Purdue pleads guilty, settles with feds for $8 billion
STAMFORD — Purdue Pharma, the bankrupt maker of the controversial drug OxyContin, will plead guilty to criminal charges as part of a settlement worth more than $8 billion, the U.S. Justice Department announced Wednesday — but the deal is vehemently opposed by elected officials including Connecticut Attorney General William Tong and Sen. Richard Blumenthal.
Stamford-based Purdue’s agreement to resolve longstanding Justice Department investigations of the firm represents one of the most prominent instances of the federal government seeking to hold a major pharmaceutical company responsible for its role in the national opioid crisis, which is resulting in tens of thousands of deaths every year.
The company will plead guilty to one count of conspiracy to defraud the U.S., and two counts of violating federal anti-kickback law. At the same time, the Sackler family members who own the company have agreed to a separate $225 million civil settlement.
“The abuse and diversion of prescription opioids has contributed to a national tragedy of addiction and deaths, in addition to those caused by illicit street opioids,” Deputy Attorney General Jeffrey Rosen said in a statement. “Diversion” of drugs refers to their being used other than as prescribed, at times non-prescribed.
“The resolution in today’s announcement re-affirms that the Department of Justice will not relent in its multi-pronged efforts to combat the opioids crisis,” Rosen said.
Additionally, the Justice Department is requiring the implementation of a longstanding plan for Purdue to be converted into a new type of “public-benefit” company after it emerges from bankruptcy.
To be enacted, the settlement will require approval in federal bankruptcy court.
“Purdue deeply regrets and accepts responsibility for the misconduct detailed by the Department of Justice in the agreed statement of facts,” Steve Miller, who joined Purdue’s board as chairman in July 2018, said in a statement.
Tong, who has made Connecticut’s civil lawsuit against Purdue one of his top priorities since taking office in January 2019, condemned the deal.
“This settlement provides a mere mirage of justice for the victims of Purdue’s
callous misconduct,” Tong said in a statement. “The federal government had the power here to put the Sacklers in jail, and they didn’t. Instead, they took fines and penalties that Purdue likely will never fully pay. Every dollar paid here is one dollar less for states like Connecticut trying to maximize money from Purdue and the Sacklers to abate the opioid epidemic.”
Criminal charges
The criminal case against Purdue includes the largest penalties ever levied against a pharmaceutical manufacturer, according to Justice Department officials.
As part of the resolution, Purdue is admitting that it obstructed the Drug Enforcement Administration by falsely representing that it had maintained an effective program to avoid drug diversion, and by reporting misleading information to the agency to boost its manufacturing quotas.
Purdue is also admitting to violating anti-kickback law by paying doctors, through a speaking program, to encourage them to write more prescriptions for its opioids, and using health-records software to influence the prescribing of pain drugs.
It will make a direct payment to the federal government of $225 million, which is part of a larger $2 billion criminal forfeiture.
In addition to that forfeiture, Purdue also faces a $3.54 billion criminal fine. That money probably will not be fully collected be
cause it will be taken through the company’s bankruptcy proceedings, which include thousands of parties such as the local and state governments that have sued Purdue.
To resolve its civil liability, the firm is agreeing to another $2.8 billion in damages.
At the same time, the Sacklers’ $225 million civil settlement with the Justice Department resolves allegations that family members who own the company and formerly served on its board perpetrated opioid marketing misconduct in recent years.
Justice Department officials also alleged that Purdue transferred assets into Sackler family holding companies and trusts that “were made to hinder future creditors and/or were otherwise voidable as fraudulent transfers.”
While they agreed to the settlement, the Sacklers did not admit any individual wrongdoing. A statement provided by a spokesperson for the family said they “acted ethically and lawfully, and the upcoming release of company documents will prove that fact in detail. This history of Purdue will also demonstrate that all financial distributions were proper.”
Purdue and the Sacklers’ agreements with the Justice Department do not include the release of the Sacklers or any other individuals from criminal liability. In addition, none of the company’s executives or other employees are receiving
releases from civil liability.
“Prior to the settlement, there was a wide range of possible penalties and sanctions, individually and to the corporation,” said Robert Bird, a professor of business law at the University of Connecticut. “Now the range of those sanctions is starting to narrow. It is now less likely that the Sacklers will receive any prison time.”
Justice Department officials said they spent years conducting the criminal and civil probes that are being settled. The Connecticut U.S. Attorney’s Office has participated in the department’s investigating of the company.
In 2007, a previous Justice Department-led investigation of Purdue produced the firm’s secondlargest punishment. In that case, it pleaded guilty in federal court to misbranding OxyContin, resulting in $635 million in company and individual penalties.
None of the three executives who pleaded guilty in 2007 served any time in prison.
“This (new) settlement is scant solace for millions of American families destroyed by Purdue Pharma’s hideous criminal law breaking,” Blumenthal, who sued Purdue when he served as state attorney general before being elected to the U.S. Senate, said in a statement. “There is little justice here. The Sacklers can buy another drug manufacturer or otherwise use the billions they have funneled from the company.
The company’s toxic corporate culture seemingly continues unchanged.”
Concerted opposition from Tong, other state attorneys general
Separate from its pact with the Justice Department, Purdue is still trying to negotiate a comprehensive settlement of the approximately 3,000 civil lawsuits filed by local and state governments, including Connecticut, that have accused the company of deceptive opioid marketing.
While Purdue and the Sacklers have denied the lawsuits’ accusations, they have submitted a settlement plan that they value at more than $10 billion.
As part of the company’s proposal, the Sacklers would relinquish control of Purdue so it could be transformed into a public-benefit company. Such an arrangement would entail the new firm’s governance by a trust.
Tong and the 23 other “non-consenting” state attorneys general who have not agreed to settle with Purdue have rejected that plan.
They are particularly concerned about the prospect of Purdue becoming a public-benefit company, outlining their misgivings in an Oct. 13 letter to U.S. Attorney General William Barr.
“A business that killed thousands of Americans should not be associated with government,” their letter said in part. “Instead, the business should be sold
to private owners, so the government can enforce the law against it with the same impartiality as for any other company.”
Justice Department officials were unconvinced by those arguments. Their settlement terms require Purdue to be turned into a public benefit company.
“In general, the (bankruptcy) creditors are aiming to ensure that nearly all proceeds of the bankruptcy go to opioid-abatement programs, and the Department of Justice generally supports that goal,” said Rosen, the deputy attorney general. “Toward that end, a key piece of today’s resolution is based on the future of the company.”
Some attorneys general, such as Tong and Massachusetts’ Maura Healey, also questioned the deal’s announcement 13 days before the election. President Donald Trump’s administration has pledged for years to tackle the opioid crisis.
“DOJ failed,” Healey said in a statement. “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.”