Purdue Pharma LP agreed to plead guilty to three felonies related to its marketing and distribution of powerful painkiller OxyContin, as part of an $8.34 billion settlement that caps yearslong federal investigations into tactics the government said helped fuel the opioid crisis.
The Justice Department unveiled the settlement Wednesday, alongside a deal with Purdue’s owners, members of the Sackler family. The price tag for Purdue, however, is largely symbolic: The bankrupt company’s assets fall well short of $8 billion. It will pay the federal government $225 million, and much of the rest of the fines will be waived to allow more money to flow to states, counties and tribes that accuse Purdue of sparking widespread opioid addiction and deaths.
The Sacklers, meanwhile, resolved civil charges for a separate $225 million, but prosecutors made clear criminal investigations into the family continue.
The government framed the deals as the latest in a crusade to crack down on drug abuse by targeting what Deputy Attorney General Jeffrey Rosen called “unlawful activity involving opioids at every level of the supply chain.”
Thousands of lawsuits have been filed by state and local governments against Purdue and other major drugmakers and distributors over an opioid crisis that has killed at least 450,000 people in the U.S. since 1999. The companies have pushed back, saying deaths by illegal opioids like fentanyl can’t be pegged on the legal prescription market.
The coronavirus pandemic has heightened drug-overdose problems in some states, as providing treatment becomes more complicated and social isolation destabilizes some trying to stay sober.
Steve Miller, the chairman of Purdue’s board, said the company regrets and accepts responsibility for the misconduct cited by prosecutors, which includes illegal kickbacks and misrepresentations made to the Drug Enforcement Administration. “Purdue today is a very different company,” he said. “We have made significant changes to our leadership, operations, governance, and oversight.”
The Sacklers didn’t concede the government’s accusations as part of the deal. The family members who once served on Purdue’s board said Wednesday they had rigorous policies to keep the company in compliance with the law and that all financial distributions to the family were proper.
The government says otherwise, alleging in court filings Wednesday that the family illegally transferred money out of the company to hide it from future creditors.
The documents cite an email that Mortimer D.A. Sackler sent in September 2014 to his cousin and fellow board member Jonathan Sackler to say Purdue was in a death spiral.
Jonathan Sackler responded, according to court documents, that “we’ve taken a fantastic amount of money out of the business.” About a month later, he wrote to family members that money could still be made off opioids, “but in the aggregate, it’s more of a smart milking program than a growth program.”
The Justice Department also alleges Sackler family members approved a program in 2013 called “Evolve to Excellence” that focused marketing on doctors writing as much as 25 times more OxyContin prescriptions than their peers.
The Sacklers said Wednesday that the release of company documents called for in the Justice Department agreements will show family members “acted ethically and lawfully.” The family said it has compassion for those who suffer from opioid addiction.
Stamford, Conn.-based Purdue filed for bankruptcy more than a year ago to halt the opioid litigation and try to cut a broad settlement. Under a plan to exit bankruptcy, supported by the Justice Department, Purdue has proposed turning itself into a corporate trust, run for the benefit of the public. The Sacklers will relinquish all ownership of the company, which would continue to sell OxyContin and develop opioid overdose- and addiction-treatment drugs.
Two dozen states, however, have opposed any future for Purdue other than a sale to a private buyer.
“The public deserves assurance that no opioid business is given the special protection of being placed under a public umbrella,” a group of 25 states, including Massachusetts and California, wrote in a letter last week to U.S. Attorney General William Barr. Selling the business outright, the letter says, ”may also deliver more upfront money that cities and states can use to abate the opioid epidemic.”
The dissenting states continued to decry the settlement on Wednesday. “It allows billionaires to keep their billions,” New York Attorney General Letitia James said.
The current value of Purdue’s bankruptcy estate is around $5 billion, which includes $3 billion pledged by the Sacklers. States that oppose Purdue’s proposed bankruptcy plan want to see more money personally contributed by the Sacklers and are in a mediation to gain clarity into what the family is worth.
The Sacklers have been shielded from litigation until next March by the judge overseeing Purdue’s chapter 11 case even though the family didn’t personally file for bankruptcy.
The Justice Department has penalized Purdue before. After a federal investigation, the company and three of its executives in 2007 pleaded guilty to criminal charges of misleading the public about the addiction risk of OxyContin and paid $634.5 million in government penalties and costs.
A week after those guilty pleas, Jonathan Sackler emailed two other Sacklers and a longtime financial adviser, saying that an investment banker once told him, “your family is already rich, the one thing you don’t want to do is to become poor,” according to Justice Department filings.
David Sackler, who wouldn’t join the board until several years later, replied to his uncle’s email: “[W]hat do you think is going on in all of these courtrooms right now? We’re rich? For how long? Until which suits get through to the family?”
The Sacklers for years avoided being publicly linked to OxyContin and the opioid crisis, instead cultivating an image as global philanthropists. As litigation against the company intensified, institutions including New York’s Metropolitan Museum of Art and the Columbia University said they would no longer take money from the family.
Purdue is one of three drugmakers to file for bankruptcy in recent years in an attempt to negotiate a settlement of opioid-related lawsuits. Counties and states are also nearing a $26 billion opioid settlement with three major drug distributors and drugmaker
The amount, while significant, would fall far short of the historic tobacco settlement with states that brought in $206 billion, a case that the opioid litigation is often compared with.
Several trials scheduled to take place this year in opioid cases have been delayed because of the coronavirus pandemic, which has slowed settlement talks.
Write to Sara Randazzo at [email protected]
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