Nine years ago, three top executives of Purdue Pharma pleaded guilty to criminal charges of "misbranding" Oxycontin. The case appeared to be a landmark. In previous years, top executives of large health care corporations rarely faced legal consequences when their companies misbehaved. Yet in the Purdue Pharma/ Oxycontin case, things were not what they seemed. Maybe that is why this case never did yield a new era of accountability for top corporate health care leaders.
Background - the Oxycontin Guilty Pleas
In 2007, we posted about the executives' guilty pleas. Relying on the New York Times coverage, we noted that the Department of Justice charged that the company used aggressive, deceptive marketing, including claims that Oxycontin had little potential for addiction, even though they then knew otherwise. Unlike many other settlements, the executives and the company admitted their dishonesty, although they were not apparently charged with fraud.
In a statement, the company said: 'Nearly six years and longer ago, some employees made, or told other employees to make, certain statements about OxyContin to some health care professionals that were inconsistent with the F.D.A.-approved prescribing information for OxyContin and the express warnings it contained about risks associated with the medicine. The statements also violated written company policies requiring adherence to the prescribing information.'While no executives went to jail, the three who pleaded guilty,
'We accept responsibility for those past misstatements and regret that they were made,' the statement said.
Michael Friedman, the company’s president, who agreed to pay $19 million in fines; Howard R. Udell, its top lawyer, who agreed to pay $8 million; and Dr. Paul D. Goldenheim, its former medical director, who agreed to pay $7.5 million.
appeared to be the top leaders of the company. So, at the time I concluded,
At least in the Purdue Pharma/ Oxycontin case top company leaders were prosecuted, pleaded guilty, and will personally have to pay substantial financial penalties. Maybe this will convince the leaders of health care organizations that deceptive marketing practices may not be in their long term interests. Up to now, it may have been too easy to be swayed by the enormous profits deceptive marketing can bring, and regard fines paid by the company as just a cost of doing business.No Lasting Effects
I was much too optimistic. Alas, we have since documented numerous legal settlements, and other cases of at least alleged bribery, kickbacks, or fraud, in which the top organizational leaders who authorized or directed the questionable conduct never suffered any consequences for their actions. That is, they demonstrated impunity.
Meanwhile, Purdue Pharma has been in the news since 2007, and not in a good way. In particular, we noted that the company seemed to keep up manipulative, if not deceptive marketing efforts on behalf of its narcotic product. In 2010, Canadian medical students protested that their "education" about narcotics and pain management was influenced by Purdue marketing (look here). In 2012, we noted that a leading "key opinion leader" who had a key role promoting the liberalized, if not reckless use of narcotics to treat all sorts of chronic pain, and had financial relationships with numerous narcotic pharmaceutical manufacturers, including Purdue Phrama, later admitted that it was all "misinformation." Yet this aggressive promotion of narcotics was likely a major factor in the ongoing narcotic epidemic which has killed thousands in the US. And in January, 2016 we described how opposition to new CDC guidelines that suggested much more conservative use of narcotics seemed to be funded, if not orchestrated by narcotic pharmaceutical manufacturers, notably including Purdue Pharma. Finally, there have been many other stories about Purdue Pharma about which we failed to post.
One would think, however, that a company that admitted to a crime, and whose three top executives lost their jobs and also pleaded guilty to crimes, would at least change its ways, even if these guilty pleas and admissions did not inspire more attempts to hold top corporate health care leaders accountable.
An Assumption about Unaccountable Hired Mangers
But it turns out that some obvious assumptions that I and probably many other people made about the Purdue Pharma cases of 2007 were wrong. I implicitly assumed when I wrote my 2007 post that the three Purdue Pharma executives who pleaded guilty were the top leaders of the company.
Furthermore, as we have discussed elsewhere, the top executives of large, for-profit publicly held corporations, like most pharmaceutical companies, have become largely unaccountable. They may seem to exist in a bubble, in which they are hailed as visionaries, and paid exceedingly well no matter how their organizations perform. (Look here). However, many top hired corporate managers have mainly become "value extractors."
These executives are nominally accountable to their corporate boards of directors, which are supposed to represent the owners of the companies. However, most large pharmaceutical companies have numerous stockholders, who have no easy avenue to organize. Many of their stockholders, in turn, are mutual funds, retirement funds, etc whose shares in turn are owned by thousands more. These numerous, dispersed "owners" have little influence on corporate boards, who often functionally are dominated by cronies of the top management.
So when the three top Purdue executives pleaded guilty, at least it looked like in this case the unaccountable hired executives had been made accountable, if not to their boards of directors, at least to the courts.
But Who Owned Purdue?
But what you see is not always what you get. There was a hint buried in the NY Times article,
Between 1995 and 2001, OxyContin brought in $2.8 billion in revenue for Purdue Pharma, a closely held company based in Stamford, Conn. At one point, the drug accounted for 90 percent of the company’s sales.
As part of the plea agreement, Purdue Frederick, a holding company for Purdue Pharma that is also closely held, pleaded guilty to a felony charge of misbranding OxyContin.
The article did not further discuss the meaning and implications of the twice used phrase, "closely held." I confess I missed it entirely. However, it seems to have meant that rather than being a public corporation with numerous, dispersed stockholders, the owners of Purdue Pharma and its parent were a smaller group, perhaps a group who should have been accountable for the actions of their executives. However, the NY Times did not further describe this group. Neither did reports in other outlets, such as the Wall Street Journal, CBS, or Time. Nor did a variety of other news stories that mentioned Purdue Pharma through 2010.
The Oxycontin Billionaires
There were a fewother clues available in 2007, but would have not been easily found at that time. After the case's resolution was disclosed, an article appeared in the Corporate Crime Reporter (but was presumably only available at that time by subscription.)
Purdue is a privately held, very secretive company based in Stamford, Connecticut.
It’s controlled by the Arthur Sackler family. Arthur Sackler is the guy who, before he delivered OxyContin, brought to you the marketing for Librium and Valium. Walk on the mall in Washington and you walk by the Freer Gallery of Art and Arthur Sackler Gallery.
Art brought to you by Oxy.
New York Times correspondent Barry Meier is probably the most plugged in journalist on the topic. A couple of years ago, he wrote a book detailing the problem titled Pain Killer: A 'Wonder' Drug’s Trail of Addiction and Death (Rodale Books, 2004.)
So apparently Purdue Pharma and Purdue Frederick were privately held, the Sackler family held a controlling interest, and the Sackler family were rich enough to have their name attached to an art museum.
The relationship between the Sackler family and Purdue got no other attention I could find until 2010. In March of that year, another member of the family, Dr Mortimer D Sackler died, and his NY Times obituary led off with evidence of his wealth, and philanthropy,
Mortimer D. Sackler, a psychiatrist who was a co-owner of the pharmaceutical company Purdue Pharma, makers of the controversial painkiller OxyContin, and whose lavish gifts to the Guggenheim Museum, the Metropolitan Museum of Art and Columbia University made him one of New York City’s most prominent benefactors, died March 24 in Gstaad, Switzerland. He was 93 and had homes in London, Gstaad and Antibes, France.
The obituary also provided evidence of a direct relationship among the Sacklers, Purdue, and the development of Oxycontin.
The Sackler brothers were all doctors, and all businessmen as well. In 1952, while the three were working at the Creedmoor state psychiatric hospital, Arthur financed the purchase of a small drug manufacturer based in Greenwich Village, the Purdue Frederick Company, which Mortimer and Raymond Sackler ran as co-chairmen and which later became Purdue Pharma, now based in Stamford, Conn.
by the mid-1990s Purdue Pharma was still a small drug company. But with a new product, OxyContin, a powerful, long-acting, narcotic painkiller, the company hoped to join the ranks of industry giants. Indeed, by 2001 sales of the drug had reached nearly $3 billion and accounted for 80 percent of Purdue Pharma’s revenue.
An obituary in the London Telegraph quantitated the wealth that the Sacklers obtained from Purdue a bit more,
The lavish scale of Sackler's generosity was indicated in The Sunday Times's "Rich List" for 2008, which noted that while he and his family owned a £500 million stake in the pharmaceutical business, Purdue Pharma, huge charitable contributions had cut their wealth to £300 million. Yet few knew much about the Sacklers apart from their association with the cultural institutions that bear their name.
However, I could find no echos of this story beyond these obituaries, and certainly none that prominently made their way into the health care world. In late 2011, about ten percent of a long piece by Fortune on Purdue made the Sackler's ownership and wealth clear, but did not discuss the implications.
The story only began to echo a little in 2014. That year, the prospect of a trial of a civil lawsuit against Purdue filed in the state of Kentucky, one of the most hard hit by the narcotic epidemic, promised to shake things up. A long Bloomberg story on the lawsuit was the first to suggest that the very wealthy Sackler family might bear some responsibility for how Purdue marketed Oxycontin, and the results on patients' and the public's health.
Kentucky lawyers plan another first for Purdue: They want to elicit testimony from the company’s board, which is dominated by members of the Sackler family, the wealthy philanthropists who own the company and have until now remained largely untouched by the controversy tied to the blockbuster drug that netted their business billions of dollars.
It underlined the tightness of the ties between the Sackler's and Purdue. The family does not merely own a controlling interest, but dominates the company's governance.
Purdue today is owned through holding companies and family trusts for the benefit of Mortimer and Raymond Sackler’s families, according to Raul Damas, a company spokesman. In all, nine members of the Sackler family are Purdue directors. In January, Raymond Sackler announced the appointment of Chief Executive Officer Mark Timney. None of the Sacklers has been named in the Kentucky suit.
Raymond, who remains on the board, and his children have been the most involved in the family business. His son, Richard, a physician, worked at Purdue for three decades before being named president in 1999. Now retired, he remains a director. A grandson, David Sackler, sits on the board and runs a family investment fund, Summer Road LLC, in New York. Raymond’s other son, Jonathan, is a director, too.
By the way, the Bloomberg article also detailed another point (which had been mentioned in the obituaries and the CNN article). One member of the Sackler family was behind the aggressive, deceptive marketing campaign that sparked so many sales of Oxycontin. In fact, this Sackler brother could be viewed as the father of modern aggressive, deceptive pharmaceutical/ biotechnology/ device corporate marketing.
Raymond and Mortimer ran the company together. Arthur, the oldest, appears to have been primarily an investor and adviser.
Considered the father of modern pharmaceutical marketing, Arthur Sackler created the first medical-journal advertising insert to promote a drug and pushed for hiring sales reps long before they became as common in physicians’ waiting rooms as out-of-date magazines. Purdue used many of Arthur Sackler’s tactics when it introduced OxyContin, a time-released dose of the opioid oxycodone, in 1995.
CNN had gone into a bit more detail on Arthur Sackler's previous work:
Arthur, joined a small advertising agency that specialized in marketing pharmaceuticals. (He also funded his brothers’ purchase of Purdue, according to a 2003 book by New York Times reporter Barry Meier called Pain Killer: A Wonder Drug’s Trail of Addiction and Death.) Arthur was so successful that in 1997 he was one of the first people named to the Medical Advertising Hall of Fame, whose website credits him with helping 'shape pharmaceutical promotion as we know it today.' As early as the 1950s he was experimenting with TV marketing, and according to the entry, Arthur’s scientific knowledge and ability to expand the uses for Valium helped turn it into the first $100 million drug ever. Arthur’s philosophy was to sell drugs by lavishing doctors with fancy junkets, expensive dinners, and lucrative speaking fees, an approach so effective that the entire industry adopted it.
So at least this article credits Dr Arthur Sackler, of Purdue Pharma, with being one of the creators of the web of conflicts of interest that has ensnared many medical professionals in the last decades. Who knew?
Just to ice this cake, in later 2015, it became apparent that the Sacklers did not merely become wealthy from Purdue profits and Oxycontin sales. They became fabulously wealthy. Forbes listed the Sackler family that year as one of the 20 richest US families, estimating their combined wealth as $14 billion.
The Sackler family, which owns Stamford, Conn.-based Purdue Pharma, flew under the radar when Forbes launched its initial list of wealthiest families in July 2014, but this year they crack the top-20, edging out storied families like the Busches, Mellons and Rockefellers.
How did the Sacklers build the 16th-largest fortune in the country? The short answer: making the most popular and controversial opioid of the 21st century — OxyContin.
Purdue, 100% owned by the Sacklers, has generated estimated sales of more than $35 billion since releasing its time-released, supposedly addiction-proof version of the painkiller oxycodone back in 1995. Its annual revenues are about $3 billion, still mostly from OxyContin. The Sacklers also own separate drug companies that sell to Asia, Latin America, Canada and Europe, together generating similar total sales as Purdue’s operation in the United States.
Forbes estimates that the combined value of the drug operations, as well as accumulated dividends over the years, puts the Sackler family’s net worth at a conservative $14 billion.
Perhaps if the Kentucky lawsuit had gone to trial, these echos would have gotten even louder.
However, in December, 2015, Purdue settled the suit for $24 million, admitting no liability, and keeping the Sackler name out of the limited press coverage (although see this in STAT by Ed Silverman.)
I, for one, only found out about the Sackler / Purdue linkage when STAT published a followup in March, 2015. It turns out that in the run up to the Kentucky trial, a member of the Sackler family was actually deposed. This may have been the only direct discussion of the Oxycontin case by a member of the family.
The settlement required the attorney general to 'completely destroy' or return to Purdue all documents it received from the company or from any other party through a subpoena. The attorney general was given 60 days from the Dec. 18 agreement to comply. The agreement also prohibits the attorney general from sharing the documents with any other entity investigating or litigating against Purdue.
The attorney general’s office destroyed millions of pages of documents within the 60-day period, according to spokesman Terry Sebastian.
While the attorney general destroyed the records in its possession, copies of some of those records remain under seal in the Pike County courthouse, including the Sackler deposition.
The STAT article noted that millions of pages of records from other Oxycontin litigation were destroyed or returned to the company as stipulated by previous settlements. This time,
STAT is making a motion to intervene in the settled Kentucky lawsuit. The motion was sent to the Pike Circuit Court Monday via overnight courier.
The motion argues that STAT and the public have a constitutional right to the records that trumps Purdue’s interest in keeping them secret. The motion also states there is a substantial public interest in the case, citing the epidemic of drug addiction and related crime stemming from the abuse of OxyContin in Kentucky and other states. STAT is requesting the court make the documents available immediately.
We will see how this attempt to shine a little light on the long running Oxycontin story goes. I am not optimistic, since this long-running case has vividly shown how those who have the biggest vested interests in keeping our commercialized, overutilizing, over-marketed health care system going can use money and influence to keep it all so anechoic.
So now we see, dimly, reasons why the penalties handed out to "top" Purdue Pharma executives for the deceptive "misbranding" of a dangerous narcotic failed to end the impunity of top health care leaders. Those supposed "top men" were not really the top.
Just like in "Raiders of the Lost Ark,"
They were hired managers with fancy titles who worked for a secretive family which owned Purdue Pharma, which was apparently directly involved in the engineering of the aggressive, deceptive, "misbranding" sales campaign which sold so much Oxycontin, which became fabulously wealthy from the ownership of the company, and which managed to conceal their relationship to the company from nearly all prying eyes. So far, the family seems to either have befuddled or intimidated law enforcement sufficiently to prevent any direct consequences from befalling them.
This case vividly demonstrates, first, how those who have personally gained the most from our current dysfunctional health care system have often brilliantly covered up what they were doing (part of what we have called the anechoic effect). As long as we do not know where the money goes, and how it is made, we do not know what needs to be done to make things better. True health care reform requires bright sunlight to be shown on how the health care sausage is made, who makes it, and how they profit from it. As long as we the people let ourselves stay in the dark, we will continue to endure our woefully overpriced, inaccessible, mediocre quality, and all too often frankly corrupt health care system.
A piece this long and heavy deserves a musical interlude. Here is a live performance by the Dramatics of "What You See Is What You Get," (if only that were the case here).