Purdue Pharma to Plead Guilty, Pay $8.3 Billion Over Opioids (3)

Purdue Pharma LP will plead guilty to three felonies and pay $8.3 billion to settle federal probes of how it marketed OxyContin, the highly addictive painkiller blamed for helping spark the U.S. opioid epidemic.

The agreement calls for Purdue’s owners, members of the billionaire Sackler family, to make an immediate $225 million payment to the government and for the company to pay $250 million after its bankruptcy is concluded, the U.S. Department of Justice said Wednesday. The remaining amount owed by Purdue will be counted toward the company’s payout to its creditors, court records show.

The deal is likely to boost Purdue’s effort to move past claims it helped spark a public-health crisis over opioids with its marketing of OxyContin. Yet the company still faces thousands of civil claims by local and state officials, for which Purdue has previously proposed a $10 billion settlement in bankruptcy court. Governments are seeking reimbursement from Purdue and others for tax dollars spent coping with the crisis, which has led to more than 200,000 U.S. overdose deaths and chronic addiction.

“Purdue deeply regrets and accepts responsibility for the misconduct,” Purdue Chairman Stephen Miller said in a statement. “Resolving the DOJ investigations is an essential step in our bankruptcy process. The settlement agreement will pave the way for Purdue to submit a plan of reorganization to the bankruptcy court that will transfer all of Purdue’s assets” to a new company owned by the public, he said.

To cope with the tidal wave of claims, Purdue last year filed for Chapter 11 protection in bankruptcy court in New York. U.S. Bankruptcy Judge Robert Drain in White Plains, New York, must approve the settlement with the Department of Justice for it to become final.

Sackler family members who served on Purdue’s board “acted ethically and lawfully” in overseeing the company’s operations, and they reached the government deal “to facilitate a global resolution that directs substantial funding to communities in need, rather than to years of legal proceedings,” a family representative said in an emailed statement.

Read More: How the Sacklers Shifted $10.8 Billion of Their Opioid Fortune

As for the criminal charges, “no member of the Sackler family was involved in that conduct or served in a management role at Purdue” during the period under federal investigation, according to the statement.

Deputy Attorney General Jeffrey Rosen, during a press conference Wednesday, said the settlement with members of the Sackler family resolved their individual civil liability for OxyContin’s wrongful market, but doesn’t bar future criminal prosecution.

The government settlements with Purdue and members of the Sackler family involved sizable amounts of money and “gave no one a pass,” said Christina Nolan, the U.S. Attorney for Vermont who was involved in the investigation of the company’s payments to a medical-software provider.

Federal prosecutors and state and local governments say Purdue fueled the opioid epidemic with illegal OxyContin marketing. The company will plead guilty to conspiracy to defraud the U.S. and two counts of conspiracy to violate a federal anti-kickback law. The plea will come at a later date.

Guilty Pleas

Purdue will admit that from May 2007 to March 2017, it conspired to defraud the U.S. by misleading Drug Enforcement Administration officials about the effectiveness of its opioid-monitoring systems, the Justice Department said.

The drugmaker also will admit to conspiring to violate federal kickback statutes by paying sham speaker fees to doctors who ramped up OxyContin prescriptions, the government said. And Purdue will acknowledge illegally making payments to Practice Fusion, an electronic health-records company, in exchange for using the firm’s software to sway doctors into prescribing larger amounts of the opioid-based painkiller and other Purdue drugs, the government said. According to media reports earlier this year, those payments amounted to $1 million.

The $225 million civil settlement announced Wednesday resolved allegations that board members including Richard Sackler, David Sackler, Mortimer Sackler and other family members urged Purdue executives find a way to pump up OxyContin sales in 2012 when the legitimate market for opioids had contracted, the Department of Justice said.

Under a plan the family members approved, entitled “Evolve to Excellence,” Purdue sales reps stepped up their OxyContin marketing to high-volume prescribers, which resulted in the addictive pills being used in ways that were “unsafe, ineffective and medically unnecessary,” the government said.

Bankruptcy Plan

As part of its 2019 bankruptcy case, Purdue is proposing a opioid-settlement deal worth more than $10 billion, calling for Sackler family members to hand over the company and all its assets to a trust controlled by the states, cities and counties suing it. As part of that proposal, members of the Sackler family would contribute $3 billion themselves.

Joe Rice, a lawyer for state and local governments suing Purdue, said the federal deal was a step in the right direction. “This should help us get the most value possible for Purdue’s assets and provide more funds to address this country’s opioid problems,” Rice said in an interview.

But numerous state attorneys general, led by Massachusetts Attorney General Maura Healey and New York Attorney General Letitia James, oppose the Sackler’s bankruptcy offer. They want the family to dig into their own pockets for additional billions, and they pledged to continue their own investigations.

“DOJ failed,” Healey said in an emailed statement on Wednesday. “Justice in this case requires exposing the truth and holding the perpetrators accountable, not rushing a settlement to beat an election. I am not done with Purdue and the Sacklers.”

Transfers

A bankruptcy audit last year uncovered $10.4 billion in company transfers engineered by family members since 2008. Some of that money went to offshore trusts and holding companies controlled by the Sacklers. On the eve of the plea’s announcement, Justice Department lawyers urged Drain to limit creditors’ investigations into billions of dollars some members of the Sackler family took out of Purdue.

Prosecutors argued in an Oct. 19 letter that forcing family members to hand over to creditors files produced during the Justice Department’s OxyContin marketing probe would provide a disincentive in future cases for targets to cooperate with the government.

It’s not the first time Purdue agreed to plead guilty to criminal charges over OxyContin. In 2007, the drugmaker and three of its top executives pleaded guilty to “misbranding” the painkiller, resulting in more than $630 million in civil and criminal penalties -- one of the largest pharmaceutical settlements in U.S. history at the time.

As part of that accord, Purdue specifically acknowledged it trained its sales representatives to mislead physicians about OxyContin’s addiction risks. The executives were sentenced to community service and served no jail time.

The bankruptcy case is In RE: Purdue Pharma LP 19-23649, U.S. Bankruptcy Court for the Southern District of New York (White Plains).

(Updates with more details on Sackler family settlement.)

--With assistance from Jeremy Hill.

To contact the reporters on this story:
Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net;
Chris Strohm in Washington at cstrohm1@bloomberg.net

To contact the editors responsible for this story:
David Glovin at dglovin@bloomberg.net

Steve Stroth

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