The American Prospect (tapped_xml) wrote,
The American Prospect
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Fine Purdue Pharma? No. Nationalize It? Now We’re Talking.

https://prospect.org/article/fine-purdue-pharma-no-nationalize-it-now-were-talking

Jeff Chiu/AP Photo

Purdue Pharma, makers of the market-leading opioid OxyContin, faces more than 2,000 lawsuits from states and localities across the country.

A judge’s ruling in Oklahoma, granting the state a $572 million verdict against Johnson & Johnson for its role marketing heavily addictive opioids, actually sent company stock up initially, though it’s fallen off since then. The award was far less than Oklahoma asked for, covering only one year of costs for the state to combat the opioid crisis rather than 30.

But Johnson & Johnson was not a major player in the opioid crisis, which has claimed over 400,000 lives since 1999. Its painkillers Duragesic and Nucynta were not the most popular and widely used. The verdict, the first against an opioid manufacturer in the U.S., really had its greatest implications for Purdue Pharma, makers of market-leading opioid OxyContin, which faces more than 2,000 lawsuits from states and localities across the country.

Purdue paid Oklahoma $270 million to settle its role in the crisis last spring, and this week’s verdict showed that figure to be woefully inadequate. If Oklahoma can get $572 million from a less-heralded manufacturer for opioid deception, then Purdue, the poster child for such shenanigans, is cooked.

Sensing this, Purdue tried to sue for peace, offering $10 to $12 billion for a “global settlement” of all claims. The last time we heard the term “global settlement,” it resulted in a $25 billion deal in 2012 with five mortgage companies for mass fraud during the foreclosure crisis. The actual benefit to homeowners bore no resemblance to that headline number, the companies were able to easily minimize their losses, and no executive saw the inside of a jail cell or had to return a penny of their bonuses. Law enforcers must do better this time; they can hardly do worse.

The Purdue case is one where individual accountability is certainly warranted. Emails of members of the billionaire Sackler family pushing for higher doses and more sales of OxyContin, even years after learning of the drug’s addictive risks, are damning. Even at the end, the Sacklers brainstormed how to move into addiction treatment services, in a brazen attempt to profit from the very pain they caused.

Elizabeth Warren has already characterized anything that doesn’t result in personal hardship for the architects of the opioid crisis as not good enough. Considering that a drug pusher selling small amounts of marijuana would almost certainly go behind bars, a pusher at a far higher and more deadly level who happens to wear a suit to work should see a more proportional response.

If there will be no jail, then the fine should be far higher. The prospect of a global settlement for $10 billion is laughable, given that a state with a little over 1 percent of the population got $572 million in a case against an opioid manufacturer with far less impact. Moreover, Purdue executives, in particular the Sackler family, should be personally liable for whatever transpires.

One possible outcome is that the Sackler family assets could be seized and placed into a trust, with the fines paid out of that. This obviously doesn’t create the full deterrent effect that jail time would. But the structure that the Sacklers have proposed could yield benefits that might provide a solution to the crisis of high prescription drug costs, as well as opioids.

The Sacklers have proposed kicking in $3 billion to settle claims against Purdue, and selling off Mundipharma, the company’s global subsidiary, to raise another $1.5 billion. They’ve also floated giving up control of the company, moving it into Chapter 11 bankruptcy and emerging with Purdue as a “public beneficiary trust” corporation. All profits from drug sales from the new Purdue Pharma would go to the plaintiffs in the cases: cities and states, mainly. Addiction treatment drugs that Purdue is in the midst of developing would be free to the public.

This effectively nationalizes Purdue, making it a company run for the public benefit. The larger the fine, the more years that Purdue could be run in this fashion. And one vision of this could be a publicly run drug company that identifies failures in the prescription drug market and seeks to remedy them.

Giving out a free version of naloxone, the nasal spray that reverses opioid overdoses, is a no-brainer. But what if, for the sake of argument, the new public beneficiary trust company decides to manufacture generic insulin and sell it virtually at cost? The public benefit of intervening in the insulin market, where millions of diabetes sufferers stand at risk from soaring prices, would be enormous.

What if the new Purdue became a low-cost generic drug competitor to hundreds of excessively priced drugs that are off patent but remain potent in the marketplace? What if its new corporate charter banned it from making “pay for delay” deals with brand-name manufacturers, who pay off generic companies to delay their entry into the market?

What if the new Purdue became the repository for executive action from the next president, who would have the power to use “march-in rights” to seize the patent of an overpriced drug created with public funding (virtually every new treatment approved by the Food and Drug Administration in the past decade used public funding of some kind) and license it to a competitor? Purdue could be re-envisioned as a discount competitor to every mammoth pharmaceutical company seeking to rip off the public. This would fulfill its public beneficiary mission, and the lower the profit margins, the more years that this could be maintained.

Of course, a slower trickle of profits means less up-front money for the various plaintiffs in the opioid cases. But the settlement could be structured in such a way as to alleviate that as well. The government could give no-interest loans for the full headline amount to cities and states, so they can initiate their anti-opioid programs immediately. Then Purdue profits would flow into the federal Treasury to offset that outlay.

Global settlements with corporate offenders have not worked out recently for America. But in this case, law enforcers could create personal accountability for the opioid crisis, and structure a system that could not only prevent opioid deaths, but prevent deaths from lack of access to prescription drugs more generally. It’s time to think creatively about these kinds of options.

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