Purdue Pharma to Pay $8B, Reorganize as Benefit Company in Opioid Settlement

The United States Department of Justice (DOJ) announced Wednesday a global resolution of criminal and civil allegations against Purdue Pharma LP along with a resolution of civil claims against individuals from the Sackler family, who founded and own the pharmaceutical giant.

The announcement of resolutions “re-affirms that the Department of Justice will not relent in its multi-pronged efforts to combat the opioids crisis,” Deputy Attorney General Jeffrey A. Rosen said in a DOJ release.

Purdue Pharma will plead guilty in federal court to three felony counts: one count of dual-object conspiracy to defraud the United States and violate the Food, Drug and Cosmetic Act, and two counts of conspiracy to violate the Federal Anti-Kickback Statute.

In its criminal pleas, Purdue has agreed to admit to conspiring to defraud the United States by maintaining to the Drug Enforcement Administration (DEA) that it was effective against diversion of opioids, when in reality, Purdue maintained marketing strategies for opioids to more than one hundred health care providers “whom the company had good reason to believe were diverting opioids,” according to the DOJ release. This resulted in misleading reporting of information to the DEA, which increased manufacturing quotas for Purdue.

Additionally, the plea will require Purdue to admit to conspiracy to violate the federal Anti-Kickback Statute; the company paid two doctors to write more prescriptions for the company’s opioids. Similarly, Purdue paid Practice Fusion Inc. to promote and coordinate orders of Purdue’s OxyContin, Butrans and Hysingla products. Purdue will also admit to aiding and abetting violations of the Food, Drug, and Cosmetic Act by permitting opioid products, such as OxyContin, to be prescribed unlawfully, or “without a legitimate medical purpose,” according to the release.

Conditions of the criminal resolution are a criminal fine of $3.544 billion and another $2 billion in criminal forfeiture — the steepest penalties ever imposed on a pharmaceutical company.

Regarding civil liability and the False Claims Act, Purdue will settle for $2.8 billion after allegations that the company caused false claims to be submitted to government health care programs. This settlement will also resolve the allegations that Purdue knowingly continued to market its opioid products to health care providers who prescribed them for “unsafe, ineffective, and medically unnecessary” reasons, as well as the allegations by the government that the company paid kickbacks to health care providers to propagate prescription of opioids as well as to Practice Fusion Inc. The allegations that Purdue had contracts with specialty pharmacies to boost prescriptions of the company’s opioids will also be resolved.

Five members of the Sackler family will pay $225 million, plus 0.75% interest, in a separate civil settlement resolving allegations from the U.S. in 2012 that the Sacklers in question knowingly approved increasing marketing for opioid prescriptions to health care providers who were already prescribing the drugs at a high rate. This settlement also includes allegations from the United States. that between 2008 and 2018, the Sacklers in question approved transfer of assets from Purdue into “Sackler family holding companies and trusts that were made to hinder future creditors, and/or were otherwise voidable as fraudulent transfers,” according to the Sackler settlement.

Under the resolutions, there will be no civil release of company executives or employees nor any criminal release of any individuals, including members of the Sackler family.

The global resolution is still subject to approval by the bankruptcy court in the Southern District of New York. If approved, one condition would require the company to emerge from bankruptcy as a public benefit company that must “deliver legitimate prescription drugs in a manner as safe as possible” and “aim to donate, or provide steep discounts for, life-saving overdose rescue drugs and medically assisted treatment medications to communities,” according to the release, while directing proceeds toward programs to reduce opioid abuse.