In mid-November 2020, the U.S. Bankruptcy Court for the Southern District of New York approved a federal settlement agreement valued at $8.3 billion between Purdue Pharma and the Department of Justice (DOJ). As part of the deal, Purdue will plead guilty to 3 felony criminal counts of defrauding the United States. Purdue was one of the central participants in the supply chain of prescription opioids and played a major role in fueling the opioid crisis that swept the nation over the past 2 decades.
As part of the DOJ settlement, Purdue will be reorganized into a public benefit corporation (PBC) that will no longer be owned by members of the Sackler family. The company will continue to produce OxyContin, but future profits will be used to fight the opioid crisis and fund programs aimed at alleviating addiction. According to a Justice Department spokesperson, “the PBC will provide extraordinary new resources for the treatment and care of those affected by addiction to opioids.” Purdue officials estimate the PBC could generate $10 billion over time.
Details of the Settlement Deal
Breaking down the $8.3 billion, Purdue agreed to a $3.54 billion criminal fine and a $2 billion criminal forfeiture amount. To absolve its civil liability, the company has agreed to $2.8 billion in damages to the United States. Members of the Sackler family have agreed to pay $275 million to settle civil liability charges for their involvement.
In a statement, Purdue Chairman Stephen Miller said, “Purdue deeply regrets and accepts responsibility for the misconduct. Resolving the DOJ investigations is an essential step in our bankruptcy process. The settlement agreement will pave the way for Purdue to submit a plan of reorganization to the bankruptcy court that will transfer all of Purdue’s assets to the PBC.”
Deal Too Lenient on Sackler Family
Under terms of the deal, members of the wealthy Sackler family who own the company also agreed to pay $225 million to settle civil claims. An amount critics say is almost insignificant compared to the wealth they derived from years of manufacturing opioids. Critics point to this as a gaping hole in the settlement agreement.
Critics of the settlement including Massachusetts Attorney General Maura Healey and New York Attorney General Letitia James oppose the deal as being far too lenient on the Sackler family who personally made billions of dollars fueling the opioid crisis. The attorneys general pledge to continue their own investigation into the matter.
As for the criminal charges, Purdue will admit that from May 2007 to March 2017, it conspired to defraud the U.S. by misleading Drug Enforcement Administration officials about the effectiveness of its opioid-monitoring system. The company will also plead guilty to conspiring to violate federal kickback status by paying sham speaker fees to doctors who ramped up OxyContin prescriptions. For the third count, Purdue will acknowledge making illegal payments to Practice Fusion, an electronic health records company in exchange for using the firm’s software to sway doctors into prescribing larger volumes of opioid pain-killers.
The settlement agreement provides only $750 million to compensate individuals harmed by the opioid crisis. Over 100,000 individual claims were filed with the bankruptcy court, so the claim values are very low compared to similar litigation outcomes.
Background on Purdue’s Bankruptcy Filing
In September 2019, opioid manufacturer Purdue Pharma and its subsidiaries filed for chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. The bankruptcy filing is part of a settlement agreement designed to preserve Purdue’s assets and future revenue to compensate victims and pay for the damage caused by the reckless actions of the company and the Sackler family.
For over 2 decades, Purdue has maintained a pattern of aggressive sales and marketing tactics even after warnings by regulators. In 2007 Purdue executives pleaded guilty to misleading regulators, doctors and patients about the risks and addictiveness of opioid pain killers. Approximately 70,000 people die annually from drug overdoses, with more than half related to opioids.
Background on the Opioid Crisis in America
Opioids were originally designed for end-of-life care and treatment of Post-Traumatic Stress Disorder. Seeing an opportunity to increase profits, opioid manufacturers like Purdue expanded the use of opioids to treat all types of pain which, over time, dramatically increased the number of prescriptions written every year.
Opioid abuse and addiction have destroyed countless lives over the past 2 decades as the crisis unfolded in the U.S. OxyContin and prescription opioids, a serious problem in 2002, evolved into a full-blown epidemic over the next several years, peaking around 2010. The national crisis was fueled in large part by opioid drug manufacturers and distributors who ignored obvious signs of over prescription and user abuse. Rings of “pill-mills” provided easy access to prescription opioid pain killers to anyone who walked in off the street, claimed to be in pain and had cash to pay for the highly addictive drugs.
In 2013, there were 53 million oxycodone prescriptions filled by U.S. pharmacies according to the National Institute on Drug Abuse (NIDA). That equates to one prescription for every 6 people in the U.S. Due to Purdue’s aggressive sales tactics and reckless disregard for risks, OxyContin became the top-selling brand-name narcotic pain reliever according to a 2003 report from the U.S. General Accounting Office. After OxyContin was approved by the FDA in 1995,