Cri­sis fu­els mas­sive lit­i­ga­tion against Pur­due Pharma, with pos­si­ble set­tle­ment in sight

The News-Times (Sunday) - - Sunday Business - By Paul Schott

“If you force them into bank­ruptcy, it might feel good, but it means you’re cut­ting off your nose to spite your face. ... (T)here’s just not the money in the in­dus­try that makes it like to­bacco.” Ge­orge Jepsen, Con­necti­cut at­tor­ney gen­eral

This sum­mer, pro­test­ers con­verged four times out­side the blue-gray glass tower at 201 Tresser Blvd., in down­town Stam­ford. Their tar­get each time was the build­ing’s largest ten­ant, drug­maker Pur­due Pharma.

On a mid-Au­gust morn­ing, hun­dreds marched with plac­ards commemorating fam­ily mem­bers and friends who had died of opi­oid over­doses, which they largely blamed on the maker of the OxyCon­tin painkiller. Sev­eral weeks ear­lier, a lo­cal art gallery owner and a friend in­stalled in the drive­way a mas­sive spoon stained to rep­re­sent burnt heroin. A few weeks be­fore, a pair of broth­ers slide-pro­jected mes­sages on the build­ing con­demn­ing the com­pany.

The protestors know the firm is not about to face a reck­on­ing in the streets. If it hap­pens, it will likely take place in the ju­di­cial sys­tem.

Over the past five years, lo­cal and state gov­ern­ments across the coun­try have filed hun­dreds of com­plaints al­leg­ing that Pur­due, with chronic and de­lib­er­ate mis­rep­re­sen­ta­tions of its drugs, has helped cause thou­sands of deaths from pre­scrip­tion and il­licit opi­oids. Re­solv­ing the tor­rent of lit­i­ga­tion, which also in­volves many other opi­oid mak­ers and dis­trib­u­tors, en­tails pro­tracted and com­plex ne­go­ti­a­tions that could lead to a colos­sal set­tle­ment. All the while, plain­tiffs face an un­cer­tain time­line for re­solv­ing their claims and no as­sur­ance they would re­ceive enough fund­ing to help tackle the epi­demic.

“The opi­oid cri­sis crosses all the lines — party lines, re­li­gious lines, cul­tural lines,” Paul Hanly, co-lead coun­sel for the plain­tiffs in a con­sol­i­dated group of hun­dreds of law­suits in­volv­ing the com­pany, said in an in­ter­view at his law firm’s of­fices in mid­town Man­hat­tan. “Peo­ple of all po­lit­i­cal and cul­tural per­sua­sions are united in that there is some­thing ter­ri­ble hap­pen­ing in our coun­try and that dras­tic steps need to get taken to deal with it.”

Pur­due of­fi­cials have de­nied the law­suits’ al­le­ga­tions.

“We share the state and lo­cal of­fi­cials’ con­cern about the opi­oid cri­sis,” the com­pany said, in part of a state­ment. “Pur­due be­lieves the ac­cu­sa­tions against the com­pany are with­out merit, and we look for­ward to the op­por­tu­nity to pre­sent our sub­stan­tial de­fenses.”

The com­pany did not make CEO and Pres­i­dent Craig Landau or other ex­ec­u­tives avail­able for an in­ter­view for this ar­ti­cle.

Long his­tory of lit­i­ga­tion

Ap­proved by the U.S. Food and Drug Ad­min­is­tra­tion in 1995, OxyCon­tin con­sists of a con­trolled-re­lease, semi-syn­thetic opi­oid painkiller to treat moder­ate to se­vere pain last­ing more than a few days.

Its cre­ator went to great ex­pense to mar­ket the drug. Pur­due’s an­nual spend­ing for OxyCon­tin ad­ver­tis­ing jumped from about $700,000 in 1996 to ap­prox­i­mately $4.6 mil­lion in 2001, ac­cord­ing to a 2003 fed­eral Gov­ern­ment Ac­count­abil­ity Of­fice re­port.

Spurred by its mar­ket­ing, OxyCon­tin’s an­nual sales sur­passed $1 bil­lion by 2001, mak­ing it the most-pre­scribed brand­name nar­cotic of its kind in the U.S., ac­cord­ing to the GAO.

Lit­i­ga­tion soon fol­lowed. Start­ing in 2003, Hanly’s firm took on about 5,000 pa­tients who had be­come ad­dicted to OxyCon­tin af­ter be­ing pre­scribed the drug. From that group, about 1,400 civil law­suits would be filed against Pur­due. That round of lit­i­ga­tion was set­tled for $75 mil­lion in 2006, ac­cord­ing to news re­ports at the time.

Based on those com­plaints, fed­eral pros­e­cu­tors built a crim­i­nal case against Pur­due. In its largest pun­ish­ment to date for mar­ket­ing vi­o­la­tions, Pur­due pleaded guilty in 2007 in fed­eral court to mis­brand­ing OxyCon­tin to mis­lead and de­fraud physi­cians and pa­tients. The com­pany agreed to pay some $600 mil­lion in crim­i­nal and civil penal­ties.

At the same time, three former and then-ex­ec­u­tives pleaded guilty, as in­di­vid­u­als, to mis­brand­ing charges and in­curred close to $35 mil­lion in fines.

But the wors­en­ing of the opi­oid cri­sis meant the 2007 pay­outs were not the end of lit­i­ga­tion.

In 2017, about 49,000 peo­ple in the U.S. died of opi­oid over­doses, ac­cord­ing to pre­lim­i­nary data from the U.S. Cen­ters for Dis­ease Con­trol and Pre­ven­tion. The toll rep­re­sented a four­fold in­crease over the number of opi­oid deaths in 2002.

As lo­cal and state gov­ern­ments strug­gled with the bil­lions of dol­lars needed to pay for health care, law en­force­ment and so­cial ser­vices to re­spond to the epi­demic, they in­creas­ingly sought fi­nan­cial ac­count­abil­ity from the phar­ma­ceu­ti­cal in­dus­try. Opi­oid pre­scrip­tions in the U.S. peaked in 2010 and then dropped each year through 2015, ac­cord­ing to the CDC, though the 2015 rate ran at about three times the 1999 level.

In ad­di­tion to Pur­due,

the likes of Al­ler­gan, Endo, In­sys, Janssen, Mallinck­rodt and Teva are fre­quently tar­geted in law­suits and in­ves­ti­ga­tions.

“The opi­oid cri­sis has got­ten into the fab­ric of our so­ci­ety and grabbed our at­ten­tion,” An­gela Mat­tie, a pro­fes­sor in the schools of busi­ness and medicine at Quin­nip­iac Univer­sity, said in an in­ter­view. “That is re­flected in the back­lash and re­pul­sion widely felt to­ward Pur­due at this point.”

Dan­gers in fo­cus

Lit­i­ga­tion filed in the past five years largely con­sists of civil, not crim­i­nal, com­plaints. The suits fit into a frame­work that has al­lowed lo­cal pros­e­cu­tors and state at­tor­neys gen­eral to in­voke a range of con­sumer-pro­tec­tion and an­tifraud laws to pros­e­cute Pur­due.

The law­suits gen­er­ally share the same al­le­ga­tions, ac­cus­ing Pur­due of years of false or fraud­u­lent mar­ket­ing that mis­rep­re­sents the ben­e­fits and risks of treat­ing chronic, non-cancer pain with its opi­oids, namely OxyCon­tin.

“That (mar­ket­ing) cam­paign caused a sea change in med­i­cal and sci­en­tific thought that had pre­vi­ously deemed these drugs too dan­ger­ous to use for chronic pain in most cir­cum­stances,” Mis­sis­sippi’s at­tor­ney gen­eral, Demo­crat Jim Hood, wrote in a July let­ter to at­tor­neys of Pur­due and sev­eral other opi­oid pro­duc­ers that he sued in De­cem­ber 2015. “It put bil­lions of doses of high-pow­ered drugs into the hands of pa­tients who were un­aware of the risks of ad­dic­tion and death.”

Mis­sis­sippi’s com­plaint led a wave of state law­suits against the com­pany. In 2017, 13 states sued, with 18 more fol­low­ing in 2018.

The law­suits have come from Repub­li­cans in deepred states such as Alabama, Ok­la­homa and South Carolina and Democrats in blue strongholds like Mas­sachusetts and New York and Wash­ing­ton state.

Over the same span, hun­dreds of cities and coun­ties have sued. They range from ru­ral com­mu­ni­ties to the coun­try’s largest cities, in­clud­ing New York, Los An­ge­les and Chicago.

In to­tal, the com­pany faces more than 1,000 ac­tive com­plaints from cities, coun­ties and states.

“These law­suits are gain­ing trac­tion and gath­er­ing mo­men­tum,” Robert Bird, a pro­fes­sor of busi­ness law at the Univer­sity of Con­necti­cut, said in an in­ter­view. “The lit­i­ga­tion gen­er­ates its own pub­lic­ity, which, in turn, en­cour­ages other states to file suits.”

To help man­age the pro­lif­er­a­tion of law­suits, a Cleve­land-based fed­eral judge, Dan Pol­ster, is over­see­ing hun­dreds of com­plaints filed by mu­nic­i­pal and county gov­ern­ments in a process known as “Mul­tidis­trict Lit­i­ga­tion.” Hanly — a part­ner in the Sim­mons Hanly Con­roy firm, which also spe­cial­izes in as­bestos and mesothe­lioma cases — is co-lead coun­sel for the MDL plain­tiffs.

Three MDL cases are sched­uled to be heard in a trial start­ing next Septem­ber

More than 20 cities and towns in south­west­ern Con­necti­cut have sued. The list in­cludes Bridge­port, Dan­bury, New Haven and Nor­walk.

“Opi­oid ad­dic­tion has had a pro­found im­pact on our com­mu­nity in terms of med­i­cal care costs, hospi­tal costs and, of course, the tragedies that you see,” Dan­bury Mayor Mark Boughton said in an in­ter­view. “We want to be re­im­bursed, and we want dol­lars there for ed­u­ca­tion and dol­lars for en­force­ment of peo­ple who are abus­ing the sys­tem.”

The com­pany’s home city, how­ever, has not taken le­gal ac­tion. Stam­ford Mayor David Martin was not avail­able for an in­ter­view for this ar­ti­cle, but Martin’s chief of staff, Michael Pol­lard, did not rule out the city pur­su­ing lit­i­ga­tion.

“We are con­tin­u­ing to as­sess all drug com­pa­nies and other il­le­gal opi­oid sources in­volved in the epi­demic,” Pol­lard said in a state­ment. “We will be de­ter­min­ing the ex­tent and cost of the epi­demic to Stam­ford and fo­cus our le­gal ac­tions on the com­pa­nies and oth­ers who are most re­spon­si­ble.”

Con­necti­cut’s role

At the state level, Con­necti­cut does not have an ac­tive law­suit against Pur­due. But the state’s out­go­ing at­tor­ney gen­eral, Demo­crat Ge­orge Jepsen, said his of­fice has con­fronted the opi­oid cri­sis as part of a 42-state coali­tion in­ves­ti­gat­ing Pur­due and six other phar­ma­ceu­ti­cal firms.

In 2017, 1,038 peo­ple in Con­necti­cut died of drug over­doses, more than dou­ble the 2012 to­tal, ac­cord­ing to state data. Nearly half of last year’s deaths in­volved heroin.

In an in­ter­view, Jepsen said his team has held ex­ten­sive talks with Pur­due of­fi­cials. In ad­di­tion, the state can gather ev­i­dence to sup­port po­ten­tial claims against. Pur­due and other com­pa­nies and does not have a statute of lim­i­ta­tions on opi­oid lit­i­ga­tion, ac­cord­ing to his of­fice.

“We ab­so­lutely have their at­ten­tion, which is what we need and want,” Jepsen said. “We could make a show of fil­ing a law­suit and de­vote very sig­nif­i­cant staff re­sources to bring­ing a law­suit. We’re very com­fort­able with the po­si­tion we’re in right now, (but) al­ways keep­ing, if set­tle­ment talks fail, the op­tion of fil­ing a suit.”

Jepsen’s in­volve­ment in the mul­ti­state al­liance will soon end, as he is not run­ning for a third term. Still, the ma­jor-party nom­i­nees vy­ing to suc­ceed Jepsen, Demo­crat Wil­liam Tong and Repub­li­can Sue Hat­field, pledged in in­ter­views to main­tain Con­necti­cut’s in­volve­ment in the in­ter­state ini­tia­tive.

“Be­cause of how it has af­fected peo­ple in our state — and it’s a cri­sis in ev­ery com­mu­nity here in Con­necti­cut — and be­cause we have Pur­due Pharma in Con­necti­cut, we have an obli­ga­tion to have a very crit­i­cal eye on this whole cri­sis,” said Tong, state rep­re­sen­ta­tive from a dis­trict that in­cludes parts of Stam­ford and Darien.

Hat­field and Tong said they would keep lit­i­ga­tion against Pur­due on the ta­ble, but they both said they would fo­cus on con­tin­u­ing set­tle­ment talks.

“If we have set­tle­ment dis­cus­sions that are cur­rently ac­tive and on­go­ing, I, as the next at­tor­ney gen­eral, wouldn’t want to dis­rupt that,” said Hat­field, a state prose­cu­tor with the Con­necti­cut Di­vi­sion of Crim­i­nal Jus­tice. “I would want to see that through, first and fore­most, and con­tinue on with At­tor­ney Gen­eral Jepsen’s work. I have a lot of re­spect for the work that he has done.”

Con­necti­cut’s in­volve­ment in lit­i­ga­tion in­volv­ing Pur­due pre­dates Jepsen’s ten­ure. In 2007, when U.S. Sen. Richard Blu­men­thal was at­tor­ney gen­eral, the state re­ceived about $700,000 as part of a nearly $20 mil­lion set­tle­ment that 26 states reached with Pur­due tied to al­le­ga­tions that the com­pany en­cour­aged physi­cians to over­pre­scribe OxyCon­tin.

The set­tle­ment re­stricted cer­tain opi­oid mar­ket­ing prac­tices and helped sup­port the launch of Con­necti­cut’s pre­scrip­tion-drug mon­i­tor­ing pro­gram.

“It was a sig­nif­i­cant and pos­i­tive first step,” Blu­men­thal said in an in­ter­view. “We con­tinue to pur- sue our ef­forts to stop overuse of these pow­er­ful painkillers. ... If there has been law break­ing, I sup­port the ef­fort in court to hold these com­pa­nies ac­count­able. There are other av­enues of re­dress and reme­dies that can be pur­sued through ne­go­ti­a­tion, as well.”

Pur­due also faces an in­ves­ti­ga­tion by the U.S. At­tor­ney’s Of­fice in Con­necti­cut, which is part of the U.S. Depart­ment of Jus­tice. A DOJ spokesman de­clined to com­ment on the in­quiry’s sta­tus.

Com­pany push­back

Across the coun­try, the law­suits have slogged through the courts. The lit­i­ga­tion has col­lec­tively cost the plain­tiffs and de­fen­dants many mil­lions of dol­lars in le­gal ser­vices. Pur­due did not an­swer a ques­tion from Hearst Con­necti­cut Me­dia in­quir­ing about how many of the law­suits it had tried to dis­miss or how many cases it had set­tled.

A $24 mil­lion pay­out to the state of Ken­tucky in De­cem­ber 2015 marked its most prom­i­nent set­tle­ment in recent years.

In court, Pur­due’s lawyers have ar­gued the com­pany’s ac­cusers have not proved that it mis­led pre­scribers about its drugs.

“The state seeks to re­cover costs stem­ming from the mis­use and abuse of pre­scrip­tion and il­licit opi­oids by down­stream ac­tors who are far out­side the man­u­fac­tur­ers’ con­trol and who in, many in­stances, en­gaged in crim­i­nal con­duct,” at­tor­neys for Pur­due and the other de­fen­dants in Florida’s law­suit wrote in a Septem­ber fil­ing sup­port­ing their mo­tion to dis­miss the case.

They have also cited FDA over­sight of use and mar­ket­ing of pre­scrip­tion opi­oids, chal­leng­ing state li­a­bil­ity for ac­tions they said the FDA has “specif­i­cally au­tho­rized.”

Com­pany of­fi­cials have also con­tested claims that the firm flooded the mar­ket with OxyCon­tin. In state­ments, they said that their opi­oids com­prise less than 2 per­cent of such pre­scrip­tions.

Out­side the court­rooms, Pur­due said it is is work­ing hard to help tackle the opi­oid cri­sis. The com­pany has al­lo­cated $2 mil­lion to sup­port pre­scrip­tion-drug ed­u­ca­tion for sev­eral thou­sand high school stu­dents around the coun­try be­tween 2017 and 2020. The to­tal in­cludes $500,000 for the pro­gram’s ex­pan­sion in Con­necti­cut dur­ing the next two years.

In Septem­ber, Pur­due an­nounced a $3.4 mil­lion grant to sup­port a non­profit phar­ma­ceu­ti­cal com­pany’s de­vel­op­ment of an over­the-counter form of nalox­one, a drug that can re­verse the ef­fects of opi­oid over­doses. Pur­due has also part­nered with the Na­tional Sher­iffs’ As­so­ci­a­tion on a pro­gram that gives nalox­one kits and train­ing to of­fi­cers across the coun­try.

In the past year, the com­pany has run full-page ads out­lin­ing such ef­forts in a number of na­tional publi­ca­tions in­clud­ing The New York Times, Wash­ing­ton Post, Wall Street Jour­nal and USA To­day.

The ef­forts have done lit­tle to as­suage crit­ics. “They can put as many ads as they want to out there, but that’s not deal­ing with the prob­lem,” Ohio’s at­tor­ney gen­eral, Repub­li­can Mike DeWine, who is his party’s gu­ber­na­to­rial nom­i­nee in Tues­day’s elec­tion, said in an in­ter­view ear­lier this year. “Why don’t we take this op­por­tu­nity to start talk­ing and try to reach an agree­ment, so that Pur­due Pharma can be part of the so­lu­tion in­stead of just be­ing the cre­ator of the prob­lem?”

En­vi­sion­ing a set­tle­ment

De­spite the wide­spread anger felt to­ward opi­oid pro­duc­ers, the lit­i­gants’ strat­egy is not to bank­rupt the com­pa­nies.

“We don’t want any of these com­pa­nies to go out of busi­ness; this is not an act of vengeance,” Hanly said. “This is lit­i­ga­tion to re­cover money that these gov­ern­ment en­ti­ties have spent and lost as a con­se­quence of the de­fen­dants.”

Some crit­ics have sug­gested Pur­due and the other phar­ma­ceu­ti­cal com­pa­nies that have been sued pay into a mas­sive fund com­pa­ra­ble to one fi­nanced by to­bacco com­pa­nies as part of a na­tion­wide set­tle­ment in 1998 that was worth nearly $250 bil­lion.

To cover the costs of the opi­oid cri­sis, such a pool could amount to sev­eral times that of the to­bacco set­tle­ment. In 2015, the opi­oid cri­sis cost the coun­try $504 bil­lion, equiv­a­lent to 2.8 per­cent of gross do­mes­tic prod­uct that year, ac­cord­ing to an es­ti­mate last year by the Coun­cil of Eco­nomic Ad­vis­ers.

A com­pre­hen­sive set­tle­ment — which would prob­a­bly be reached through the MDL pro­ceed­ings, ac­cord­ing to Hanly — does not ap­pear im­mi­nent. Such a pact could take sev­eral more months, even years, to ham­mer out. Be­fore en­ter­ing into any ma­jor agree­ments, Pur­due and the other de­fen­dants are ex­pected to de­mand they would not be li­able again for any ac­tions pre­dat­ing a set­tle­ment.

“These de­fen­dants need ‘eter­nal peace,’” Hanly said. “That’s why this set­tle­ment is in­cred­i­bly com­plex … be­cause it has to be com­pletely but­toned up. Oth­er­wise, if there’s an es­cape hatch, the com­pa­nies are pre­sum­ably pay­ing all this money to get sued, maybe not to­mor­row, but per­haps a year from now, or three years from now.”

The ex­tent to which Pur­due and its own­ers, mem­bers of the Sack­ler fam­ily, could con­trib­ute to a set­tle­ment is de­bat­able as the com­pany does not pub­licly dis­close its fi­nances.

Third-party es­ti­mates sug­gest OxyCon­tin is still lu­cra­tive, but less so than at its peak. The drug’s sales last year to­taled $1.8 bil­lion, down from $2.8 bil­lion five years ear­lier, ac­cord­ing to data from health care an­a­lyt­ics com­pany Sym­phony Health So­lu­tions. Com­pe­ti­tion from generic drugs has con­trib­uted to the de­cline.

“One of the is­sues that we face is not all these com­pa­nies are fi­nan­cially that cash-flushed,” Jepsen said. “If you force them into bank­ruptcy, it might feel good, but it means you’re cut­ting off your nose to spite your face about get­ting some kind of fu­ture in­come stream, on a pay-asyou-go ba­sis. But there’s just not the money in the in­dus­try that makes it like to­bacco.”

Af­ter col­lect­ing their set­tle­ment shares, hun­dreds of the plain­tiffs would al­lot a to-be-de­ter­mined por­tion of their pro­ceeds to cover ex­penses and fees for pri­vate-sec­tor law firms. They would then grap­ple with com­pli­cated de­ci­sions about the funds’ dis­tri­bu­tion.

“The re­al­ity is these law­suits take years, and years is not some­thing we have. We need to deal with the prob­lem in the here and now, which we’re do­ing,” Dr. Jeff Gor­don, a former pres­i­dent of the Con­necti­cut State Med­i­cal So­ci­ety, said in an in­ter­view. “But if there are set­tle­ments in the fu­ture, we should be very clear that the money is pro­tected to sup­port pre­ven­tion and treat­ment pro­grams.”

In the mean­time, Pur­due’s dwin­dling head­count sug­gests it may be feel­ing fis­cal strain. In June, it an­nounced ap­prox­i­mately 350 lay­offs, about half of which were linked to the elim­i­na­tion of its al­ready­down­sized sales force. That fol­lowed ear­lier job cuts stem­ming from the com­pany’s an­nounce­ment in Fe­bru­ary that it would stop mar­ket­ing OxyCon­tin and other opi­oids to pre­scribers.

About 550 re­main with the com­pany, in­clud­ing some 250 at its Stam­ford head­quar­ters. Ear­lier this year, the firm re­ported em­ploy­ing about 1,100.

Pur­due has also shaken up its lead­er­ship. In July, the com­pany an­nounced a new board chair­man and a new gen­eral coun­sel. At the same time, the com­pany is in­creas­ingly mov­ing away from opi­oids. Last month, it an­nounced an “ex­clu­sive op­tion” to ac­quire a Min­nesota com­pany de­vel­op­ing an in­jectable steroid treat­ment for back pain.

Those changes may even­tu­ally help re­pair the com­pany’s bat­tered rep­u­ta­tion, but they will not end the lit­i­ga­tion. Only money flow­ing out of 201 Tresser that makes its way to the plain­tiffs would likely bring the com­pany re­lief from its op­po­nents.

“If some com­pany has stolen from the state of Mis­sis­sippi or in­jured its ci­ti­zens or vi­o­lated its laws, I’ve got a duty to col­lect what’s owed to the state,” Hood said in an in­ter­view. “That’s my job.”

Hearst Con­necti­cut Me­dia file photo

Rhonda Lotti, of Water­town, Mass., holds a picture of her late daugh­ter, Mariah, who died in 2011 of a heroin over­dose, dur­ing a protest Aug. 17 out­side Pur­due Pharma’s head­quar­ters at 201 Tresser Blvd. in Stam­ford.

Hearst Con­necti­cut Me­dia file pho­tos

Sev­eral hun­dred pro­test­ers at­tended a demon­stra­tion out­side Pur­due Pharma’s head­quar­ters at 201 Tresser Blvd. in down­town Stam­ford on Aug. 17.

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