OxyContin Maker Pleads Guilty and Shuts Down
In March 2019, facing an estimated 2,600 lawsuits1,2 relating to its role in creating the opioid epidemic, Purdue Pharma — the maker of OxyContin — announced the company was considering filing for bankruptcy protection.
Around that same time, New York expanded its lawsuit against the company to include allegations that company funds had been fraudulently transferred into trusts and offshore accounts owned by members of the Sackler family in an effort to shield assets from litigation.3,4 In all, court documents reveal the Sacklers transferred more than $10 billion of the company’s funds into family trusts.5
How this does not fall under the fraudulent conveyance statutes, which is attempting to avoid a debt by moving assets to another person or legal entity, boggles my mind. It appears the only reason they got away with this is they found the loophole of transferring their assets offshore.
The New York complaint also charged Purdue with secretly setting up a new company, Rhodes Pharma, in 2007 while the company was being investigated by federal prosecutors, as a way to protect the Sacklers from the mounting OxyContin crisis and continue their profit scheme.6 Rhodes Pharma makes generic opioids, allowing the Sacklers to benefit from the opioid epidemic both in terms of brand name sales and generic sales.7
Rhodes Pharma and Richard Sackler also hold the patent to a new, faster-dissolving form of buprenorphine, a mild opioid drug used in the treatment of opioid addiction,8 allowing the Sacklers to further profit from the addiction crisis they helped instigate, the economic burden of which is costing the U.S. an estimated $504 billion a year.9
Indeed, according to a lawsuit filed in Massachusetts,10 Purdue Pharma and the Sacklers sought to increase opioid prescriptions while simultaneously developing overdose treatment to boost its profits.
US Government Enters Opioid Business
Purdue finally filed for Chapter 11 bankruptcy in September 2019.11 At the end of October 2020, Purdue Pharma agreed to plead guilty to three federal criminal charges relating to its role in the opioid crisis, including violating a federal anti-kickback law, conspiracy to defraud the U.S. government and violating the Food, Drug and Cosmetic Act.12,13
To settle the charges, Purdue is supposed to pay $8.3 billion in fines, forfeiture of past profits and civil liability payments.14 However, the company doesn’t have enough cash to cover the payments so, instead, Purdue Pharma will be dissolved, and its assets used to erect a “public benefit company,” in other words, a government-owned and controlled drug company.
This new company will reportedly be controlled by a trust that will “balance the trust’s interests against those of the American public and public health.”15 Future earnings from this public benefit company will be used to pay off the $8.3 billion penalty, which in turn is supposed to be used to combat the opioid crisis.
This is a remarkable development, and one wonders just how functional this setup is going to be. In essence, the government will now be in the business of making and selling opioids, the profits from which will then be used to combat opioid addiction. It seems like a circular and rather illogical setup. According to CNN:16
“Deputy Attorney General Jeffrey Rosen, who announced the settlement, defended the plans for the new company to continue to sell that drug, saying there are legitimate uses for painkillers such as OxyContin.”
Sackler Family Walk Away Scot-Free, Again
The Sackler family, meanwhile, have reached a separate settlement in which they will pay $225 million in civil liability for causing false claims about OxyContin to be made to Medicare and other government health care programs.17
While the agreement does not release the Sacklers from potential criminal liability, it seems the family will walk away scot-free. And, considering they already transferred some $10 billion into their family trusts, the $225 million fine is a very small fraction, so they won’t end up wanting financially either.
Proving they have no remorse, Sackler family members, in a recent statement, shifted blame for the company’s illegal activities on its managers, saying they “relied on management assertions the company acted lawfully.”18 This, even though several Sackler family members sat on the company board and were intimately familiar with the company’s marketing strategy.
It’s unclear whether this DOJ agreement affects or includes the Sacklers’ other opioid company, Rhodes Pharmaceuticals. If not, it falls short in that respect too, since they would then be able to continue their opioid business. Between 2009 and 2016, Rhodes’ market share of opioid sales actually exceeded that of Purdue itself.19
Aside from Purdue and Rhodes, the Sacklers have also profited from Napp Pharmaceuticals, a Cambridge-based drug company that manufactures — you guessed it — opioids.20 In 2018, seven family members resigned from their directors’ posts at Napp following a string of bad publicity relating to alleged tax evasion schemes.
Mortimer Sackler, since deceased, was found to have avoided paying income tax, capital gains tax and inheritance taxes in the U.K. by falsely claiming non-domiciled status. The family was also accused of using a Bermuda-based company to avoid paying corporate taxes for Napp Pharmaceuticals.21
Penalties Still Won’t Cover States’ Claims
Even though $8.3 billion is a record-breaking settlement, states have filed claims exceeding $2 trillion in Purdue’s bankruptcy case, and according to a November 2017 report22 by the White House Council on Economic Advisers, the estimated financial cost of opioid addiction and death in the U.S. was $504 billion in 2015.
In addition to health care costs, criminal justice costs and lost productivity due to addiction or incarceration, this figure also takes into account projected lost earnings and the value of statistical life for people who died prematurely.
In response to the Justice Department’s settlement with Purdue Pharma, 25 state attorneys general sent a letter23 to U.S. Attorney
Article from LewRockwell