| Item 1.01. | Entry into a Material Definitive Agreement. |
On April 4, 2019, Jazz Pharmaceuticals plc (the “Company”) and its subsidiaries Jazz Pharmaceuticals, Inc. and Jazz Pharmaceuticals Ireland Limited (collectively, “Jazz”) entered into a civil Settlement Agreement (the “Settlement Agreement”) with the U.S. Department of Justice (“DOJ”) and the Office of Inspector General (“OIG”) of the Department of Health and Human Services (collectively, the “U.S. Government”). The Settlement Agreement relates to subpoenas that Jazz received from the DOJ in 2016 and 2017 requesting documents related to Jazz’s support of charitable organizations that provide financial assistance to Medicare patients. Jazz previously announced an agreement in principle to resolve this matter.
In accordance with the Settlement Agreement, the Company will pay the U.S. Government the sum of $57.0 million plus interest at a rate of 2.75% commencing from April 10, 2018 through the day before full payment is made, within ten business days. During 2018, the Company recorded $58.2 million related to this matter, including related interest, within accrued liabilities on its consolidated balance sheet with the related expense included in selling, general and administrative expenses on its consolidated statement of income. The U.S. Government will release the Company from any civil or administrative monetary claim the U.S. Government has arising from allegations described in the Settlement Agreement relating to Jazz’s conduct between 2011 and May 2014 in supporting a charitable foundation that provided financial assistance to Medicare patients. The Settlement Agreement is not an admission of any wrongdoing or liability by Jazz but a settlement of the U.S. Government’s claims.
In connection with the civil settlement, the Company also entered into a Corporate Integrity Agreement (the “Corporate Integrity Agreement”) with the OIG, which requires the Company to maintain its ongoing corporate compliance program and obligates the Company to implement or continue, as applicable, a set of defined corporate integrity activities for a period of five years from the effective date of the Corporate Integrity Agreement. Among other things, the Corporate Integrity Agreement requires the Company to impose certain oversight obligations on the nominating and corporate governance committee of the Company’s board of directors; provide certain management certifications; continue or implement, as applicable, certain compliance training and education; implement a risk assessment and mitigation process; maintain certain policies, procedures and practices for cash donations to independent charity patient assistance programs and for Jazz-sponsored patient assistance programs; and engage an independent review organization to perform certain auditing and reviews. The Corporate Integrity Agreement also includes certain reporting, certification, record retention, and notification requirements. In the event of a breach of the Corporate Integrity Agreement, Jazz could become liable for payment of certain stipulated penalties or could be excluded from participation in federal health care programs.
The foregoing description of the Settlement Agreement and Corporate Integrity Agreement is not intended to be complete and is qualified in its entirety by reference to the full text of such agreements, which will be filed as exhibits to Jazz’s quarterly report onForm 10-Q for the quarter ended March 31, 2019.
