BOSTON, April 10 (Reuters) - The U.S. Justice Department

on Wednesday accused Regeneron Pharmaceuticals ( REGN ) of

manipulating Medicare's drug-pricing process by inflating the

average sales price for its expensive macular degeneration drug

Eylea.

The department, in a complaint filed in federal court in

Boston, alleged the drugmaker failed for years to report how it

paid hundreds of millions of dollars to subsidize Eylea

purchases by reimbursing drug distributors for credit-card

processing fees.

Those payments were made to ensure that specialty drug

distributors would accept credit cards from doctors and retina

practices purchasing Eylea while continuing to charge physicians

a lower price, according to the lawsuit.

The drug, which the Tarrytown, New York-based company began

marketing in 2011, is approved by the U.S. Food and Drug

Administration for treating conditions including wet age-related

macular degeneration, which impairs vision.

The medication has a wholesale acquisition cost of $1,850

per vial, and the department said it was a leading expense for

Medicare, the government healthcare program for people 65 and

older, with more than $25 billion paid out from 2012 to 2023.

The lawsuit said that by not reporting to Medicare all price

concessions for Eylea, the drugmaker violated the False Claims

Act, which prohibits submitting a false claim to the government

for payment.

"By doing so, Regeneron greatly inflated the costs of its

drug to Medicare over many years and enhanced its revenues,"

acting U.S. Attorney Joshua Levy of Massachusetts said in a

statement.

Regeneron in a statement called the allegations without

merit and said its reimbursement of costs incurred by specialty

distributors were lawful. It said it would "vigorously defend

itself in court."

The case is the latest by the U.S. Attorney's Office in

Massachusetts against Regeneron concerning Eylea.

An ongoing lawsuit filed in 2020 accused the drugmaker of

using a charity that helps cover Medicare patients' drug costs

as a means to pay kickbacks for using Eylea. The company denies

wrongdoing.

Wednesday's case began as a whistleblower lawsuit filed in

2020 by three people who worked for Regeneron. It was filed

under the False Claims Act, which allows whistleblowers to sue

companies to recover taxpayer funds paid out based on false

claims.

The cases are filed initially under seal to allow the

Justice Department a chance to investigate and decide whether to

intervene. Whistleblowers are entitled to a share of any

financial recovery.