Saturday, May 12, 2007
OxyContin settlement a reversal of fortune
Although Purdue Pharma had been able to shake off civil lawsuits, it couldn't withstand a federal investigation.
The headline on the company news release was boastful, almost cocky: "65-0: OxyContin cases against Purdue Pharma dismissed at a record rate."
It was the winter of 2003, and Purdue was celebrating its 65th straight victory in the fight against lawsuits filed by people who blamed the company for their addictions to OxyContin.
Howard Udell, Purdue's top attorney, was quoted in the news release as saying the company would never settle "absurd lawsuits" brought by those who abused its top-selling painkiller.
Udell was back in court this week.
But this time, he was ready to settle.
Along with the company's president and its former medical director, Udell pleaded guilty to his role in a marketing blitz that hyped OxyContin's strengths while downplaying a key weakness: its propensity for abuse and addiction.
The company and its three executives agreed to pay more than $630 million in fines to resolve a criminal case that in many ways resembled the civil claims it had earlier defeated.
While the standard of proof generally is higher for a criminal charge than a lawsuit, legal observers attributed Purdue's big loss this week to at least two factors.
A six-year federal investigation of the company drew on a vast array of resources not available to a private plaintiff's attorney, they said. And once the government brought charges, it didn't have to prove that the company's illegal acts directly harmed any individuals.
For a lawsuit to succeed, the plaintiff must show that his or her injuries and suffering were the result of the defendant's actions.
"With individual cases you have individual facts, and you have to prove causation," said Timothy Jost, a Washington and Lee University law professor who specializes in health care law.
Winning a lawsuit against OxyContin's maker was complicated by the fact that many of the plaintiffs, by their own admission, had become addicted to the drug.
"You're starting with an unsympathetic plaintiff, and you're going to have a real hard time convincing the jury that it was the drug company that caused the addiction," Jost said.
That is one reason why 121 lawsuits filed against Purdue across the country had been dismissed by mid-2004, with no settlements or verdicts against the company.
By then, however, the U.S. Attorney's Office in Roanoke had begun an investigation. The office was empowered by the strength of subpoenas, a federal grand jury sitting in Abingdon and the assistance of at least nine state and federal agencies.
When the probe was done, more than 2,000 cardboard boxes had been filled with documents.
"Certainly the government, when it decides to go after something like this, can bring a lot of resources to bear that a private litigant cannot," said Thomas Hafemeister, a University of Virginia law professor.
And when it came time to negotiate a plea agreement, company officials were facing more than just financial punishment. There was also the risk of jail time.
"When you're talking about white-collar criminals, that's when they really start to squirm," Hafemeister said.
Some critics say prosecutors should have pushed for more money at the least, jail sentences at the most.
"The government should have forced the company to disgorge far more of its ill-gotten profits in this case," Public Citizen, a consumer advocacy group, said in a statement.
"Why have the three wealthy Purdue executives, who have pleaded guilty to orchestrating this dangerous promotional campaign, escaped jail time, and why are they paying merely $34.5 million in penalties?"
That figure is the portion of the $634,515,475 in fines to be paid by Udell, company president and chief executive officer Michael Friedman, and former director of medical affairs Paul Goldenheim.
Although the company has indicated it will survive the financial penalties, U.S. Attorney John Brownlee said the punishment is still a substantial one.
"I think it's fair to say it hurt, and we wanted it to hurt," Brownlee said.
As part of the plea agreement reached this week in U.S. District Court in Abingdon, Purdue agreed to pay $130 million to resolve OxyContin-related civil claims.
It was unclear Friday how that money will be disbursed.
The company said in a news release it has already paid or agreed to pay the full amount to settle claims brought by individuals.
But according to the plea agreement, any portion of the $130 million that remains unpaid after two years will be turned over to the U.S. Treasury.
Emmitt Yeary, an Abingdon attorney who unsuccessfully sued Purdue on behalf of three men who said they became addicted to the drug while taking it for legitimate reasons, said Friday he's not sure if his clients can get any of the money.
Yeary's lawsuit accused the company of over-promoting OxyContin to doctors while ignoring its addictive side "because their appetite for significant future profits far outweighed their concern for the health and safety of the citizens of Virginia."
The lawsuit's language was strikingly similar to that used this week by Brownlee, who said the company's intensive marketing efforts unleashed "a potentially dangerous drug on an unsuspecting and unknowing public."
Although federal Judge James Jones dismissed Yeary's lawsuit in 2004, he noted in a written opinion that the cases could not answer many questions, including whether Purdue oversold OxyContin for its own profit.
Dale Rubin, a law professor at the Appalachian School of Law, said the passage of time and additional evidence of wrongdoing by Purdue makes that question easier to answer now.
"You bring a tobacco lawsuit in 1937, and nothing happens," Rubin said. "It takes 70 years before the cigarette executives are taken to task for misleading the public about the addictive qualities of tobacco."
Had the criminal case gone to trial, federal prosecutors would not have been required to prove that Purdue's illegal marketing of OxyContin led to rampant addiction, crime and death.
But they nonetheless made that case in announcing the plea agreement.
"The results of Purdue's crimes were staggering," Brownlee said at a news conference Thursday, referring to soaring crime rates and more than 200 overdose deaths in Southwest Virginia that have been linked to the drug.
The company, however, insisted that its only crime was misbranding, the legal term for making false representations about OxyContin in its advertising, labeling or sales pitches to the medical community.
"Any attempt to connect today's plea of misbranding by Purdue to abuse and diversion of OxyContin is completely false," company spokesman James Heins said on the day of the plea agreement. "The papers filed by the government do not make any such allegation and the company did not admit to any such wrongdoing."
Still, those who tangled with the company earlier during its aggressive defense of lawsuits found some vindication in this week's criminal prosecution.
"This is long overdue," Yeary said.
"These corporate drug lords have done more devastation to the Appalachian region than the Colombian drug cartel ever thought about doing."