The firm's US division agreed to the fine for marketing the the anti-psychotic drug Seroquel for so-called "off-label" uses not included in the drug's approved product label, the Justice Department said.
US authorities contended that AstraZeneca illegally marketed Seroquel for uses never approved by the Food and Drug Administration (FDA) such as aggression, Alzheimer's disease, anger management, anxiety, attention deficit hyperactivity disorder, bipolar maintenance, dementia, depression, mood disorder, post-traumatic stress disorder, and sleeplessness.
By doing so, the pharmaceutical group received government insurance payments that officials said were fraudulent.
Under the settlement terms, the federal government will receive some $301 million and various state insurance programs will get $218 million.
In New York, AstraZeneca shares were down over two-and-a-half percent, to
$43.77 before the close of trading.
The FDA originally approved Seroquel in September 1997 to treat manifestations of psychotic disorders. In September 2000, FDA proposed narrowing Seroquel's approval to the short term treatment of schizophrenia only. It later approved Seroquel for short term treatment of acute manic episodes associated with bipolar disorder and for bipolar depression.
"When pharmaceutical companies interfere with the FDA's mission to insure that drugs are safe and effective, they undermine the doctor-patient relationship and put the health and safety of patients at risk," said Michael Levy, the US attorney for the Eastern District of Pennsylvania.
"People have a legal right to know that pharmaceutical companies are marketing their drugs only for uses approved by the FDA and that their doctors' judgment has not been affected by misinformation from a pharmaceutical company trying to boost revenues."
The government also contended that AstraZeneca violated the federal Anti-Kickback Statute by offering and paying illegal remuneration to doctors it recruited to "advise" the firm about marketing for unapproved and unaccepted uses of Seroquel.
"Rooting out health care fraud is a top priority for the Obama administration," said US Health and Human Services Secretary Kathleen Sebelius.
"Today's settlement sends a clear warning to any individual or company seeking to defraud our health care system and returns hundreds of millions of dollars of taxpayer money to the Medicare trust fund where they belong."
The investigation was triggered by a "whistleblower lawsuit" filed under US law.
James Wetta, the whistleblower in the action, will receive more than $45 million from the federal share of the civil recovery.
AstraZeneca's US general counsel Glenn Engelmann said the company agreed to the fine without admitting wrongdoing.
"It is in the best interest of AstraZeneca to resolve these matters and to move forward with our business of discovering and developing important, life-changing medicines, while avoiding the delay, uncertainty, and expense of protracted litigation," he said.
"While we deny the allegations, AstraZeneca takes its obligations very seriously under its agreements with the government."