Purdue Feels the Pain of OxyContin Felony, Fine

May 15, 2007

Executives at Purdue Pharma are opening their own wallets and paying out large wads of cash to settle charges that they "misbranded" painkiller OxyContin--as part of a hefty plea agreement that may signal the courts' mounting frustration with sketchy marketing practices by Big Pharma.

Purdue will pay upwards of $600 million--one of the largest fines ever slapped on a drug maker--to resolve felony charges that they encouraged sales reps to fraudulently market OxyContin (oxycodone) as less addictive than other pain medications.

In a striking twist, the fine is levied against both the company and three high-level execs: Michael Friedman, president and COO; Howard Udell, executive vice-president and chief legal officer; and Paul Goldenheim, former executive vice-president of worldwide medical affairs. All three had to plead guilty to misdemeanor charges and together cover a $34.5 million fine.

While naming individual officials in such suits is not unheard of, it is unusual for a firm's chief legal officer to be among them, according to Carole Handler, vice-chair of the intellectual property litigation practice at law firm Foley & Lardner. "We're in a standard of much stricter scrutiny on corporate management. In order to bring about compliance...the philosophy is you need to hurt people in their pocketbooks," Handler said, adding, "This decision is designed to prevent others from going down the same road."

Officials in Virginia came down hard and fast on the company when they announced the settlement to the public. "Even in the face of warnings from healthcare professionals, the media, and members of its own sales force...Purdue, under the leadership of its top executives, continued to push a fraudulent marketing campaign," said US Attorney John Brownlee in a statement. "In the process, scores died as a result of OxyContin abuse, and an even greater number became addicted."

The case related to Purdue's marketing push between January 1996 and June 2001. It alleged that the company's sales reps used tools such as exaggerated graphs and incomplete study data to "prove" that time-released OxyContin was less addictive and prone to abuse--and had fewer withdrawal side effects--than fast-acting painkillers like morphine.

With an aggressive push to general practitioners, OxyContin achieved sales of $1.8 billion in 2004 before it lost patent protection the following year. By then it had also become infamous as one of America's most abused substances--snorted, crushed, and injected by rural teens and tabloid celebs alike.

On its Web site, Purdue seemed to "depict [the case] as a rogue action of a few individuals," said August Horvath, special counsel at law firm Heller Ehrman.

"Nearly six years and longer ago, some employees made, or told other employees to make, certain statements about OxyContin..that were inconsistent with the FDA-approved prescribing information for OxyContin," the statement reads. "During the past six years, we have implemented changes to our internal training, compliance, and monitoring systems that seek to assure that similar events do not occur again." The site also lists measures that Purdue has taken to retrain its sales force and alert physicians about potential for abuse.

Horvath recalled that 10 years ago a $10 million fine was considered a large settlement in such false-marketing cases. Now the closest precedent is the 2004 Neurontin (gabapentin) settlement, in which Warner-Lambert (now part of Pfizer) paid $430 million to resolve similar charges.

"They're going for big bucks because the conduct keeps occurring," Horvath said about federal prosecutors. "The majority [of the fine] is deterrent. There's a sense that they will have reached the right number when the cases stop happening."