Legal, Regulatory

Jazz, Lundbeck and Alexion pay $122M+ to resolve DoJ claims of using charities as ‘conduits’ to stimulate use of their drugs

Three drugmakers — Jazz Pharma, Lundbeck and Alexion — are paying a total $122.6 million to resolve allegations that they employed charitable foundations to help cover Medicare out-of-pocket costs for their own drugs to encourage the use of their own medicines.

Andrew Lelling

The US Department of Justice has charged the trifecta as part of a wider probe accusing biopharma companies of violating the “anti-kickback statute,” which forbids them from offering or paying directly or indirectly any remuneration — including copays — to induce Medicare or Civilian Health and Medical Program (ChampVA) patients to purchase the company’s drugs.

The investigation comes at a time when soaring prescription drug prices have sparked public furor — copays, which impose a portion of the list price of the drug on to the patient, were introduced by Congress to partly serve as a check on health care costs. In this case, the trio of companies have been allegedly using “independent” financial assistance charities to serve as “conduits” for the the companies to subsidize the copays of their own drugs — in effect, illegally promoting the use of their treatments.

Jazz $JAZZ was accused of improperly encouraging the use of two of its products using charities: its narcolepsy drug Xyrem and its painkiller Prialt, and has agreed to pay $57 million to resolve the government’s allegations, without admitting any wrongdoing.

  • In 2011, Jazz asked a foundation to create a fund that would pay the copays of Xyrem Medicare patients and that the foundation agreed to establish a “Narcolepsy Fund,” to which Jazz became the sole donor, the DoJ alleged, adding that Jazz made Medicare patients ineligible for Jazz’s free drug program and instead referred Xyrem Medicare patients to the foundation. Meanwhile, Jazz raised the price of Xyrem by over 150 percent from 2011 through the end of the relevant time period, the DoJ noted.
  • Jazz asked the same foundation to create a fund ostensibly to assist patients with the co-pays of any severe chronic pain drugs, but which, in practice, almost exclusively paid Prialt Medicare copays, the DoJ said, adding that shortly after creating the fund, the foundation allegedly told Jazz that when severe chronic pain patients seeking assistance with other drugs contacted the foundation, it would refer them elsewhere.

Lundbeck was accused of engaging in a similar scheme to invigorate sales of its Huntington’s disease drug Xenazine, and the Danish drugmaker has agreed to fork over $52.6 million to settle the claims.

Lundbeck was the sole donor and made millions in payments to a fund at a foundation that ostensibly provided financial support only for patients with Huntington’s disease, but the company referred Xenazine patients with other conditions to this foundation, the DoJ said. In addition, Lundbeck does not permit Medicare and ChampVA patients to participate in its free drug program for Xenazine — instead, in order to induce Medicare and ChampVA to purchase Xenazine, Lundbeck referred financially needy non-Huntington’s Disease Xenazine patients to the foundation, the DoJ alleged.

Alexion $ALXN triggered the DoJ’s interest in relation to its pricey rare blood disorder drug, Soliris, which costs more than half a million US dollars annually. The drugmaker agreed to pay $13 million for its alleged penalties.

Alexion made donations to a “Complement-Mediated Disease” (CMD) fund at a foundation to pay the Medicare copay obligations of patients taking Soliris and to induce those patients’ purchases of Soliris knowing that its price was a barrier, the DoJ claimed, adding that as the sole donor to the fund, Alexion allegedly understood that the foundation’s provision of financial assistance was contingent on the patient taking Soliris. In addition, Alexion had a general practice of not permitting Medicare patients to participate in its free drug program, instead Alexion referred Medicare patients prescribed Soliris to the foundation via a referral portal, the DoJ alleged.

Overall, Jazz and Lundbeck were made to also sign five-year corporate integrity agreements as part of their settlements, requiring them to implement measures and controls to promote independence from any patient assistance programs to which they donate. Alexion did not suffer the same fate, since it has already made “sweeping and fundamental organizational changes” to its organizational makeup, including hiring a new eight-member executive leadership team and changing half of the members of its board, the DoJ said.

“This misconduct is widespread, and enforcement will continue until pharmaceutical companies stop circumventing the anti-kickback laws to artificially bolster high drug prices, all at the expense of American taxpayers,” said US Attorney Andrew Lelling in a statement.


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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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