Purdue pleads out, will pay $634 million in fines

John O'Brien May 10, 2007, 1:00pm


ABINGDON, Va. - Only a few days after paying $20 million to 27 state attorneys general to settle similar civil allegations, Purdue Frederick Co. pleaded guilty in a Virginia federal court Thursday to criminal charges of misbranding the addictive and abusable nature of its prescription painkiller OxyContin.

The guilty pleas end a four-year investigation that was initiated by the Virginia Medicaid Fraud Control under the direction of then-Attorney General Jerry Kilgore. Also known as Purdue Pharma, the company and three of its top executives will pay a total of $634,515,475 in fines.

"The criminal behavior in this case embodies a systematic pattern of misrepresentations about the addictive nature of the product by these defendants," Attorney General Bob McDonnell said. "Purdue Frederick and certain corporate offices, over a period of time, engaged in criminally deceptive behavior which caused OxyContin, a highly addictive drug, to be misbranded."

According to the State Medical Examiner in Roanoke, Dr. William Massello, 228 individuals died in western Virginia from oxycodone overdoses from 1996-2005. Oxycodone is the main ingredient in OxyContin.

Purdue pleaded guilty to felony misbranding with the intent to defraud and mislead, while President and Chief Operating Officer Michael Friedman, Executive Vice President and Chief Legal Officer Howard Udell and former Executive Vice President of Worldwide Medical Affairs Paul Goldenheim each pleaded guilty to a misdemeanor charge of misbranding OxyContin.

McDonnell continued noting, "In our Commonwealth, we have a proven track record of investigating and prosecuting health care fraud schemes. The guilty pleas in this case demonstrate the committment of our state and federal law enforcement team to pursue corporate accountability in accordance with state and federal law.

Forfeited to the United States will be $276.1 million, while $160 million will be paid to federal and state government agencies to resolve liability for false claims made to Medicaid and other government healthcare programs.

Also, $130 million will be set aside to resolve private civil claims, with monies remaining after three years being paid to the United States. Another $5.3 million will be paid to McDonnell's Medicaid Fraud Control Unit to fund future healthcare fraud investigations, and $20 million will fund the Virginia Prescription Monitoring Program. Purdue also paid the maximum criminal fine of $500,000.

Individually, Friedman will pay $19 million, Udell will pay $8 million and Goldenheim will pay $7.5 million. The payments will go to McDonnell's Medicaid Fraud Control Unit, and each will also pay a $5,000 criminal fine.

"In our Commonwealth, we have a proven track record of investigating and prosecuting health care fraud schemes," McDonnell said. "The guilty pleas in this case demonstrate the commitment of our state and federal law enforcement team to pursue corporate accountability in accordance with state and federal law."

The Statement of Facts filed with the court showed that Purdue's own research found that the biggest negative of OxyContin "was the abuse potential."

McDonnell said Purdue misbranded OxyContin in three specific ways:

-Sales representatives told some healthcare providers that the drug had less euphoric effect and less abuse potential than short-acting opioids and exaggerated the differences between blood plasma levels achieved by OxyContin compared to the levels of other painkillers;

-Supervisors and employees drafted an article about a study of the use of the drug in osteoarthritis patients that was published in a medical journal, and the article was given to representatives for distribution to falsely represent that patients taking OxyContin at doses below 60 milligams per day could be discontinued abruptly without withdrawal symptoms; and

-Sales representatives told healthcare providers that a statement on the drug's package -- "delayed absorption, as provided by OxyContin tablets, is believe to reduce the abuse liability of a drug" -- meant that it did not produce a buzz or euphoria and had less addiction potential.

The case was investigated by the Virginia Attorney General's Medicaid Fraud Control Unit; Food and Drug Administration, Office of Criminal Investigations; Internal Revenue Service Criminal Investigation; the Department of Health and Human Services Office of Inspector General; Department of Labor, Office of Inspector General; Defense Criminal Investigative Service; Virginia State Police; and West Virginia State Police.

The case was prosecuted by Assistant United States Attorneys Rick Mountcastle, Randy Ramseyer and Sharon Burnham and U.S. Department of Justice, Office of Consumer Litigation and trial attorneys Barbara Wells and Elizabeth Stein.

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