Purdue Pharma and the Sackler Family’s Plan to Keep Its Billions | The New Yorker
Many pharmaceutical companies had a hand in creating the opioid crisis, an ongoing public-health emergency in which as many as half a million Americans have lost their lives. But Purdue, which is owned by the Sackler family, played a special role because it was the first to set out, in the nineteen-nineties, to persuade the American medical establishment that strong opioids should be much more widely prescribed—and that physicians’ longstanding fears about the addictive nature of such drugs were overblown. With the launch of OxyContin, in 1995, Purdue unleashed an unprecedented marketing blitz, pushing the use of powerful opioids for a huge range of ailments and asserting that its product led to addiction in “fewer than one percent” of patients. This strategy was a spectacular commercial success: according to Purdue, OxyContin has since generated approximately thirty billion dollars in revenue, making the Sacklers (whom I wrote about for the magazine, in 2017, and about whom I will publish a book next year) one of America’s richest families.
But OxyContin’s success also sparked a deadly crisis of addiction. Other pharmaceutical companies followed Purdue’s lead, introducing competing products; eventually, millions of Americans were struggling with opioid-use disorders. Many people who were addicted but couldn’t afford or access prescription drugs transitioned to heroin and black-market fentanyl. According to a recent analysis by the Wall Street Journal, the disruptions associated with the coronavirus have only intensified the opioid epidemic, and overdose deaths are accelerating. For all the complexity of this public-health crisis, there is now widespread agreement that its origins are relatively straightforward. New York’s attorney general, Letitia James, has described OxyContin as the “taproot” of the epidemic. A recent study, by a team of economists from the Wharton School, Notre Dame, and RAND, reviewed overdose statistics in five states where Purdue opted, because of local regulations, to concentrate fewer resources in promoting its drug. The scholars found that, in those states, overdose rates—even from heroin and fentanyl—are markedly lower than in states where Purdue did the full marketing push. The study concludes that “the introduction and marketing of OxyContin explain a substantial share of overdose deaths over the last two decades.”
Arlen Specter, then a Republican senator from Pennsylvania, was unhappy with the deal. When the government fines a corporation instead of sending its executives to jail, he declared, it is essentially granting “expensive licenses for criminal misconduct.” After the settlement, Purdue kept marketing OxyContin aggressively and playing down its risks. (The company denies doing so.) Sales of the drug grew, eventually reaching more than two billion dollars annually. The fact that, thirteen years after the 2007 settlement, Purdue is alleged to have orchestrated another criminally overzealous campaign to push its opioids suggests that Specter was right: when the profits generated by crossing the line are enormous, fines aren’t much of a deterrent.
Ne jamais oublier la corruption
The Sacklers have long maintained that they and their company are blameless when it comes to the opioid crisis because OxyContin was fully approved by the Food and Drug Administration. But some of the more shocking passages in the prosecution memo involve previously unreported details about the F.D.A. official in charge of issuing that approval, Dr. Curtis Wright. Prosecutors discovered significant impropriety in the way that Wright shepherded the OxyContin application through the F.D.A., describing his relationship with the company as conspicuously “informal in nature.” Not long after Wright approved the drug for sale, he stepped down from his position. A year later, he took a job at Purdue. According to the prosecution memo, his first-year compensation package was at least three hundred and seventy-nine thousand dollars—roughly three times his previous salary. (Wright declined to comment.)
But, at the time, Purdue was being sued by forty-five other states, and David Sackler offered to resolve all the cases against the company and the family in a single grand gesture. A wave of headlines reported the news: “PURDUE PHARMA OFFERS $10-12 BILLION TO SETTLE OPIOID CLAIMS.”
This seemed like a significant figure, but the headlines were misleading. According to a term sheet in which attorneys for the Sacklers and Purdue laid out the particulars of this proposed “comprehensive settlement,” the Sacklers were prepared to make a guaranteed contribution of only three billion dollars. Further funds could be secured, the family suggested, by selling its international businesses and by converting Purdue Pharma into a “public benefit corporation” that would continue to yield revenue—by selling OxyContin and other opioids—but would no longer profit the Sacklers personally. This was a discomfiting, and somewhat brazen, suggestion: the Sacklers were proposing to remediate the damage of the opioid crisis with funds generated by continuing to sell the drug that had initiated the crisis. At the same time, the term sheet suggested, Purdue would supply new drugs to treat opioid addiction and counteract overdoses—though the practicalities of realizing this initiative, and the Sacklers’ estimate that it would represent four billion dollars in value, remained distinctly speculative.
When the attorneys general refused to consent to the deal, the Sacklers followed through on their threat, and Purdue declared bankruptcy. But, significantly, the Sacklers did not declare bankruptcy themselves. According to the case filed by James, the family had known as early as 2014 that the company could one day face the prospect of damaging judgments. To protect themselves on this day of reckoning, the lawsuit maintains, the Sacklers assiduously siphoned money out of Purdue and transferred it offshore, beyond the reach of U.S. authorities. A representative for Purdue told me that the drugmaker, when it declared bankruptcy, had cash and assets of roughly a billion dollars. In a deposition, one of the company’s own experts testified that the Sacklers had removed as much as thirteen billion dollars from Purdue. When the company announced that it was filing for Chapter 11, Stein derided the move as a sham. The Sacklers had “extracted nearly all the money out of Purdue and pushed the carcass of the company into bankruptcy,” he said. “Multi-billionaires are the opposite of bankrupt.”
You might think that this would leave open the possibility of future suits brought by states, but Drain has signalled a desire to foreclose those as well, maintaining that a blanket dispensation is a necessary component of the bankruptcy resolution. In February, he remarked that the “only way to get true peace, if the parties are prepared to support it and not fight it in a meaningful way, is to have a third-party release” that grants the Sacklers freedom from any future liability. This is a controversial issue, and Drain indicated that he was raising it early because in some parts of the country it’s illegal for a federal bankruptcy judge to grant a third-party release barring state authorities from bringing their own lawsuits. The case law is evolving, Drain said.
The Trump Administration has paid lip service to the importance of addressing the opioid crisis. Bill Barr, Trump’s Attorney General, has said that his “highest priority is dealing with the plague of drugs.” In practice, however, this has meant rhetoric about heroin coming from Mexico and fentanyl coming from China, rather than a sustained effort to hold the well-heeled malefactors of the American pharmaceutical industry to account. Richard Sackler once boasted, “We can get virtually every senator and congressman we want to talk to on the phone in the next seventy-two hours.” Although the Sacklers may now be social pariahs, the family’s money—and army of white-shoe fixers—means that they still exert political influence.
According to three attorneys familiar with the dynamics inside the Justice Department, career line prosecutors have pushed to sanction Purdue in a serious way, and have been alarmed by efforts by the department’s political leadership to soften the blow. Should that happen, it will mark a grim instance of Purdue’s history repeating itself: a robust federal investigation of the company being defanged, behind closed doors, by a coalition of Purdue lawyers and political appointees. And it seems likely, as was also the case in 2007, that this failure will be dressed up as a success: a guilty plea from the company, another fine.
In a statement to The New Yorker, a representative for the families of Raymond and Mortimer Sackler denied all wrongdoing, maintaining that family members on Purdue’s board “were consistently assured by management that all marketing of OxyContin was done in compliance with law.” The statement continued, “Our hearts go out to those affected by drug abuse and addiction,” adding that “the rise in opioid-related deaths is driven overwhelmingly by heroin and illicit fentanyl smuggled by drug traffickers into the U.S. from China and Mexico.” At “the conclusion of this process,” the statement suggested, “all of Purdue’s documents” will be publicly disclosed, “making clear that the Sackler family acted ethically and responsibly at all times.”
The states have asserted in legal filings that the total cost of the opioid crisis exceeds two trillion dollars. Relative to that number, the three billion dollars that the Sacklers are guaranteeing in their offer is miniscule. It is also a small number relative to the fortune that the Sacklers appear likely to retain, which could be three or four times that amount. As the March filing by the states opposed to the deal argued, “When your illegal marketing campaign causes a national crisis, you should not get to keep most of the money.” What the Sacklers are offering simply “does not match what they owe.”
Nevertheless, in absolute terms, three billion dollars is still a significant sum—and the Sacklers have made it clear that they are prepared to pay it only in the event that they are granted a release from future liability. It may be that the magnitude of the dollars at stake will persuade Drain, the Justice Department officials on the case, and even the state attorneys general who initially rejected the Sacklers’ proposal to sign off. The problem, one attorney familiar with the case said, is that “criminal liability is not something that should be sold,” adding, “It should not depend on how rich they are. It’s not right.”