Funds designated for resolution of DOJ investigation into Patient Assistant Program donations

In January, we noted that the new U.S. Attorney in Massachusetts, Andrew Lelling, had publicly stated that he plans to keep the pressure on drug makers and patient assistance charities that are involved in “crooked” donations – see “Massachusetts’ New U.S. Attorney Vows to Continue Pressure on Drug Makers and Patient Assistance Programs.”

Lelling appears to be keeping to that promise based on a disclosure by Dublin-based drug maker Jazz Pharmaceuticals PLC (Jazz) in a recent quarterly Securities and Exchange Commission (SEC) filing. Jazz is the maker of Xyrem, an expensive drug used primarily in the treatment of narcolepsy.

Jazz, like many other pharmaceutical companies, engages in the practice of donating large sums to charitable Patient Assistance Programs that help patients, particularly those served by federally-funded health programs like Medicare and Medicaid, afford expensive prescription drugs by funding health insurance copayments. The programs rely on government protection from Kickback liability, which is generally granted so long as the programs demonstrate that a bona fide charitable organization is interposed between the drug manufacturers and the recipients of aid.  Many pharmaceutical makers have run into trouble, however, when those donations begin to look more like kickbacks.

In its quarterly financial statement (Form 10-Q) filed with the SEC, Jazz revealed that in May and October of 2016, and in November of 2017, it received subpoenas from the U.S. Attorney’s Office for the District of Massachusetts requesting documents related to the company’s support of charitable patient assistance programs. The filing states, “We have engaged with the DOJ about a possible resolution, and in the first quarter of 2018, we recorded a $57.0 million accrual related to this matter.” Jazz further indicated in the filing that it anticipates incurring additional costs related to the investigation since the agreement with DOJ is not yet final.

Jazz isn’t the first, and is unlikely to be the last, pharmaceutical company to run afoul of the DOJ regarding Patient Assistance Program donations.  In the past year a number of companies have received similar subpoenas and/or reached significant financial settlements with the government, including United Therapeutics Corp., Valeant Pharmaceuticals, Gilead, and Biogen.

The FisherBroyles Pharmacy and Health Care Law team is pleased to keep you updated on events of interest to those in the healthcare and pharmaceutical industries. Questions regarding the subject matter of this alert may be directed to any of the following attorneys:

Brian Dickerson, FisherBroyles Partner
Brian E. Dickerson

Anthony Calamunci, FisherBroyles Partner
Anthony Calamunci

Nicole Waid, FisherBroyles Partner
Nicole Hughes Waid

Amy Butler, FisherBroyles Partner
Amy Butler