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Historic Guilty Plea By Oxycontin Maker Purdue Pharma: What It Means

Purdue Pharma's Stamford headquarters
Purdue Pharma's Stamford headquarters Photo Credit: Google Maps

Oxycontin maker Purdue Pharma pleaded guilty in federal court in Newark on Tuesday in exchange for not only the largest penalties ever levied against a pharmaceutical manufacturer for its role in creating the nation’s opioid crisis.

The company, which declared bankruptcy last year, also will be dissolved and its assets used to establish a new "public benefit company,” federal authorities said.

US District Judge Madeline Cox Arleo approved the deal after Purdue Pharma Board Chairman Steve Miller pleaded guilty during a teleconference to three criminal charges on behalf of the company.

“Purdue admitted that it marketed and sold its dangerous opioid products to healthcare providers, even though it had reason to believe those providers were diverting them to abusers,” First Assistant U.S. Attorney for New Jersey Rachael A. Honig said.

“The company lied to the Drug Enforcement Administration about steps it had taken to prevent such diversion, fraudulently increasing the amount of its products it was permitted to sell. Purdue also paid kickbacks to providers to encourage them to prescribe even more of its products.”

Indeed, Miller, on behalf of Purdue, admitted that the company:

  • impeded the DEA’s efforts to fight the epidemic, which the government said has killed more than 470,000 Americans who used either prescription and or illegal opiods over the past two decades, as well as countless innocent victims;
  • lied to the agency when it said it had developed a method to keep prescription drugs from being diverted to the black market when it hadn’t;
  • paid doctors through speakers program fees to get them to write more painkiller prescriptions;
  • paid an electronic medical records company to send patient information to physicians that encouraged them to prescribe opioids.

The conspiracy also involved “aiding and abetting violations” of the federal Food, Drug, and Cosmetic Act by facilitating the dispensing of its opioid products, including OxyContin, “without a legitimate medical purpose” – thus, without lawful prescriptions, the Justice Department said.

The guilty pleas “send a strong message to the pharmaceutical industry that illegal behavior will have serious consequences,” Deputy Attorney General Jeffrey A. Rosen noted.

The pleas were entered as part of a criminal and civil settlement last month between the Justice Department and the Stamford, CT-based company, owned by the Sackler family.

The counts: conspiracy to defraud the United States and to violate the Food, Drug, and Cosmetic Act and to violate the Federal Anti-Kickback Statute (two counts).

The penalties: a $3.544 billion criminal fine and $2 billion more in forfeited proceeds, the Justice Department said.

“Purdue has also agreed to a civil settlement that provides the United States with an allowed, unsubordinated, general unsecured bankruptcy claim for recovery of $2.8 billion to resolve its civil liability under the False Claims Act,” the department said.

“Separately, the Sackler family will pay $225 million in damages to resolve its civil False Claims Act liability.”

That may be all that’s paid from the forfeiture decision.

The Justice Department said it’s “willing to credit up to $1.775 billion against the agreed $2 billion forfeiture amount” if the company can complete a federal bankruptcy settlement with state and local governments who are among those suing the company.

“Having our plea accepted in federal court, and taking responsibility for past misconduct, is an essential step to preserve billions of dollars of value” for that settlement, the company said in a statement.

“We continue to work tirelessly to build additional support for a proposed bankruptcy settlement, which would direct the overwhelming majority of the settlement funds to state, local and tribal governments for the purpose of abating the opioid crisis,” the statement says.

The new public company, using the assets seized by the government, will be controlled by a trust or similar entity designed for the benefit of the American public, authorities said.

Attorneys general from nearly half the states and some activists opposed the deal, saying that the Sacklers will remain wealthy and free from punishment by surrendering control of the company.

They noted that the US Centers for Disease Control and Prevention reported about 70,000 American deaths in 2018 alone, an estimated 70% of which it said was by prescription or illicit opioids like OxyContin.

Federal authorities countered that the Sackler family, as well as other current and former employees and owners of the company, still face possible criminal charges and additional financial penalties.

Arleo didn’t set a sentencing date.

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