CEOs under scrutiny
Lawsuits eye OxyContin maker’s executives
STAMFORD — The growing list of defendants in the torrent of litigation against OxyContin maker Purdue Pharma extends beyond the firm’s owners.
While the eight members of the Sackler family figure most prominently among the accused, Connecticut’s expanded lawsuit filed this week and a similar complaint from Massachusetts highlight the crucial role of four current and former executives in carrying out the alleged fraudulent marketing of the firm’s opioids. So far, the litigation has not weakened the Sacklers’ control of Purdue’s top positions, but a prospective bankruptcy could inject an unprecedented level of outside influence into the company.
“Connecticut’s lawsuit echoes society’s sentiments that somebody has to pay for this significant publichealth crisis we’re facing,” said Angela Mattie, a professor in the schools of business and medicine at Quinnipiac University. “Not only are they having the corporation be responsible, but they’re also having the corporate officers be responsible. It’s a way of looking for justice.”
Purdue has denied Connecticut’s allegations, as well as those in the lawsuits filed by more than 1,000 other states and cities.
Executive scrutiny
In the lawsuits, the eight Sacklers are depicted as Purdue’s undisputed leaders.
Purdue CEO and President Craig Landau said the company’s board — which had included those Sacklers — functioned as the “de facto” CEO, according to Massachusetts’ complaint, whose own expanded version was filed in January.
The Sacklers relied, however, on a number of executives including Landau to implement their efforts to get patients to take more opioids, at higher doses, for longer periods, the litigation said.
In an earlier role as the firm’s chief medical officer, Landau allegedly helped to develop the company’s sales strategy and materials. Since becoming CEO in June 2017, he has overseen more than 5,000 visits by Purdue sales representatives to prescribers in the state, according to the lawsuit.
Among other allegations, Massachusetts said Landau drafted goals in 2011 that included supporting the approval of OxyContin for children.
Landau is not a defendant in Connecticut’s lawsuit.
Connecticut’s and Massachusetts’ complaints also focus on former CEOs Mark Timney and John Stewart.
Timney, the chief executive from 2014 to 2017, allegedly directed sales reps to promote OxyContin’s “abuse-deterrent properties” — without disclosing that he knew that those traits did not address oral overconsumption of the drug.
Similar accusations are leveled against Stewart, Purdue’s chief executive from 2007 to 2013. At his direction, Purdue’s sales reps visited Massachusetts prescribers more than 70,000 times, Massachusetts said.
Former vice president of sales and marketing Russell Gasdia also contributed to the misleading marketing campaigns, according to Connecticut and Massachusetts. He was added as a defendant in the amended Connecticut complaint and is also one in the Massachusetts litigation.
Gasdia allegedly figured among the staff who told the Sacklers that Purdue was pushing opioid savings cards, which were intended to keep patients longer on Purdue pain drugs, to tens of thousands of prescribers.
Five former board members, who are not Sackler family members, are also named as defendants by Connecticut and Massachusetts, facing similar allegations of supporting fraudulent marketing.
Accountability
The lawsuits represent the most-sustained pressure on the company’s leadership — but not the first time Purdue officials have been prosecuted.
Purdue, as a company, and three former and then-executives pleaded guilty in 2007 to federal criminal charges of them misbranding OxyContin. In total, they incurred about $635 million in penalties.
While the case imposed the most severe sanctions of Purdue, the punishment did not noticeably loosen the Sacklers’ grip on the company.
Since then, the owners have overseen several CEO changes. When Landau was appointed chief executive two years ago, the company faced a fraction of the lawsuits that it does today.
“The trouble for Purdue is, if they get rid of executives now, it would be tantamount to an admission of guilt,” said Richard Ausness, a law professor at the University of Kentucky. “I think they would probably stick with them for a little while.”
So far, Purdue’s settlements — including its $270 million agreement reached last month with Oklahoma — have not involved any executive shakeups. The plaintiffs have focused on funding for programming to tackle the opioid crisis.
But a Purdue bankruptcy — a course of action that Landau has acknowledged is an option— could precipitate significant outside involvement in the company.
Bankruptcies often entail executive changes to secure creditors’ support for restructuring plans. After going bankrupt last year, Stamford printing-and-mailing company Cenveo’s CEO stepped down and was replaced by one of his sons.
“It all depends on whether creditors have confidence in management or not,” said Jeff Hellman, a New Havenbased attorney, whose practice concentrates on commercial litigation and bankruptcy. “If you file for Chapter 11, your company’s life is an open book, and your creditors can pretty much find out most of what you’re doing. A lot of private companies don’t like that kind of scrutiny.”
Ongoing overhaul
Purdue’s owners have already shaken up their company’s leadership.
None of the eight Sackler defendants — Mortimer D.A. Sackler, Kathe Sackler, Ilene Sackler Lefcourt, Theresa Sackler, Jonathan Sackler, David Sackler, Beverly Sackler and Richard Sackler — serve today on the Purdue board. They have quit the panel during the past year and a half, with the last of them leaving at the beginning of the year.
In the same period, the Sacklers have overseen a number of other sweeping changes.
Last year, Purdue stopped marketing its opioids to prescribers and disbanded its sales force. The sales team’s demise resulted in hundreds of layoffs.
Now, the company is increasingly focusing on non-opioids.
A new Purdue subsidiary gained U.S. Food and Drug Administration approval last month for a drug called Adhansia XR, to treat attention deficit hyperactivity disorder, known as ADHD.
In the past three months, another new Purdue subsidiary has secured the FDA’s “orphan drug designation” for expedited reviews of drugs to, respectively, treat rare bile-duct cancer and an extremely rare type of leukemia.
Also last month, Purdue announced an FDA fast-track designation for a “nalmefene hydrochloride” injection that would treat known or suspected opioid overdoses.
The company said it would not profit from the latter medication.
“There have to be a multitude of approaches in responding to the opioid crisis,” said Quinnipiac’s Mattie.