Federal prosecutors are investigating civil and criminal claims against Purdue Pharma.
Photo: John Moore/Getty ImagesThe Justice Department is seeking as much as $18.1 billion from bankrupt opioid maker Purdue Pharma LP, new filings show, a demand that could disrupt the company’s monthslong effort to reach a settlement with states and local communities that accuse it of helping fuel the opioid crisis.
The filings, made by the Justice Department in connection with Purdue’s bankruptcy case, also telegraph for the first time the nature and scope of yearslong criminal and civil investigations into the OxyContin maker.
Federal prosecutors are investigating whether Purdue’s marketing and distribution of opioids violated criminal statutes including anti-kickback laws, misbranding under the Food, Drug and Cosmetic Act and conspiracy, according to the filings.
On the civil side, they are looking at whether Purdue offered kickbacks to doctors and pharmacies to encourage them to prescribe and dispense more OxyContin, and whether the company transferred cash to hide money from creditors, the new filings show.
Purdue said Tuesday that the company is in discussions to resolve criminal and civil investigations with the Justice Department and had no further comment. The Justice Department declined to comment.
In the filings, the Justice Department valued its civil claims at $2.8 billion, which could be tripled under the law. In the event of criminal charges and a conviction, the government said it would seek a $6.2 billion fine and the forfeiture of potentially $3.5 billion more. The filings haven’t yet been made public but were viewed by The Wall Street Journal.
Related
- OxyContin Maker Purdue Pharma Files for Bankruptcy Protection (Sept. 16, 2019)
- Purdue Pharma Reaches Deal With Cities, 23 States Over Opioid Crisis (Sept. 11, 2019)
- Purdue Pharma in Talks With Justice Department to Resolve Criminal, Civil Probes (Sept. 6, 2019)
- OxyContin Made The Sacklers Rich. Now It’s Tearing Them Apart. (July 13, 2019)
Purdue filed for chapter 11 bankruptcy protection in September to try to implement a multibillion-dollar settlement plan with states and local governments that had sued the company, claiming its aggressive marketing of the powerful painkiller OxyContin led to widespread opioid addiction.
The company has denied the allegations and said it is committed to helping alleviate opioid addiction.
The prospect of criminal or civil charges being brought against the company has clouded the bankruptcy, though until now the Justice Department hasn’t actively participated in the case. Purdue has previously acknowledged the existence of federal probes and said it is cooperating.
Since entering bankruptcy, the Stamford, Conn.-based company has been in talks—overseen as of March by two $500,000-a-month mediators—to split its limited pool of assets among competing factions of creditors. Some of the sticking points have been around how much money Purdue’s owners, members of the Sackler family, are willing to personally contribute.
The company entered bankruptcy valuing its settlement proposal at as much as $10 billion, though the recent mediation has generally valued the company’s assets at $5 billion, a person familiar with the matter said. At least $3 billion of any settlement would come from the Sacklers. The federal government has been monitoring but not actively participating in the mediation, court filings show.
The recent Justice Department filings are proofs of claim, statements required from anyone seeking money from a bankrupt company. Even before last week’s deadline to file such claims, thousands had been made by state and local governments, Native American tribes, hospitals, addicted individuals and insurers, totaling amounts far in excess of anything Purdue would be able to pay.
The federal government laid out the basics of its investigation, alleging that from 2010 to 2018, Purdue marketed OxyContin to prescribers it knew wrote medically unnecessary prescriptions and paid kickbacks to keep the prescriptions flowing. The practices caused reimbursements to be paid from federal health-care insurance programs in violation of the False Claims Act, the government alleges in one of the filings.
The allegations include that Purdue paid at least $137,000 in kickbacks to specialty pharmacies to get them to fill prescriptions others wouldn’t fill, according to the filing.
The filing also mentions probes into Purdue’s relationship with Practice Fusion, a health-care technology company that this year admitted to receiving kickbacks to use its software to help push certain opioids and agreed to pay $145 million to resolve criminal and civil investigations. The settlement with Practice Fusion didn’t name Purdue, but mentioned a “major opioid company.”
The Justice Department claim also details $10.4 billion in cash distributions it says were taken out of the company from 2008 to 2019, including $4 billion that went to Sackler family members after taxes were paid. The government alleges in the filing that some of the transfers, including $412 million worth of stock and intellectual property rights made to a parent company, weren’t fully documented and were made with the intent to hinder creditors from recovering money.
An attorney for the Raymond Sackler branch of the family declined to comment on the Justice Department filings, but said the family acted ethically and responsibly at all times and supports the settlement process. A representative for a second Sackler branch didn’t respond to requests for comment.
The criminal investigation is being run by the U.S. attorney’s offices in New Jersey and Vermont and the consumer protection branch of the main Justice Department.
Write to Sara Randazzo at sara.randazzo@wsj.com
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