Opioid Manufacturer Endo Health Solutions Inc. Agrees to Global Resolution of Criminal and Civil Investigations into Sales and Marketing of Branded Opioid Drug
United States Also Reaches Settlement with Endo International in Bankruptcy Case
WASHINGTON - Endo Health Solutions Inc. (EHSI), which is in bankruptcy, has agreed to resolve criminal and civil investigations related to the company's sales and marketing of the opioid drug Opana ER with INTAC (Opana ER), the Justice Department announced today. The United States has also reached an agreement in Endo's bankruptcy case to settle its monetary claims arising from the criminal and civil settlements, as well as additional tax and healthcare related claims. Under the bankruptcy agreement, the government will be paid up to $464.9 million over 10 years. EHSI's entry into all of these agreements is subject to the approval of the U.S. Bankruptcy Court in the Southern District of New York.
Under the proposed criminal resolution, EHSI agreed to plead guilty in federal court in the Eastern District of Michigan to a one-count misdemeanor information charging it with violating the Federal Food, Drug and Cosmetic Act (FDCA) by introducing misbranded drugs into interstate commerce. The criminal resolution includes the second-largest set of criminal financial penalties ever levied against a pharmaceutical company, including a criminal fine of $1.086 billion and an additional $450 million in criminal forfeiture. The proposed resolution includes a corporate criminal release regarding conduct relating to the sale, marketing, and distribution of Opana ER, but does not release any individual criminal liability.
EHSI also has agreed to a civil settlement of $475.6 million to resolve its civil liability under the False Claims Act $(FCA)$. The civil settlement will address alleged losses to federal healthcare programs that paid for Opana ER.
Endo International plc and several of its affiliates, including EHSI (together, Endo), commenced Chapter 11 bankruptcy proceedings in the Southern District of New York on Aug. 16, 2022. Today, the United States announced that it also reached an agreement to resolve all of its monetary claims against the debtors - including the claims arising from the criminal plea and civil settlement - in Endo's bankruptcy cases. In addition to the criminal and civil settlement resolutions, the bankruptcy settlement provides payment for claims for unpaid taxes and for costs incurred by federal healthcare agencies to treat individuals harmed by Endo's products. As noted, under the bankruptcy agreement, the government will be paid up to $464.9 million over 10 years.
"Companies that profit from the opioid abuse epidemic by misrepresenting the safety of their opioid products and using reckless marketing tactics to increase sales threaten the health and safety of Americans," said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department's Civil Division. "With today's announcement of a criminal guilty plea and a substantial civil settlement, the Justice Department re-affirms its commitment to holding accountable those whose illegal conduct contributed to the opioid crisis."
"Chapter 11 is an important tool for businesses to preserve value for their stakeholders. Bankruptcy protections are not a free pass to evade responsibility for criminal misconduct, civil fraud, or taxes," said U.S. Attorney Damian Williams for the Southern District of New York. "Today's settlement ensures that Endo takes responsibility for its past misconduct, pays its federal debts, helps abate the nation's opioid crisis by funding evidence-based treatment programs at the state and local level and distributes payments to individuals harmed by the opioid epidemic."
"Combating the opioid epidemic remains a top public health priority for the Food and Drug Administration (FDA)," said Director Patrizia Cavazzoni, M.D. of FDA's Center for Drug Evaluation and Research. "This case demonstrates FDA and the Justice Department's commitment to work collaboratively to hold drug manufacturers accountable if they fail to share accurate information with health care professionals about the risks and benefits of opioids."
"The metrics of the opioid crisis are staggering. When companies do not provide accurate information about the safety and abuse potential of their products, they put patients at risk of abuse and addiction," said Associate Commissioner Michael Rogers of FDA's Regulatory Affairs. "Such conduct will not be tolerated, and we will aggressively pursue and bring to justice those who endanger the public health in this manner."
One important condition in the resolution is that Endo would cease to operate in its current form and would not emerge from the bankruptcy. Moreover, as part of its resolution with the opioid claimants, Endo's affiliates have agreed to a Voluntary Operating Injunction that restrains opioid marketing and sales and requires Endo to turn over millions of documents related to its role in the opioid crisis for publication in a public online archive.
The Criminal Plea
As part of the plea, EHSI will admit that from April 2012 through May 2013, certain EHSI sales representatives marketed Opana ER to prescribers by touting Opana ER's purported abuse deterrence, tamper resistance, and/or crush resistance, despite a lack of clinical data supporting those claims. According to the plea agreement, certain EHSI sales managers were aware that the sales representatives were making claims of purported abuse deterrence, tamper resistance, and/or crush resistance during sales calls, including hitting demonstration "blister packs" of non-medicated sample pills with hammers and conducting other demonstrations to convey the message that Opana ER was, in fact, crush proof and tamper resistant. The approved labeling for Opana ER did not provide adequate information for healthcare providers to safely prescribe Opana ER for use as an opioid that is abuse deterrent. According to the plea agreement, EHSI was responsible for the misbranding of Opana ER by marketing the drug with a label that failed to include adequate directions for its claimed abuse deterrence use, in violation of the FDCA.
EHSI voluntarily withdrew Opana ER from the market in 2017.
The Civil Settlement
The civil settlement announced today resolves allegations that, from 2011 to 2017, EHSI used a marketing scheme that targeted healthcare providers that EHSI knew were prescribing Opana ER for non-medically accepted indications. Aware that fewer than 10% of Opana ER prescribers wrote more than half of all Opana ER prescriptions, EHSI allegedly sought to increase its revenue from Opana ER prescriptions by focusing its marketing on those healthcare providers who prescribed the highest levels of opioids in general and Opana ER in particular. When EHSI employees raised concerns about targeting prescribers believed to be engaged in abuse, diversion or pill mill prescribing, EHSI allegedly ignored or minimized such concerns and continued to directly market Opana ER to such prescribers.
The allegations resolved by the civil settlement relating to EHSI's marketing activities include that in 2015, after marketing the reformulated Opana ER for years, EHSI sought to further increase prescriptions by partnering with a consulting company to "pull[] all the levers" it could "to drive incremental growth" of Opana ER prescriptions. In what it termed a "sales force blitz," EHSI allegedly added 3,000 priority targets to its sales representatives' call lists, with nearly all of these priority targets chosen because they prescribed a high volume of opioids in general or Opana ER in particular. EHSI allegedly used sales goals and contests to ensure that its sales representatives targeted these outlier prescribers, including prescribers who previously had been excluded from EHSI's call lists as posing risks of abuse and diversion.
The Bankruptcy Resolution
As part of Endo's bankruptcy plan, a group of Endo's secured lenders will purchase Endo's assets and operate the business under a new corporate structure. Under the bankruptcy agreement negotiated by the United States to resolve its claims against Endo, this new business will pay the United States $364.9 million over 10 years, which can be prepaid at $200 million on the bankruptcy plan's effective date, plus up to an additional $100 million contingent on the business performance of the new company.
The bankruptcy agreement resolves multiple federal claims against Endo, including the claims arising from the criminal and civil settlements, as well as tax claims and the claims of various federal healthcare agencies. The settlement agreement further precludes the new company from acquiring any unused tax credits or other beneficial tax attributes of Endo. Additionally, the new company will fund voluntary trusts in settlement of opioid-related claims against Endo, including public trusts that will pay over $450 million to state, municipal and Tribal entities to help fund programs to abate the opioid crisis. The department will credit up to $450 million of such payments against the agreed forfeiture amount.
In addition to the criminal and civil claims described above, the Internal Revenue Service $(IRS)$ filed substantial tax claims in the bankruptcy proceeding against Endo based on ongoing audits. These audits concerned, among other things, Endo's valuation of assets it transferred to foreign affiliates and its payment of a large loan pre-payment penalty to a foreign affiliate for which it sought a tax deduction. A substantial majority of these payments were entitled to priority over Endo's other unsecured claims.
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