stand to make more money the longer the case lasts. A logical answer is harder to discern for the pharmaceutical companies. In both the Novartis and Biogen cases, the companies presumably could have settled much earlier at a fraction of the cost. Instead, the companies allowed the cases to fester, with the plaintiffs finding ever more support for their allegations and hardening their settlement positions. Meanwhile, the pharmaceutical companies had to spend tens of millions of dollars in legal fees – Skadden Arps, Ropes & Gray, and Cravath don’t come cheap. Moreover, in the Biogen case, the company also will have to pay Mr. Bawduniak’s legal fees and costs, which likely were also in the millions of dollars after ten years of litigation. See 31 U.S.C. § 3730(d)(2). It’s hard to conceive how these sorts of scorched earth litigation tactics are in the best interests of the pharmaceutical companies’ shareholders.

Not only did Biogen likely spend hundreds of millions of dollars more than it would have spent in the Bawduniak case had it tried more proactively to resolve the case earlier, it also created excellent case law for plaintiffs in the process. In 2018, when the court denied Biogen’s motion to dismiss, the court was the first in the First Circuit to hold that “a claim is false if it seeks reimbursement for a prescription that was not provided in compliance with the Anti-Kickback Statute, regardless of whether the claim was the result of a quid-pro-quo exchange or would have been submitted even absent the kickback.” United States ex rel. Bawduniak v. Biogen Idec, Inc., 2018 WL 1996829 (D. Mass. Apr. 27, 2018). Then, in July 2022, in the course of ruling on various pre-trial issues, the court held that “a violation of the AKS is per se a violation of the False Claims Act.” Bawduniak, 2022 WL 2438971 (D. Mass. July 5, 2022). These precedential rulings will benefit False Claims Act plaintiffs in Massachusetts for years to come, and none of them would have happened had Biogen focused promptly on resolving the case rather than litigating it.