As investigators closed in on Purdue Pharma, the maker of the opioid painkiller OxyContin, more than a decade ago, members of the family that owns the company began methodically erasing a paper trail of profits and shifting hundreds of millions of dollars from the business to themselves through offshore entities, the state of New York alleged in a lawsuit on Thursday.
The legal complaint, released at a news conference by the state attorney general Letitia James, was heavily redacted. Even so, it contains striking details alleging systematic fraud not only by the Sacklers but by a group of large but lesser-known companies that distributed alarming amounts of prescription painkillers amid a rising epidemic of abuse that has killed hundreds of thousands of people nationwide.
The major pharmaceutical distributors — Cardinal Health, McKesson and Amerisource Bergen — warned pharmacies when their monthly opioid limits were approaching, then helped them manipulate the timing and volume of orders to circumvent the limits, the complaint charged. On the rare occasion when a distributor would conduct “surprise” audits of its customers, it would often alert them in advance, the complaint says.
Over the past two decades, more than 200,000 people have died in the United States from overdoses involving prescription opioids, according to the Centers for Disease Control and Prevention. About 200,000 more have died from overdoses involving illegal opioids, like heroin.
In New York State, where prescriptions for opioids increased ninefold between 2000 and 2011, opioid-related deaths have more than doubled since 2013, the lawsuit said. Nine New Yorkers die each day.
The suit, filed in New York State Supreme Court in Suffolk County, names eight Sacklers: Richard, Jonathan, Mortimer, Kathe, David, Beverly and Theresa Sackler, as well as Ilene Sackler Lefcourt. It seeks to claw back funds that it alleges were transferred from Purdue Pharma to private or offshore accounts held by family members in an effort to shield the assets from litigation; to order the Sacklers to return any transferred assets; and to restrain them from disposing of any property.
A spokesman for the Sackler family called the allegations “a misguided attempt to place blame where it does not belong for a complex public health crisis. We strongly deny these allegations, which are inconsistent with the factual record, and will vigorously defend against them.”
A spokesman for Purdue Pharma said the company and its former directors “vigorously deny” the charges set forth in the complaint, and will defend themselves against the “misleading allegations.”
The Sacklers are one of the richest families in the United States, known for their generous philanthropy in the arts. But they have come under increasing scrutiny after new documents came to light in a Massachusetts case suggesting that some family members helped direct misleading marketing efforts for OxyContin and ignored evidence that the drug was being abused. Over the past several weeks, a number of cultural institutions in the United States and abroad have said they will no longer accept the family’s money.
The New York lawsuit alleges that Sackler family members abolished quarterly reports, insisted that numbers be recounted only orally to board members, and voted to pay themselves millions of dollars, often through offshore companies.
It further charges that in 2007, while Purdue was being investigated by federal prosecutors, the family created a new company to sell opioids, called Rhodes, which a former Purdue official said was specifically set up as a “landing pad” for the Sacklers because of the crisis surrounding OxyContin, according to the lawsuit.
Rhodes, which is owned by trusts benefiting the Sacklers and is overseen by members of the family, started selling generic opioids in 2009, the lawsuit says. By 2016, Rhodes had a far greater share of the opioid market than did Purdue, according to a Financial Times article quoted by the lawsuit.
“Whereas the Sacklers have reduced Purdue’s operations and size, Rhodes continues to grow and sell opioids for the benefit of the Sackler families,” the legal complaint said.
By 2014, fearing that Purdue could face catastrophic financial judgments, the Sacklers directed Purdue to pay family members hundreds of millions of dollars a year in distributions, sending money to offshore companies, the lawsuit claims, an act of clear “bad faith.”
As a result of these distributions, the lawsuit says, “assets are no longer available to satisfy Purdue’s future creditor, the state of New York.”
The complaint takes a skeptical view of recent reports that the company is considering filing for bankruptcy. It charges that the company is actually conducting “a well-thought out and deliberate media campaign to intimidate the litigating states, including New York, by threatening to commence bankruptcy proceedings.”
The lawsuit also goes well beyond other cases in spelling out in granular detail how pharmaceutical distributors played a role in the opioid epidemic by ignoring blatant “red flags” that indicated mountains of opioids were being diverted for illegal use.
The distributors are far less known than opioid makers and retailers, but they are among the wealthiest companies in the United States. (The lawsuit says all three are in the top 20 in terms of revenue.) Distributors buy drugs in bulk from manufacturers and then sell them to pharmacies and other distributors, such as clinics. They are legally bound to monitor the quantities sold to each vendor and alert regulators if the amounts seem excessive.
The suit (which also names a regional distributor, Rochester Drug) alleges that the distributors turned “a collective blind eye as orders for opioids in New York skyrocketed” and drugs known to be dangerous “came to be dispensed like candy.”
A spokeswoman for Cardinal Health said the company has a rigorous system in place to flag and report suspicious orders and has enhanced the program over time.
“We report suspicious orders to the federal Drug Enforcement Administration and state regulators but we do not know what they do with those reports, if anything,” the spokesman said, adding, “Our people operate in good faith and our goal is to get it right.”
A spokeswoman for McKesson said the company would not issue a statement in response to the lawsuit, but has stated in the past that it is deeply concerned about the opioid epidemic and continuously enhancing programs to detect and prevent illicit diversion and sales of controlled substances.
The lawsuit alleges that Cardinal Health — which distributed 780 million oxycodone pills to its New York State customers between 2010 and 2018 — appointed people with no experience to key compliance positions and gave them no training.
The company fired employees who alerted executives to pharmacies who repeatedly requested excessive orders, and even, for a time, did away with written site visit reports, according to the suit.
One drugstore in Suffolk County was in the 99th percentile of opioid sales in the state from 2011 through the first quarter of 2018, the complaint said; Cardinal reported an average of 85 suspicious orders a year from the pharmacy yet continued to deliver opioids to the drugstore.
The lawsuit amends an earlier suit New York State filed against Purdue Pharma, the company considered primarily responsible for unleashing the current opioid epidemic by misleading doctors about the OxyContin’s dangers and ignoring evidence that the drug was being abused.
The lawsuit adds other opioid manufacturers, including Janssen Pharmaceuticals, a subsidiary of Johnson & Johnson; Mallinckrodt; Endo Pharmaceuticals; Teva Pharmaceuticals; Allergan; and many of their affiliated companies.
New York is one of three dozen states to sue opioid manufacturers, litigation that is separate from the bundle of 1,600 opioid-related federal cases being overseen by a United States District Court judge in Ohio, who hopes to help craft a single comprehensive settlement — an objective that may be out of reach.
With the exception of Alabama, which joined the federal consolidation, these states potentially stand to wrest swifter, bigger paydays for their constituents, as long as the states can prove their cases. This week Purdue Pharma and the Sacklers agreed to pay $270 million to settle a case in Oklahoma that was to go to trial in May.