Posted on

Purdue Pharma Pleads Guilty to Criminal Charges for Opioid Sales

Purdue Pharma, the maker of OxyContin, has agreed to plead guilty to criminal charges related to its marketing of the addictive painkiller, and faces penalties of roughly $8.3 billion, the Justice Department announced on Wednesday. The settlement could pave the way for a resolution of thousands of lawsuits brought against the company for its role in a public health crisis that has killed more than 450,000 Americans since 1999.

The company’s owners, members of the wealthy Sackler family, have agreed to pay $225 million in civil penalties. Prosecutors said the agreement did not preclude the filing of criminal charges against Purdue executives or individual Sacklers.

The federal settlement does not end all of the extensive litigation against Purdue, but it does represent a significant advance in the long legal march by states, tribes, cities and counties to hold the most prominent opioid maker accountable.

In a statement issued after the announcement of the deal, Steve Miller, chairman of the company board, said: “Purdue deeply regrets and accepts responsibility for the misconduct detailed by the Department of Justice in the agreed statement of facts.”

Members of the Sackler family said in a statement that they “acted ethically and lawfully.” Issued on behalf of members who had served on the company’s board, the family statement added: “The board relied on repeated and consistent assurances from Purdue’s management team that the company was meeting all legal requirements.”

OxyContin, which came on the market in the mid-90s, is seen as an early, ferocious driver of the opioid epidemic and Purdue is regarded as the architect of muscular, misleading drug marketing. But it is unlikely the company will pay anything close to the $8.3 billion negotiated in the settlement deal. That is because Purdue sought bankruptcy court protection amid the onslaught of lawsuits, and so the federal government will now have to take its place in a long line of creditors. Typically, creditors end up collecting pennies on the dollar in bankruptcy proceedings.

The settlement does give the Justice Department and the Trump administration a high-profile achievement that the president can tout on the campaign trail. Mr. Trump won the 2016 election in part because he vowed to combat an opioid addiction crisis that had gripped large swaths of the country and continues to be an issue in important swing states.

But state attorneys general from Massachusetts, New York and North Carolina, among others, have raised questions about just how much of an effect the settlement will have with respect to holding the Sackler family to account. Purdue was keen to settle its federal legal troubles under a Trump administration, which it sensed would cut a better deal than a new Biden administration. The $225 million that the Sacklers would pay as part of their civil settlements is small relative to the family’s net worth, estimated to be at least $13 billion, much of it generated from sales of OxyContin.

Joe Rice, a negotiator for local governments that are suing Purdue, said, “Purdue is doing everything they can to get this deal done in this administration. It’s advantageous to both sides.”

This federal case against Purdue is distinct from thousands of opioid-related lawsuits against other drug manufacturers, as well as distributors and pharmacy chains, still pending in federal and state courts.

Purdue has long demanded that the federal charges against it be resolved before it would agree to a larger settlement with cities, tribes, states and individuals, who claim that its relentless marketing of OxyContin directly contributed to a crisis of addiction and overdoses, resulting in towering costs in health care, law enforcement and unemployment. Lawyers close to negotiations expect that the final settlement may emerge early next year.

In the federal settlement, the company agreed to plead guilty to felony charges of defrauding federal health agencies and violating anti-kickback laws. The penalties include $3.54 billion in criminal fines and $2 billion in criminal forfeiture of profits, the largest penalties ever levied against a pharmaceutical manufacturer. The company pleaded guilty to marketing opioids to more than 100 doctors that it suspected of writing illegal prescriptions and lying about this to the federal Drug Enforcement Administration.

Purdue also pleaded guilty to paying illegal kickbacks to doctors and to an electronic health records company, Practice Fusion. In January Practice Fusion paid $145 million in fines for taking kickbacks from drug manufacturers in exchange for embedding pop-up alerts to physicians, intended to boost opioid prescriptions.

The Purdue settlement also includes $2.8 billion in civil penalties, related to allegations that the company violated the False Claims Act by using aggressive marketing tactics to convince doctors to unnecessarily prescribe opioids — frivolous prescriptions that experts say helped fuel a drug addiction crisis that has ravaged America for decades. Those prescriptions were often paid for by federal health care programs like Medicare and Medicaid.

Mr. Miller, the Purdue chairman, said that the resolution of the Justice Department’s charges was an essential step in the company’s bankruptcy restructuring. “Purdue today is a very different company,” he added. “We have made significant changes to our leadership, operations, governance and oversight.”

This is the first time since 2007 that Purdue has pleaded guilty to federal criminal charges for misleading doctors, patients and the government about its drug. At the time, the company paid $600 million in fines.

To resolve thousands of local lawsuits, Purdue has proposed a global settlement that it values at about $10 billion. That figure includes future profits from drugs still in development as well as a $3 billion contribution from the Sacklers, which is separate from the $225 million the family has agreed to pay the federal government.

A year ago, under the weight of opioid litigation, Purdue filed for bankruptcy, and it is expected to emerge at some point as a new company. At least two other opioid manufacturers, Insys Therapeutics and Mallinckrodt, have also sought bankruptcy protection because of litigation.

Judge Robert D. Drain, who is overseeing the Purdue bankruptcy case in White Plains, N.Y., will have to approve the terms of the federal settlement and will review the billions of dollars in federal penalties alongside a long line of unsecured creditors. When the bankruptcy is finalized, Purdue said in the federal agreement, it would post documents related to the prosecutions on a public website.

But one bucket of sanctions, the $2 billion in criminal forfeiture of profits, is more likely to be paid in full. The Justice Department said on Wednesday that it would require that Purdue directly pay the U.S. Treasury just $225 million, but would earmark the remaining $1.775 billion for municipalities, states and tribes, on condition that they allocate the money to abate local opioid crises.

A second condition of the settlement has prompted an outcry from some two dozen state attorneys general: the ownership of Purdue, after it emerges from bankruptcy.

Purdue has proposed that the company be run as a “public benefit corporation,” with proceeds from continuing limited sales of OxyContin and several overdose-reversing medications under development to go toward opioid abatement. The Justice Department endorses that model.

But in a forceful letter addressed to Attorney General William P. Barr earlier this month, the state attorneys general decried the public trust model. Governments should not be in the opioid business, they said. Instead, they argued that Purdue should be run privately, with government oversight.

Another objection to the new settlement centers on the resolution of civil claims against individual Sacklers, raised by private families who are suing. A forensic audit last year by Purdue found that the Sacklers directed at least $10.7 billion in the company’s proceeds to family-controlled trusts and holding companies, even as Purdue was facing legal scrutiny. Much of those proceeds, the Sacklers have said, went toward tax payments.

In a letter to Mr. Barr, a coalition of relatives of opioid victims said the agreement was premature and too little.

Massachusetts, for example, has scheduled depositions against some Sacklers in November, during which more information may come to light.

“The D.O.J. failed,” said Maura Healey, the Massachusetts attorney general. “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, and I will never sell out the families who have been calling for justice for so long.”

During a news briefing on the federal settlement, Deputy Attorney General Jeffrey A. Rosen pushed back on critics who said that the deal was not tough enough on Purdue and the Sackler family. He said that the department had taken “very substantial” and “very significant” punitive action against Purdue, which pleaded guilty to three criminal charges, and he noted that the family would turn over ownership of the company.

A contentious issue with respect to the Sacklers is that the family itself is not seeking bankruptcy protection and has been seeking release from litigation as a condition of settling the Purdue claims.

Mr. Rice, the negotiator for thousands of local governments, favors the broad contours of a public benefit trust. “You have to figure out what you do with the limited need there may be for some opioids. You don’t maximize the value of the Purdue asset if you destroy the product totally,” he said. “And you want to make sure that the people who abused the right to sell narcotics pay for what they did. The Sacklers lose their name, their company and substantially more.”