Jazz Sets Aside $57M to Settle Probe into Charitable Giving as DOJ Continues to Investigate Potential Kickbacks

Department of Justice_Mark Van Scyoc_Editorial

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Jazz Pharmaceuticals set aside $57 million in the first quarter of 2018 to settle an investigation by the U.S. Attorney's Office for the District of Massachusetts regarding its support of 501(c)(3) organizations that provide financial assistance to Medicare patients.

The settlement funds, which were reported by Reuters, are part of a part of a civil settlement, the company said. The company announced the $57 million payment on May 8 during its first quarter financial report. However, Jazz said it could not guarantee its efforts to finally settle this investigation would be successful.

“We have been engaged in discussions with the U.S. Department of Justice about a possible resolution, and last month we reached an agreement in principle on a proposal for a civil settlement of potential claims by the DOJ subject to the negotiation of a definitive settlement agreement and other contingencies,” Bruce C. Cozadd, chief executive officer of Jazz said during a conference call with investors.

The decision by Jazz to set aside money to cover any civil agreements highlights a growing concern from the government about corporate giving to third-party charitable organizations. Pharma companies are allowed to provide philanthropic support to charities that provide patient assistance. However, companies are not allowed to use their financial influence to urge the charitable organizations to give preference to their own medications. The companies are further prohibited from providing financial assistance to people who receive their medications through government assistance programs such as Medicaid or Medicare.

Over the past few years, the government has been going after companies that engage in the shady donations as part of a massive kickback investigation. Multiple companies have been the target of subpoenas, including Pfizer, Astellas and Johnson & Johnson. In 2016 BioSpace highlighted allegations made in court that Celgene had donated millions of dollars to charities to help patients afford high-priced cancer drugs the company manufactures and markets. The government said it was a scheme to turn a profit of billions of dollars. In August 2017 Celgene agreed to pay $280 million to settle the allegations of fraud.

The biggest charge in the recent past was made against United Therapeutics. In December United Therapeutics disclosed that it had set aside $210 million to cover the cost of a government probe into its support of similar charitable giving programs -- support that the government called a kickback. The government alleged that United Therapeutics was providing funding to third-party charity organizations who in turn would urge those patients to receive the company’s pulmonary arterial hypertension (PAH) medications from Medicare. The government alleged that between February 2010 and January 2014, United Therapeutics “routinely obtained data from the foundation detailing how many patients on each UT PAH drug the foundation had assisted and how much the foundation had spent on those patients.” Additionally, the government said United Therapeutics, in turn, used this data to decide the amount to donate to the foundation.  

The allegations against Jazz Pharma are not a first time thing. Last year the company reached a comprehensive settlement with the government regarding the marketing of its narcolepsy drug, Xyrem. The company agreed to pay $20 million over a period of five years, which includes payment to Medicaid participating states.

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