The settlement resolves allegations that Sanofi submitted false average sales price reports for the drug Hyalgan, a knee injection to treat arthritis, that did not account for free units distributed contingent on future purchases.

Average sales prices are used to determine reimbursement rates by government health programs, such as Medicare. The Justice Dept said the practice caused government programs to pay inflated amounts for Hyalgan and a competing product.

Sanofi sales representatives were given thousands of free "sample" Hyalgan syringes and used the free drug as kickbacks with a promise to provide negotiated numbers of the syringes in order to lower Hyalgan's effective price, the government claimed.

The drugmaker said it had taken "strong, proactive and effective steps" to address the issue and voluntarily halted the Hyalgan sampling program in 2009.

The settlement with the U.S. Attorney's Office, District of Massachusetts, the U.S. Department of Justice and several states resolves all claims arising out of the investigation into sampling of Hyalgan, Sanofi said.

In addition to the $109 million payment, Sanofi said it expects to enter into a Corporate Integrity Agreement with the Office of the Inspector General of the United States Department of Health and Human Services that will place its operations under enhanced scrutiny.

There are no criminal charges against the company related to the Hyalgan allegations.

(Reporting by Bill Berkrot; Editing by M.D. Golan)

• A Permanent Economic Emergency