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Arizona lawsuit wants stop of $4B transfer to owners of opioid manufacturer

Posted 7/31/19

By Howard Fischer

Capitol Media Services

PHOENIX — Attorney General Mark Brnovich is asking the U.S. Supreme Court to stop the family that owns a major opioid manufacturer from “looting” …

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Arizona lawsuit wants stop of $4B transfer to owners of opioid manufacturer


By Howard Fischer

Capitol Media Services

PHOENIX — Attorney General Mark Brnovich is asking the U.S. Supreme Court to stop the family that owns a major opioid manufacturer from “looting” company assets.

In a new filing Wednesday, Mr. Brnovich contends that Purdue Pharma has transferred more than $4 billion to members of the Sackler family between 2008 and 2016. That does not include millions of dollars in transfers to other companies controlled by family members, including overseas firms.

What makes all this relevant — and, from Mr. Brnovich’s perspective, appropriate for Supreme Court action — is the company currently is facing multiple lawsuits, including several here in Arizona, accusing the firm of improperly promoting its OxyContin brand and helping cause the opioid crisis.

Mr. Brnovich wants the justices to not only stop the transfers but, more to the point, order family members to give back what already has been taken.

He specifically is looking to preserve funds for a case pending in Pima County Superior Court which contends that Purdue violated the terms of a 2007 consent judgment which prohibited the promotion and marketing of its oxycodone painkillers in deceptive ways. That case is set for trial in 2021.

“As a lawyer and the state’s chief legal officer, we’re going to do everything we can that those who helped create this crisis are held responsible,” Mr. Brnovich told Capitol Media Services.

Mr. Brnovich, in his arguments to the justices, said the company has been knowingly engaged in an “aggressive marketing campaign” for OxyContin. In fact, he said, company president Richard Sackler “crassly boasted that ‘the launch of OxyContin tablets will be followed by a blizzard of prescriptions that will bury the competition.’”

He said that the rise in Purdue’s profits were mirrored by an increase in opioid addiction, overdoses and deaths, with a 400 percent increase between 1999 and 2006.

All that led to $600 million in fines from the federal government and that 2007 consent judgment in Arizona and elsewhere when Purdue paid $19.5 million which was distributed to Arizona and 25 other states.

“Despite all of the fines, settlements, judgments and promises, Purdue — with the knowledge and approval of the Sacklers — continued to market its opioids illegally through a marketing campaign that was designed to aggressively increase sales,” Mr. Brnovich wrote.

It has the desired result, he said: By 2009 Purdue was making more than $2 billion each year from OxyContin sales alone, with cumulative earnings of more than $31 billion by 2016.

At the same time, though, Mr. Brnovich said opioid-related deaths in Arizona rose 76 percent since 2013, with 928 in just 2017 alone. And he said the state health department estimates that between June 2017 and this past June more than 3,000 Arizonans died from opioid overdose.

Mr. Brnovich said that after the 2007 settlement in Arizona and elsewhere, Richard Sackler wrote a memo exploring options that could protect the family from the “dangerous concentration of risk” it faced. And that, he said, is related to the transfer of company assets to the family and his argument to the Supreme Court urging the justices to intercede.

“They were basically taking cash out of the company to enrich themselves when they knew there was likely to be judgments or financial risk associated with them,” he said.

Mr. Brnovich acknowledged that the owners of a privately held company are entitled to reap the financial benefits.

“We are arguing that the transfer of the funds was made with an intent to hinder, delay or defraud present and future creditors or avoid, basically, paying what they knew was going to be owed,” he told Capitol Media Services. Mr. Brnovich said it’s like someone who is going through a divorce or a bankruptcy proceeding either hiding or liquidating assets to keep the money from creditors.

He said having the high court itself take up the issue, versus being shunted off to a lower federal court, would fulfill its responsibility to “resolve nationally important issues,” calling the nationwide opioid epidemic an “unprecedented” public health crisis.

“The human toll is unimaginable,” Mr. Brnovich said, with estimates that the abuse has cost more than a trillion dollars in health care, social services and criminal justice.

“Nearly every state (including Arizona), thousands of municipalities and others who have been harmed have sued Purdue to recover damages caused by the company’s illegal marketing practices,” Mr. Brnovich wrote. “Yet because of the Sackers’ campaign to drain Purdue of its assets, these victims now face the prospect of recovering a fraction of what they are owed.”

And that, Mr. Brnovich told the justices, is where they fit in.

“It is urgent that those responsible for the opioids crisis be held accountable, that their victims be able to recover for the harm that has been inflicted on them, and that the Sacklers’ looting of Purdue be remedied,” he wrote. “Only this court can resolve this pressing national issue in a uniform and timely manner.”

Purdue Pharma, in a written response, called the U.S. Supreme Court “an improper forum” to conduct a trial on the claims being made by Arizona.

“This petition was filed solely for the purpose of leapfrogging other similar lawsuits, and we expect the court will see it as such,” the company said.

Attorney Gregory Joseph, who represents several family members, declined comment. And a spokeswoman for Mortimer and Raymond Sackler issued a statement strongly denying the allegations, calling them “inconsistent with the factual record.”

In a separate filing Wednesday, Mr. Brnovich asked Pima County Superior Court Judge Brenden Griffin to add members of the Sackler family to the existing lawsuit, the one set for trial in 2021.

Mr. Brnovich said adding the family members is a backup position in case the Supreme Court refuses to take the case. It also potentially makes their assets available in the case, as Arizona is seeking $25,000 for each violation of that 2007 consent decree.

“The Sackler defendants were the chief architects and beneficiaries of Purdue’s deception,” the new filings in Pima County state.

That deception, the legal papers state, include what they say is the family’s knowledge that sales reps would “unfairly and deceptively promote opioid sales that are risky for patients,” including pushing the drug for patients who never had taken then before without disclosing the higher risk, pushing opioids as substitutes for safer medications and “falsely assuring doctors and patients that reformulated OxyContin was safe.”

In 2016, Forbes listed the family at the 19th wealthiest in the U.S. with worth of $13 billion.

The family is known for its donations to museums. But in recent years some institutions, citing the source of the funds as ultimately coming from opioid sales, have declined to take new cash.

Most recently, the Louvre Museum in Paris removed the family name from what had been its Sackler Wing of Oriental Antiquities. But the name remains at several museums including the Guggenheim Museum and American Museum of Natural History, both in New York City.