Jazz cop a plea - ex-rep whistleblower gets payday

Jazz Pharmaceuticals has agreed to pay $20 million in penalties and victim compensation to resolve parallel criminal and civil investigations conducted by the United States Attorney's Office for the Eastern District of New York relating to the illegal marketing practices of its wholly-owned subsidiary Orphan Medical, Inc. (Orphan).

As part of this resolution, Orphan plead guilty this morning to felony misbranding, in violation of the Food, Drug, and Cosmetic Act in connection with its illegal promotion of the prescription medication Xyrem, also known as gamma-hydroxybutyrate or "GHB," for unapproved uses. GHB is a powerful and fast-acting central nervous system depressant that has been subject to abuse as a recreational drug and is classified by the Department of Health and Human Services (HHS) as a "date rape" drug. The guilty plea proceeding was held before United States District Judge Eric N. Vitaliano.

The criminal misbranding scheme induced physicians throughout the country to write prescriptions for Xyrem that were not reimbursable by private health insurers or public insurance programs like Medicare and Medicaid, and caused millions of dollars of losses to these insurers. Pursuant to a non- prosecution agreement with the United States, Jazz has agreed to guarantee Orphan's obligation to pay criminal restitution to public and private insurers of approximately $12.2 million and a criminal fine of $5 million, and to provide ongoing cooperation to the government in connection with its investigation and prosecution of the underlying illegal marketing scheme. Pursuant to the civil settlement agreement, Jazz and Orphan have agreed to resolve the government's civil False Claims Act claims by paying $3.75 million, plus interest. A portion of the restitution ordered in the criminal case is also accounted for as a part of the civil settlement, resulting in a total payment by Jazz and Orphan of $20 million.

Jazz has also agreed to implement the terms of a corporate integrity agreement required by the Office of Inspector General for HHS, and has taken other proactive and remedial measures, including implementing a Code of Conduct prohibiting promotion for unapproved or "off-label" use, requiring compliance training for promotional speakers and sales representatives, and replacing the former Orphan regional sales managers who were responsible for overseeing the conduct of sales representatives in their respective territories.

The government's investigation was commenced after a former sales representative for Orphan filed a suit in the Eastern District of New York on behalf of the United States.

Under the federal False Claims Act, a private individual is allowed to file a whistleblower suit to bring the United States information about wrongdoing. If the United States is successful in resolving or litigating the whistleblower's claims, the whistleblower may share in part of the recovery.

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