Oklahoma’s decision to accept a multi-million-dollar settlement from Purdue Pharmaceutical is being widely heralded as a major step toward accountability for both the corporate titans behind the opioid epidemic and the Sackler family, the principal owners of the company.
It’s not. The details of the deal amount to a win for Purdue, its latest in a 15-year string of narrow escapes for a drug maker that knowingly misrepresented a product one pharmacology expert later dubbed an “addiction producing machine.”
The coverage of the settlement with the state of Oklahoma, announced on Tuesday, naturally focuses on the total dollar figure in the deal: $270 million. But the impression that large number leaves with readers – a quarter-billion-dollar hit to the firm – doesn’t match the reality. In numerous, tangible ways, this was a slap on the wrist for Purdue.
For instance, everything Purdue is giving up in the settlement will be tax deductible.
The deal’s structure disperses some of the settlement funds immediately and some over a longer timeline, which would spread these potential deductions across many tax years. As tax lawyer Robert Wood, who’s written a book specifically on the tax treatment of settlement lucre, told ThinkProgress, “These rules are complex. Eventually, though, the cash could presumably be deducted by the respective businesses.”
Wood notes that the rest of the on-paper costs driving the starry-eyed coverage of a $270 million settlement – including $20 million paid in the form of addiction treatment drugs rather than cash – is subject to the manipulations of tax advisors, who will have ample means at their disposal to reduce their client’s debts to society.
Just $12.5 million of the proceeds will be directly allocated to the cities and counties that have borne the frontline costs of the addiction epidemic which Purdue’s misleading marketing of OxyContin helped spark. The outside lawyers Oklahoma Attorney General Mike Hunter hired to assist in the case will receive roughly five times as much as the local governments will share amongst themselves.
And the vast majority of the funds Purdue and the Sacklers will deduct from their corporate and personal tax bills for 2019 will be spent on a cutting-edge research and treatment facility at Oklahoma State University. It’s the latest example of wealthy plutocrats being permitted to donate their way out of scandal and legal jeopardy.
Public health experts have expressed a preference for structuring settlements like these in ways that ensure money will be spent directly on the harms involved, rather than letting the money bleed out to patch a slew of unrelated budget holes. That helps explain the roughly 17-to-1 ratio between OSU’s share of the deal and the local government distributions from it.
Nevertheless, this doesn’t mean these arrangements are optimal or effective ways to direct the funds, longtime Purdue critic Dr. David Egilman told ThinkProgress. Egilman, a Brown University professor who has dogged Purdue for decades over its misrepresentations about OxyContin as an expert witness in numerous suits, shares his peers’ concerns about dumping settlement money into all-purpose general funds but hastens to add that the way Oklahoma has structured the settlement won’t ameliorate the societal costs of the opioid epidemic.
“If you were concerned about helping addicts get off of their drugs you would not fund a large building at a medical school,” Egilman said. A dispersed statewide network of smaller rehab facilities staffed by a mix of former addicts and medical professionals would be more effective than a central structure located many hours away from those who need its services, he added.
And the settlement’s focus on the currently addicted does little to curb Purdue’s continued promotion of a drug that sets patients and doctors up for disaster. Egilman, who famously coined the “addiction producing machine” moniker for OxyContin in a little-noticed 2013 presentation to the Food and Drug Administration which laid out how users who trusted the company’s marketing would be inexorably dragged toward chasing a narcotic high more powerful than Purdue had claimed, said the new settlement fails to protect future patients.
“I haven’t seen anything that would stop company from marketing the drugs in a way that encourages physicians to continue to addict people,” Egilman said. “If you can only pump water so fast out of a boat that’s got a huge hole in it, sooner or later that boat’s gonna sink — unless you plug the hole. I don’t see any programs to plug the hole in here.”
The Sacklers’ quasi-voluntary underwriting of the new facility – which will presumably help Oklahoma’s public university system attract both research funding and academic talent – is of a piece with the family’s philanthropy. Those efforts have only recently become controversial. Neither the Sackler nor Purdue name will appear anywhere on or in the buildings they’re funding at OSU, a Purdue spokesman told ThinkProgress.
The spokesman did not respond to questions about how Purdue or the Sacklers might apply the costs of the Oklahoma deal to their tax obligations. But there is nothing to stop them from writing off the full costs as they are paid out over the next five years.
Corporations can generally deduct everything they pay to settle civil and criminal disputes save for any fines they pay. When settlement components are characterized as a forfeiture rather than a fine, they may or may not be tax deductible. The Oklahoma deal is entirely comprised of voluntary payments to resolve the lawsuit’s claims, not fines or forfeitures.
Purdue’s other major payout over OxyContin – a $600-million-plus deal with federal prosecutors in 2007 – included some structures that limited the tax benefits of the deal. Half a million dollars of the total was a federal fine, and close to $300 million of it was a forfeiture. Oklahoma’s deal puts no such strictures on how the company or its billionaire backers can deploy the settlement costs in tax strategies.
But the details of the settlement are of secondary concern for Purdue. Avoiding a trial, and obtaining a permanent seal of the documents already accumulated in the case, would have been a steal at twice its tax-deductible price. Since the early 2000s, Purdue’s legal strategies in scores of lawsuits prosecutions have placed a high value on secrecy.
Egilman has, time and again, watched the firm march away with its balance sheet bloodied but its business practices unbowed. Despite the fact that these cases have continually produced damning evidence that the company has known for some time that OxyContin does not reliably deliver 12 hours of pain relief from a single dose for all patients, the Sacklers and their firm continue to enjoy a sterling public reputation, thanks to their willingness to trade cash for confidentiality.
It took years for journalists at the Los Angeles Times and ProPublica to unearth the truth from sealed documents: That top Purdue executives had sought and received affirmative permission to keep doctors in the dark about how their patients might experience the drug differently from what its packaging and marketing materials promised.
“It would be a win for Purdue if the documents and testimony were kept out of the public domain,” Egilman said. “Purdue is quite concerned that the plaintiff lawyers and the attorneys general who’ve prosecuted cases against them have ‘cherrypicked’ the documents. I would think if they’re concerned about that they should release all the documents, so that no one can be accused of cherrypicking them.”
Naturally, the company has preferred to get such cases dismissed entirely, and has often succeeded in that endeavor thanks to broad legal protections meant to prevent pill-makers from being wrongly blamed for the actions of prescribing doctors. When a dismissal is unobtainable, however, Purdue moves swiftly to pay off its pursuers before they start airing the ample primary-source evidence that illuminates the way the company’s executives and Sackler family members have knowingly conspired to prop up the false perception that OxyContin was safer than its competitor pain medications.
The suit Oklahoma settled Tuesday was headed for trial later this spring. Scores of other cases are still pending from other states. The reputational indemnity and high-profile allies that Purdue and the Sacklers courted through years of philanthropic activity have begun to disintegrate as the public learns of materials that critics like Egilman have been barred from discussing by court orders. A spate of pending lawsuits, combined with the toxifiication of the company’s brand, has led Purdue CEO Craig Landau to consider whether bankruptcy might be the swiftest and cheapest way out of trouble.
Indeed, bankruptcy court might offer the Sacklers a chance to liquidate their firm and shield some significant share of their wealth from creditors. The immense past, present, and future costs of opioid addiction – what economists term an “externality” to the business of making and selling potentially-addictive medicines at a price pegged to the actual good they do provide to people in pain – would continue to land on someone else’s balance sheet.
“[P]eople don’t understand that you need regulation to protect us from companies shifting the cost of their externalities [and] the emotional and social cost that the population suffered. While these companies appear to be quite profitable, for society as a whole they’ve been a net drag on the economy,” Egilman said.
The real costs are “born by the victims and their families,” he said. “Everything else is just money.”