Exclusive: OxyContin maker Purdue nears guilty plea agreement in U.S. criminal probe - sources

[October 07, 2020]  By Mike Spector and Jessica DiNapoli

NEW YORK (Reuters) - Purdue Pharma LP, the OxyContin maker controlled by members of the wealthy Sackler family, is nearing an agreement to plead guilty to criminal charges as part of a broader deal to resolve U.S. Justice Department probes into its alleged role in fueling the nation’s opioid crisis, six people familiar with the matter said.

Purdue lawyers and federal prosecutors are brokering a plea deal that could be unveiled as soon as within the next two weeks and include billions of dollars of financial penalties, four of the people said. They stressed that talks are fluid and that some of the terms could change as discussions continue.

In addition to the criminal case, U.S. prosecutors are negotiating a settlement of civil claims also carrying a financial penalty that allege unlawful conduct in Purdue's handling of prescription painkillers, they said.

The Stamford, Connecticut-based company is expected to face penalties exceeding $8 billion. They consist of a roughly $3.54 billion criminal fine, $2 billion criminal forfeiture and $2.8 billion civil penalty, some of the people familiar with the negotiations said.

They are unlikely to be paid in the near term as the criminal fine and civil penalty are expected to be considered alongside other claims in Purdue's bankruptcy proceedings and the company lacks necessary funds to fully repay all creditors.

The tentative agreement would draw a line under Purdue's criminal exposure for what prosecutors and state attorneys general have described as aggressive marketing of a highly-addictive painkiller that minimized the drug's potential for abuse and overdosing.

Over the years, Purdue reaped billions of dollars in profits from its opioids, enriching Sackler family members and funneling illegal kickbacks to doctors and pharmacies, federal prosecutors and state attorneys general have alleged. The company now faces thousands of lawsuits seeking damages to address a public health crisis that has ravaged U.S. communities.
 

Purdue said it is cooperating with the investigations and in discussions to resolve them, but declined further comment. Representatives of Sackler family members controlling Purdue had no immediate comment or did not immediately respond to a request for comment. They have denied allegations that they contributed to the opioid crisis.

A Justice Department spokeswoman said it does not generally comment on investigations or settlement discussions, but added that Reuters’ understanding of the situation "contains inaccuracies and is highly misleading" without elaborating further.

The Justice Department is prepared to waive a large portion of its $2 billion forfeiture claim as long as Purdue meets certain conditions. The first is that Purdue steer significant financial sums for combating the opioid epidemic to U.S. communities suing it over the crisis, two people said. The other is that it receive court approval for a reorganization plan transforming it into a "public benefit company" run on behalf of those communities and no longer controlled by the Sacklers.

Purdue, which filed for bankruptcy protection last year facing an onslaught of litigation, is in discussions to plead guilty to charges that include conspiracy, violations of an anti-kickback law and misbranding under the Food, Drug and Cosmetic Act, two of the people said. A plea agreement would require approval of Purdue's bankruptcy judge. One of the negotiated terms of Purdue's proposal to settle thousands of other opioid lawsuits is that it resolve the Justice Department probes.

SACKLERS UNLIKELY TO FACE CRIMINAL CHARGES

Members of the Sackler family, many of whom previously served on Purdue’s board and also face lawsuits, will avoid criminal charges in the looming settlement, the two people said.

Certain family members are in discussions to pay a roughly $225 million civil penalty for allegedly causing false claims regarding Purdue's prescription painkillers to be filed with government healthcare programs, three people said. That would be on top of $3 billion the Sacklers have offered to settle other lawsuits.

The current settlement under discussion does not resolve any future criminal liability the Sacklers or other individuals may face.

The Justice Department is continuing a criminal probe of some Sackler family members and other individuals associated with Purdue, though it remains unclear whether charges will materialize, one person said.

Details of the Justice Department settlement, including when it will be unveiled and the financial penalties, also remain in flux. They hinge in part on the outcome of separate negotiations among Purdue, the Sacklers, state attorneys general and others to resolve widespread litigation as part of mediation in the company’s bankruptcy proceedings, individuals familiar with the talks said.

Some state attorneys general, including those in Massachusetts and New York, have demanded the Sacklers disclose additional details of their finances and pay more than the $3 billion they offered to settle lawsuits.

They are likely to scrutinize the size of the family's Justice Department penalty. The Sacklers are poised to receive a legal release should a bankruptcy judge approve a broader settlement, shielding them from future civil, though not criminal, claims.

Purdue's bankruptcy has shielded, through an injunction, the company and Sackler family members until at least March 2021 from thousands of lawsuits brought by states, cities, counties and others seeking to hold them responsible for allegedly flooding communities with opioid painkillers that contributed to widespread addiction and fatal overdoses. The company and family deny the allegations.

The Sacklers controlling Purdue themselves have not filed for bankruptcy. That has drawn criticism from states arguing litigation against family members should proceed to hold them accountable for the opioid crisis.

The outcome of settlement talks among Purdue, its owners and litigants will help determine how much money U.S. communities receive to address the toll from opioids.

In earlier filings made as part of Purdue's bankruptcy case, federal prosecutors alleged the company at times paid doctors and pharmacies illegal kickbacks between 2010 and 2018 to encourage medically unnecessary opioid prescriptions, resulting in fraudulent claims to government healthcare programs, such as Medicare.

Purdue has offered to settle widespread litigation in a deal it values at more than $10 billion, much of it linked to drugs under development to treat addiction and combat overdoses. One contentious aspect of the proposal is that some of the funds would come from continued OxyContin sales.

(Reporting by Mike Spector and Jessica DiNapoli; Editing by Vanessa O'Connell, Bill Berkrot and Edward Tobin)

[© 2020 Thomson Reuters. All rights reserved.]

Copyright 2020 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.