Jazz Pharmaceuticals Sets Aside $57 Million to Settle DOJ Probe

(Bloomberg) -- Jazz Pharmaceuticals Plc reached a tentative agreement with the Justice Department to settle a probe over its donations to charities that help people afford drugs, part of a long-running U.S. investigation into drugmaker ties to such groups.

In a securities filing Tuesday, the maker of the costly narcolepsy drug Xyrem said it reached an agreement in principle in April for a civil settlement and has set aside $57 million to resolve the probe. The company had previously received multiple subpoenas from the Justice Department over its charitable donations.

“We cannot provide assurances that our efforts to reach a final settlement with the DOJ will be successful,” Jazz 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.”

A Jazz spokeswoman said the company was “pleased” to have reached the agreement in principle. It has a comprehensive program to ensure compliance with government rules, she said.

Before the filing, Jazz shares closed at $147.56 in New York on Tuesday. They are up 9.6 percent so far this year.

While drugmakers are allowed to directly help patients who have private insurance, such as by giving them coupons to cover their copays, they can’t do it for the millions of patients on government-funded Medicare plans. The government considers that a kickback, one that could steer patients toward higher-priced medications.

But the U.S. does allow drugmakers to donate money to independent patient-assistance charities, which can help Medicare recipients with out-of-pocket expenses, so long as the pharmaceutical companies don’t exert any influence over how the charities are run or who they help.

Blurred Lines

Despite government rules, the lines separating drug companies and charities have sometimes become blurred. A Bloomberg Businessweek investigation in 2016 found that one charity in some cases appeared to give preferential treatment to patients of donor companies. For instance, patients who needed Jazz’s Xyrem got help quickly, while patients using other narcolepsy drugs from nondonors were sometimes steered away or waitlisted.

In December, the DOJ announced a $210 million settlement with United Therapeutics Corp., a maker of pulmonary hypertension drugs, for using a charity to funnel money to its own patients. The company tracked its donations to ensure that sales from Medicare patients being helped “far exceeded” its donations, the government alleged. Separately, Celgene Corp. and Aegerion Pharmaceuticals reached settlements with federal and state officials in 2017.

©2018 Bloomberg L.P.