Jazz Pharmaceuticals Sets Aside $57M to Settle DOJ Probe

Jazz Pharmaceuticals Plc disclosed yesterday it has reached a tentative agreement to pay $57 million to resolve a Justice Department probe over its donations to charities that reduce drug prices for Medicare patients. The company manufactures Xyrem, a costly drug used to treat narcolepsy.

Jazz had previously received multiple DOJ subpoenas concerning its charitable donations and announced the agreement in principle in a Tuesday filing with the Securities and Exchange Commission. “We cannot provide assurances that our efforts to reach a final settlement with the DOJ will be successful,” the company said in the filing. “Any such settlement could also involve entry into a corporate integrity agreement, which would impose costs and burdens on the operation of our business.”

Payments by drugmakers to charities to offset the costs of drugs for Medicare beneficiaries can constitute illegal kickbacks where the donor pharmaceutical company exercises influence over the charities’ operations or subsequent use of the funds. Interference by pharmaceutical companies could steer patients toward higher-priced medications. For example, according to a Bloomberg investigation, one charity appeared to give preferential treatment to patients of donor companies like Jazz. The patients who used Xyrem got help more quickly than patients using other similar drugs from non-donors.

Jazz is the latest in series of industry-wide settlements for similar conduct. In December, United Therapeutics Corp. agreed to pay $210 million for funneling money through a charity to cover its patients’ costs and increase its sales.

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