Jazz Pharmaceuticals: Two Copay Funds, Two Ways to Favor Its Drugs
In the Jazz Pharmaceuticals copay settlement, the company agreed to pay $57 million to resolve allegations of copay charity kickbacks involving Xyrem and Prialt. The government’s account describes different ways to favor the donor’s drugs: extra paperwork for patients taking a Xyrem competitor, and a Prialt fund that did not appear on the foundation’s website. For someone working in patient assistance, those are decisions about who gets through the door.
The Department of Justice announced the pharmaceutical fraud settlement on April 4, 2019. Its $122.6 million combined announcement also covered Lundbeck and Alexion, each with a separate agreement. Jazz’s part concerned the alleged use of foundations to pay patients’ share of the cost of its own products. As part of its settlement, Jazz entered a five-year corporate integrity agreement with the Department of Health and Human Services’ Office of Inspector General, which requires measures, controls and monitoring designed to keep the company independent of any patient assistance program it donates to.
How Do Pharmaceutical Kickbacks Work?
This alleged healthcare kickback works by channeling a manufacturer’s donation to patients taking its own drug, covering their share so Medicare pays the resulting claims. The manufacturer supplies money to a foundation, and the foundation pays the copay. The company’s donation helps preserve a sale funded by public health care dollars.
That explains the commercial difference between giving a patient a free drug and paying for copay assistance. A free-drug program costs the manufacturer the cost of supplying the medicine and generates no sales revenue. A foundation-paid copay can leave the rest of the prescription payable by Medicare. Both arrangements help the patient obtain medicine, but the money reaches the manufacturer differently.
The government described that incentive plainly in its 2019 Amgen copay settlement announcement. It alleged that Amgen’s payments to a Sensipar assistance fund exceeded what it would have cost the company to supply free drugs to financially needy patients. Funding copays nevertheless generated Medicare claims and revenue for Amgen. Spending more on assistance could make commercial sense because the rest of the prescription produced revenue.
The Department of Health and Human Services’ Office of Inspector General, in its September 2014 copayment-coupon bulletin, explained the price incentive: relieving consumers of copays removes a market constraint on manufacturers’ drug prices. The same bulletin recognized that assistance can help patients stay on medicines they could otherwise struggle to afford. The patient can receive real help while the manufacturer preserves the price that made the help necessary.
The Xyrem Narcolepsy Fund’s Extra Gate
The government alleged that Jazz became the sole donor to a Narcolepsy Fund that required patients taking competing drugs to obtain a denial letter from another assistance plan before receiving help. According to the government, Jazz asked a foundation to create the fund in 2011, and although Xyrem accounted for a small share of the overall narcolepsy market, the fund used Jazz’s donations almost exclusively to pay Xyrem copays.
That condition made the patient’s prescribed drug part of the assistance decision. Someone processing an application would encounter the distinction in a routine document request: a patient taking another manufacturer’s medicine needed an additional letter. The government’s allegation puts that ordinary piece of paperwork at the center of the fund’s preference for the donor’s product.
The Inspector General had addressed that distinction in its November 2005 patient-assistance bulletin. It described assistance based on a consistent financial-need test, awarded without regard to the donor’s interests or the patient’s choice of product. It also warned about disease categories defined so narrowly that donations effectively subsidized particular products. The Xyrem allegation shows how an extra eligibility requirement can favor a product even when the fund carries the name of a disease.
According to the government, when the fund was established, Jazz also made Medicare patients ineligible for its free drug program and referred Xyrem Medicare patients to the foundation, generating revenue from Medicare instead of continuing to give those patients the drug free. The government also alleged that Jazz raised Xyrem’s price by more than 150% from 2011 through the end of the period covered by the allegations. Copay support could cushion the patient against that increase while taxpayers, through Medicare, still faced the bill for an increasingly expensive drug.
The Prialt Fund Missing From the Website
The Prialt allegation concerned visibility. According to the government, Jazz knew that the fund did not appear on the foundation’s website, minimizing the number of non-Prialt patients seeking help from it. The fund was nominally for the copays of any severe chronic pain drug, but in practice it almost exclusively paid Prialt Medicare copays, and shortly after it was created the foundation allegedly told Jazz that it would refer patients seeking help with other drugs elsewhere.
The alleged effect began before an application reached the foundation. A rule requiring a denial letter operates when someone asks for assistance. Keeping a fund off the website affects who learns that assistance is available in the first place.
Astellas and the Drug-Class Restriction
In a separate 2019 settlement, the government alleged that Astellas sought funds restricted to androgen receptor inhibitors and then promoted the assistance as an advantage for Xtandi over competing drugs. Its account connects fund eligibility directly to the sales conversation.
According to the Justice Department, Astellas asked two foundations for those restricted funds in May 2013. Both opened them that July, with Astellas as the sole donor. The alleged preference was built into the drug class the funds would cover, then used to encourage medical providers to prescribe Xtandi.
A fund’s covered drug class, an extra application requirement and its public visibility can each influence which patients receive the donor’s support.
What Evidence Is Needed to Prove Fraud?
For a copay-fund case, the useful evidence connects the manufacturer’s decisions about assistance to the patients, drugs and Medicare claims those decisions supported. We examine how the company influenced the fund and how that influence affected the business reaching the public program.
In a case like the Xyrem fund, we look at how the extra requirement for patients taking competing drugs was explained and enforced. The person handling those requests may know how the policy was explained and who expected it to be followed.
In a case like the Prialt fund, we look at how patients learned about the assistance and how their applications reached the foundation. Someone responsible for patient referrals may see the route into a fund that a person searching the website would miss.
The financial connection matters too: which drug the assistance supported, which payer received the claim, and what information passed back to the donor. The Inspector General’s May 2014 patient-assistance supplement specifically addressed donor efforts to correlate funding with support for their own products. It explained that a favorable opinion about a charity did not protect the donor’s conduct. The communications between the two can reveal more than the charity’s public description.
The False Claims Act reaches manufacturers that cause false claims to be submitted, including when a pharmacy or physician submits the bill. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Your knowledge of an eligibility rule, a referral route or a donor instruction may supply the connection that the payment records alone do not explain.
You Saw How the Fund Worked
If you worked with fund eligibility, patient referrals or manufacturer donations, speak with our whistleblower experts about who controlled the assistance. We work with you to connect those decisions to the resulting claims and bring in pharmaceutical kickback whistleblower lawyers who understand foundation funding and Medicare payments. We stay beside you as partners throughout the case, putting your knowledge of the program to work.
