Professor Lucy Hodder breaks down the settlement Purdue Pharma, the manufacturer of OxyContin, reached with the US Department of Justice and how some state attorney generals are not happy with this result. Produced and Hosted by A. J. Kierstead
Read the letter from state attorney generals: https://www.mass.gov/doc/october-14-2020-letter-to-attorney-general-barr/download
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Legal topics include business, criminal law, civil lawsuit, opioid epidemic, prescription drugs
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A. J. Kierstead (Host):
Oxycontin manufacturer Purdue Pharma has reached a settlement with the US Department of Justice. Professor Lucy Hodder breaks it down. This is The Legal Impact, presented by the University of New Hampshire Franklin Pierce School of Law. Now accepting applications for JD graduate programs and online professional certificates. Learn more and apply at law.unh.edu. The opinions discussed are solely the opinion of the facts to your host and do not constitute legal advice or necessarily represent the official views of the University of New Hampshire. So Lucy, On Wednesday October 21, The US Department of Justice announced a ‘resolution’ regarding its criminal and civil investigations into the abuse and diversion of prescription opioids by manufacturer Purdue Pharma LP (Purdue), and a civil resolution of its civil investigation into individual shareholders from the Sackler family. The resolution includes over $8 billion in fines, dissolution of a company and repurposing its assets to operate as a public benefit corporation, which are subject to the approval of the bankruptcy court. Can you dive into this?
Lucy Hodder:
I absolutely can, A. J. What's happened here is a long, long drawn out series of actions against Purdue Pharma and the Sackler family, who are their owners, around the development and manufacturing of Oxycontin. They aren't the only manufacturer who has been subject to litigation. We've got Insys Therapeutics and others, but this drawn out litigation has been not only pursued by the Department of Justice under the previous and this administration, but also by cities and towns and states and Native American tribes all over this country, alleging that the marketing and fraudulent marketing of Oxycontin actually helped cause the opioid crisis, which resulted in so many deaths and illnesses across the country that have been ravaging our communities, with a real focus on New Hampshire.
A. J. Kierstead (Host):
Now, how does that work, when there is a case brought against a company from both a federal and a local end of things?
Lucy Hodder:
So what's happened here is that there are multiple litigations, which have caused both the civil actions to seek fines and monetary damages. And what's happening in the civil litigation is, it's called a multi-district litigation. We had a live, in the old days, a live event with Emily Rice, from the city of Manchester, and Jim [Buffetti 00:02:16], who's taken on this litigation for New Hampshire around the multi-district litigation, which is really all of the states trying to figure out what kind of remedy is necessary against this, what kind of harm they've all incurred and how to litigate this wrong against Purdue Pharma. So they are coming together around statements of fact, conclusions of law regarding what kind of harm did Purdue Pharma actually engage in.
Lucy Hodder:
At the same time, there are the criminal actions, which of course has to be brought by the departments of justice. And this administration has pursued it aggressively, but has come up with a settlement. The settlement is pretty unique here. It was announced just last week, two weeks ago. The settlement both asks for and gets agreement on significant fines by the owners of the Purdue Pharma, the Sackler family, as well as the corporation itself. And in addition to that, it basically puts the company itself in trust for a community benefit corporation and seeks to have that be the resolution of the bankruptcy proceeding, which has caused the attorney generals, a number of them to say, "Hey, wait a minute. That's not what we want. We don't want the government operating Purdue Pharma as a shareholder. We want a private company to be operating any of the assets on an ongoing basis so that the government can enforce rules and laws against the manufacturer, as any other company."
A. J. Kierstead (Host):
Yeah. Almost a couple dozen attorneys general from different states signed that. I'll be sure to put that in the episode description. I mean, is this letter basically saying, "Hey, can you reverse what you've done? Can you alter the settlement in some way?" Or is this just a getting something on the record?
Lucy Hodder:
It's asking that they alter the settlement. So the attorneys general have said you can't do that as part of the settlement, that the states objected to it during the bankruptcy proceeding. And that they basically said, "We do not want the government in the business of operating a company that's manufacturing opioids that cause the kind of devastation that we think it did throughout the country. Instead we need a private company, like has happened in other bankruptcy proceedings around drug manufacturers. We want another company to come in and operate it and we'll have a very close eye on how they're doing it," which thinks was their role.
A. J. Kierstead (Host):
What companies operate in this public-private fashion like this? I've never heard of that personally.
Lucy Hodder:
Well, so this is what's really interesting. There are nonprofit corporations, obviously, where there are no shareholders and they are actually companies that are held in public trust, but then there are these entities that are called public benefit corporations. That's what they're called in Delaware, for example. New Hampshire has a public benefit corporation law, and it basically says you still have shareholders. They still want a profit. They still get paid dividends. But what they are asking for as part of their public benefit corporation is to not have the obligation to have profit, be the primary shareholder obligation to operate the company. So basically it's a different type of for-profit corporation, where they don't have to pursue profit as one of their fiduciary responsibilities to shareholders.
A. J. Kierstead (Host):
So what's the next steps, before we get into the Sacklers, specifically the family? I mean, what's the next steps for Purdue Pharma?
Lucy Hodder:
So Purdue Pharma, basically the allegation is that they saw politics and they wanted to get in good with this administration in the event that there might be a new president who they thought was going to be much stricter and more difficult to deal with around a settlement. So they wanted to get this done now. And it's right on the eve of the election, which is not a big surprise. So the question is whether or not this will go forward. I think the attorney general has the authority to resolve these claims. The fact is though that the states and the municipalities and the tribes, and even individuals who've sued, still have their litigation and still have a big say over what happens. So it certainly complicates things in this litigation that you have this many parties, and you have one of them leading the way with a settlement in the criminal case that is not supported by the other law enforcement leaders at the state level in the litigation.
Lucy Hodder:
And they say, basically the state attorney generals say, "We are going to continue to oppose this in the bankruptcy and in the multi-district litigation, and if there are other criminal actions against the corporation and the family." They also are frustrated that the family seems to be getting off with fines that they don't think are commensurate with their responsibilities. So there's a lot that remains unknown. The attorneys general have always raised the issue in the multi-district litigation, which is the civil litigation, that basically we've got to be very careful how we allocate fines and penalties here because different states have very different interests. So you have small states with very high rates of overdose deaths. New Hampshire is one of those states. We have one of the highest rates of overdose deaths in the country. We have almost 200 opioid deaths just through July of 2020.
Lucy Hodder:
So New Hampshire wants to make sure if there's an allocation of those fines and penalties, that it's done fairly based on the need of the state, not just the population or the numbers who have been impacted, but actually the rate of impact. And New Hampshire is continuing to see, especially as COVID has unraveled services and supports in many ways and unraveled people's wellbeing, their ability to engage in 12 step programs, to stay in sober living locations. There's been all kinds of disruption during COVID that has really impacted people who are suffering with substance use disorder and seeking to maintain their recovery, and that's really been an issue. We also have seen generally new patterns of aggressive marketing of illegal substances in order to get to the populations they want to get to. So, the issue is not over at all in New Hampshire.
Lucy Hodder:
So our attorney general is standing up to the Department of Justice and saying, "We don't like this. We don't want this company to be operated in a public trust. And we want to make sure that if there are fines and penalties, they're distributed appropriately." Honestly, the federal government is seeking about $8.3 billion in penalties, but for those penalties to be paid by the corporation, they've got to stand in line with everybody else in the bankruptcy proceeding. They're seeking millions of dollars from the family, the owners of the corporation as well, which not everyone thinks is quite enough.
A. J. Kierstead (Host):
Yeah. I mean, the Sacklers basically are only going to be on the hook for a financial impact, correct? They're not looking at jail time, correct?
Lucy Hodder:
Right. Right now. There could be additional actions. This doesn't preclude additional actions. What's important to think about though, A. J., is that the underlying commitment that Purdue Pharma and its owners made to wrongdoing is pretty substantial. They have agreed to fraud. They have agreed to illegally marketing to physicians who they knew were operating as illegal pill mills. They've agreed to heightened marketing with kickbacks to physicians to encourage them to prescribe. They've agreed that they engaged in aggressive marketing that minimized the harm of the Oxycodone and its degree of addictiveness. They've agreed that they made illegal payments to electronic health records company called Practice Fusion to put pop-up alerts to doctors prescribing. So they have agreed in the statement of facts to some pretty egregious behavior, which is a interesting roadmap for the future of pharmaceutical companies seeking to get the attention of physicians around their prescriptions.
Lucy Hodder:
So, the only way a pharmaceutical company can get to the patient is either through direct advertising to patients, so the patients ask their physicians for this prescription, or direct marketing and advertising to physicians. And we know there've been much stricter rules around what pharmaceutical companies can do to get physicians' attention or what kind of payments they can make to them. So marketing and advertising is a huge part of their business. So you get to see a little bit of the soft underbelly of what practices the pharmaceutical companies engage in when they're trying to get their drug to physicians in this way.
Lucy Hodder:
It's important to remember that the defense of Purdue Pharma has always been, it was a legal drug, it was approved by the FDA for the purpose for which the physicians were prescribing it. It was safe and effective, and that's what we were marketing. So, it's important to remember that underneath this all was a drug that was approved by the FDA for the purposes for which it was being used. Although when you look at the overall manufacturing scheme and the lack of information that went to physicians and patients about the severely addictive qualities of this pharmaceutical, it's no wonder where we are.
Lucy Hodder:
So I just want to say that this isn't over and it's really important to follow along what our attorney general is doing in response to this, because the dollars that we're seeking to support New Hampshire's efforts to engage in prevention, treatment and recovery is critically important. So I think we're probably going to need to bring back Attorney Buffetti, who has done a superb job litigating these cases in very, very under-resourced situation as a state attorney general going after big pharma, and the various cities and towns like Manchester and Nashua, who are also participating in various litigations. It's important to get them back to the table, so we can, as a community, understand what they're doing and how they're doing it. So it remains to be seen. I would be shocked if they end up operating assets of Purdue Pharma and holding it in a public benefit corporation. It seems like a very risky way to try and manage the situation.
A. J. Kierstead (Host):
Thanks for listening to The Legal Impact, presented by UNH Franklin Pierce School of Law. To help spread word about the show, please be sure to subscribe and comment on your favorite podcast platform, including Apple Podcasts, Google Play, and Spotify
