Tarbell is highlighting the government fines and penalties businesses pay when they engage in fraudulent or criminal behavior. Often, these fines are just a small part of the firms’ annual revenue and don’t actually serve as a deterrent. To these companies, it’s just the cost of doing business.
International company Endo Pharmaceuticals will pay $10 million to two Ohio counties that have been scourged by America’s opioid crisis, and executive vice president Matthew J. Maletta called it a “favorable outcome for the company.” It certainly is, because the drugmaker both managed to skirt a drawn-out lawsuit without admitting culpability and shore up revenue, too.
Endo’s first quarter 2019 revenue more than made up for this $10 million hit and the company’s promise to provide $1 million of its Vasostrict and Adrenalin – used for diabetes and allergic reactions, respectively – to the counties. The company earned $1.42 billion in revenue the first six months of this year, up almost $5 million from the same period last year.
Despite reputational damage and a slight decline in sales because it dropped an opioid from the market, Endo seems to have suffered minimal consequences as one among a range of drug companies that flooded the nation with branded opioid painkillers like Endo’s Opana ER.
Once Endo successfully escaped the class action lawsuit in U.S. District Court in Ohio, its stocks vaulted 28.86 percent to $3.23, The Street reported. The lawsuit had named a dozen drug companies and suppliers for their alleged contributions to raging opioid addiction in the two Ohio counties. If Endo hadn’t settled, the lawsuit would likely have cost the company additional legal fees and possible compensation and damages. However, Ohio Attorney General David Yost has warned Endo that it has not deflected liability for excessively marketing opioids statewide.
Endo removed its branded painkiller, Opana ER, from the market in September 2017 under increased pressure on drug companies that profited from a nationwide abuse crisis. At the time, Opana was one of Endo’s most successful branded drugs, generating almost $159 million in sales according to company documents. Adjusted income on its U.S. branded specialty and established products dropped about 33 percent between 2016 and 2018 from the loss of Opana, alongside hits from generic competition and legal proceedings. Opana ER sales had been declining after a generic was released in 2013, when the company earned $227 million a year on the extended-release oxymorphone drug alone.
Meanwhile, Endo still gained nearly $70 million in sales of Percocet in the first six months of this year, and subsidiary Par Pharmaceuticals – which produced 15.7 percent of opioids on the market between 2006 and 2012 – still sells a range of generic opioid compounds including hydrocodone, oxycodone and others.
Shortly after the lawsuit was filed in 2018, Endo released a sobering letter evaluating its role in the opioid crisis. The letter explained Endo’s decision to drop Opana ER from the market and cut its entire sales force for pain products. But in Endo’s 2016 annual report, the company said it had eliminated the 375-person pain salesforce as a cost savings initiative.
All these profit and loss dollar figures say nothing of the human toll. In 2017, doctors in Ohio prescribed 63.5 opioids for every 100 patients, which is actually a dramatic downturn from the 102.4 prescriptions written for every 100 people in 2010, according to the National Institute on Drug Abuse.
Opioid abuse killed 4,293 people in Ohio in 2017 alone, NIH said. Cuyahoga and Summit, the two counties in the lawsuit, are requesting funds to cover the compounding costs of treating those with addiction and the strain on health systems and mortuaries, and to create new addiction recovery programs in jails and the community. NIH estimates the crisis cost the nation $78 billion in 2013, the most recently available estimate.
Summit County alone has extracted nearly $70 million from taxpayers to combat drug abuse and contend with its aftermath, but the county is seeking grants and holding out for legal payouts from other companies named in the lawsuit to recover loss of funds, NPR reported.
Allergan, which markets the opioid painkiller Kadian, tentatively agreed to pay $5 million in settlements to the two counties for its part in the opioid crisis, according to Reuters.
Multiple health companies – Purdue Pharma, Teva Pharmaceuticals, Johnson & Johnson, McKesson, Cardinal Health and AmerisourceBergen – still are scheduled to face trial in federal court when the trial starts on Oct. 21 in Cuyahoga County. Purdue and Teva ducked out of a lawsuit in Oklahoma earlier this year with settlements of $270 million and $85 million respectively. On Tuesday, the judge in Oklahoma ordered Johnson & Johnson to pay $572 million for its role in promoting opioids, which could cover approximately one year of services to combat addiction. However, the total reparations paid by the three named drug companies fell far below the $17 billion that Oklahoma sought.
It remains to be seen whether the other players named in the Ohio lawsuit will also seek settlements. But for Endo, this lawsuit is just the Cost of Doing Business.
Updated 8/27/19 at 10:15 a.m. Eastern to include Oklahoma court’s sentence to Johnson & Johnson.