Corporate Crime Reporter
May 16, 2007
How does street crime work?
You commit the crime, you do the time.
How does corporate crime work?
Big pharma corporation commits a crime and hires a highly paid white collar crime defense lawyer.
Defense lawyer approaches prosecutor and says--let's make a deal.
You agree not to prosecute the company.
I'll give you a shell company that does little business but has a similar name. That company pleads guilty to the crime. It no longer sells drugs and thus when Medicare excludes it, it loses nothing. We turn over a couple of executives. They plead guilty. And you promise no jail time.
You can hold a press conference and say--we cracked down on corporate crime.
We can get on with our business of making millions of dollars off average Americans addicted to our opiate of choice.
That's pretty much what came down last week when the Justice Department went after the maker of OxyContin, the addictive pain killer that addicts will die for.
OxyContin is a Godsend for cancer patients and others in chronic pain.
But it's also an easy high for thousands of down and out Americans.
Crush the pill and snort it.
It's like heroin--without the needles. It's big in Appalachia. You don't need to ship it in from overseas. You can get it at your local doctor's office or pharmacy.
Talk to family doctors working in hill country and one of the first issues they raise is Oxy addiction. Abuse is so rampant that some hill doctors have stopped prescribing it. No more break-ins and harassing phone calls from addicts claiming back pain.
Last week John Brownlee, the U.S. Attorney in Roanoke, Virginia tried to pin the blame where it rightly belongs--on the company and executives who pushed the drug on an unsuspecting public with claims that it was less addictive than other painkillers.
Emphasis on the word "tried."
If you read the papers last week, you might now believe that Purdue Pharma, the Stamford, Connecticut-based maker of OxyContin, pled guilty last week to pushing OxyContin by making claims that it is less addictive and less subject to abuse than other pain medications and that it continued to do so despite warnings to the contrary from doctors, the media, and members of its own sales force.
You might believe, as the Los Angeles Times and other newspapers reported, "Purdue Pharma pleaded guilty to one felony count of fraudulently misbranding a drug."
Purdue Pharma did not plead guilty to this crime.
It was Purdue Frederick that pled guilty.
Why is this distinction important?
Well, if you are a pharmaceutical company and you are convicted of a felony, under federal law, you are automatically excluded from federal insurance programs like Medicare.
The idea behind mandatory exclusions is clean government--if you commit a serious crime, the federal government isn't going to do business with you.
Unless you are a giant corporation with hundreds of millions of dollars in profits at stake.
Then you get a deal.
In this case, the deal was brokered by Howard Shapiro, a partner at WilmerHale in Washington, D.C.--the lawyer for Purdue Pharma.
Shapiro did not return calls seeking comment for this story.
Shapiro offered up Purdue Frederick to plead guilty.
What is Purdue Frederick?
We sent an e-mail off to company spokesman James Heims.
We asked--what is the difference between Purdue Frederick and Purdue Pharma?
He writes back immediately.
"They are independent, associated companies. Please let me know if you have further questions."
Well, yes, we do have further questions.
Why did Purdue Frederick plead guilty and not Purdue Pharma?
We call Mr. Heims.
Now he's busy.
So, we turn to the press packet sent out by Heidi Coy, the public affairs person for U.S. Attorney Brownlee.
It's 89 pages.
It contains Brownlee's statement, the press release, the information, the agreed statement of facts, the plea agreements with Purdue Frederick, Michael Friedman, the president and CEO, Howard Udell, the company's general counsel, and Paul Goldenheim, the company's former medical director.
What doesn't the press packet contain?
It doesn't contain the non-prosecution agreement.
And, not surprisingly, out of the hundreds of mainstream news outlets that carried this story last week, not one mentioned the non-prosecution agreement.
The non-prosecution agreement is the one that protects the companies that make the money.
Purdue Frederick takes the hit. It's the felon. It is excluded from government programs. But so what? We can assume it has little if any government business to lose. (Brownlee says he doesn't know. The company won't return calls.)
The more than 200 other affiliated Purdue Pharma companies scattered around the world and listed in Appendix A of the non-prosecution agreement get off.
No felony charge.
Business as usual.
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.)
In his statement that he read before the cameras last week, U.S. Attorney Brownlee said that Purdue Frederick is the "manufacturer and distributor" of OxyContin.
Well, as it turns out, they used to be. No longer. Now, that's Purdue Pharma.
In an interview with Corporate Crime Reporter, Brownlee admits that Purdue Frederick was chosen to plead guilty because "we didn't want to ban the future sale of the drug."
Had Purdue Pharma been forced to plead guilty, Oxycontin would have been excluded from Medicare coverage, he said.
"And we didn't want that," Brownlee says.
The other document that was not sent out in the press packet was the corporate integrity agreement.
This was the agreement that Purdue Pharma entered into and that requires the company to hire an independent monitor to make sure it doesn't engage in future criminal activity.
But Brownlee won't give the name of the independent monitor who has been appointed.
He won't say.
And he says that while all documents in the case weren't released to the media in the press packet, they were posted on the web site of the federal court in Roanoke.
You a reporter? Go find it.
The bottom line is that Brownlee prosecuted a case that few other U.S. Attorneys would touch. He proceeded against a powerful privately held and secretive pharmaceutical company with major resources at its disposal. He secured a guilty plea against an entity and three top executives.
As part of the settlement, the company will pay over $600 million in fines, restitution and a civil settlement. The three executives will pay collectively over $34.5 million in penalties.
But in the end, he pulled his punches.
Purdue Pharma not charged.
Independent monitor's name not made public.
And perhaps most importantly, the executives will not face jail time.
Brownlee dodges the question.
This irks Sidney Wolfe of Public Citizen's Health Research Group.
Wolfe called the fines and guilty pleas "an important message to the drug industry that this kind of malicious, death-dealing behavior will not be tolerated."
But the government could have come down much harder on what he called "white-collar drug pushers."
Wolfe pointed out that from 2000 through 2006 alone, according to data from Drug Topics, the news magazine for pharmacists, there have been $9.6 billion in retail U.S. sales of OxyContin. It was one of 25 top-selling drugs from 2000 to 2005--it was the 11th largest selling prescription drug in 2003.
"The government should have forced the company to disgorge far more of its ill-gotten profits in this case," Wolfe said. "Hundreds of thousands of people are languishing in jail for relatively minor drug possession or distribution crimes involving illegal drugs or, in a smaller number of cases, prescription drugs such as OxyContin. Why have the three wealthy Purdue executives, who have pleaded guilty to orchestrating this dangerous promotional campaign, escaped jail time, and why are they paying merely $34.5 million in penalties? The damage to the public from these white-collared drug pushers surely exceeds the collective damage done by traditional street drug pushers. Why do we have such a double standard of justice?"
Corporate Crime Reporter is located in Washington, DC. They can be reached through their website.