The Sackler Family’s Plan to Keep Its Billions

By Patrick Radden Keefe, a staff writer at The New Yorker, is the author of “Say Nothing: A True Story of Murder and Memory in Northern Ireland,” which won the 2019 National Book Critics Circle Award for nonfiction. He is also the host of the podcast “Wind of Change.”

This past January, the Justice Department announced the results of investigations into Practice Fusion, a San Francisco-based company that maintains an online platform for health records. According to prosecutors, Practice Fusion had created a digital alert that prompted physicians to recommend strong opioid painkillers while meeting with patients. In return for adding the alert, Practice Fusion received a kickback from a pharmaceutical company, described in court papers as “Pharma Co. X.” A federal prosecutor, Christina Nolan, said that the alert “effectively placed the pharma company pushing opioids into the exam room.” Practice Fusion had suggested including a warning in the alert about how dangerous opioids can be, but, according to court filings, Pharma Co. X resisted the idea.

Practice Fusion agreed to pay a hundred and forty-five million dollars in fines and forfeiture. The settlement seemed to represent the first half of a two-act drama: if the company was now coöperating with authorities, then the Justice Department would surely turn next to Pharma Co. X—a prospect that became all the more intriguing when Reuters reported, the next day, that the drugmaker’s identity was Purdue Pharma, the maker of the blockbuster opioid OxyContin.

Many pharmaceutical companies had a hand in creating the opioid crisis, an ongoing public-health emergency in which as many as half a million Americans have lost their lives. But Purdue, which is owned by the Sackler family, played a special role because it was the first to set out, in the nineteen-nineties, to persuade the American medical establishment that strong opioids should be much more widely prescribed—and that physicians’ longstanding fears about the addictive nature of such drugs were overblown. With the launch of OxyContin, in 1995, Purdue unleashed an unprecedented marketing blitz, pushing the use of powerful opioids for a huge range of ailments and asserting that its product led to addiction in “fewer than one percent” of patients. This strategy was a spectacular commercial success: according to Purdue, OxyContin has since generated approximately thirty billion dollars in revenue, making the Sacklers (whom I wrote about for the magazine, in 2017, and about whom I will publish a book next year) one of America’s richest families.

But OxyContin’s success also sparked a deadly crisis of addiction. Other pharmaceutical companies followed Purdue’s lead, introducing competing products; eventually, millions of Americans were struggling with opioid-use disorders. Many people who were addicted but couldn’t afford or access prescription drugs transitioned to heroin and black-market fentanyl. According to a recent analysis by the Wall Street Journal, the disruptions associated with the coronavirus have only intensified the opioid epidemic, and overdose deaths are accelerating. For all the complexity of this public-health crisis, there is now widespread agreement that its origins are relatively straightforward. New York’s attorney general, Letitia James, has described OxyContin as the “taproot” of the epidemic. A recent study, by a team of economists from the Wharton School, Notre Dame, and RAND, reviewed overdose statistics in five states where Purdue opted, because of local regulations, to concentrate fewer resources in promoting its drug. The scholars found that, in those states, overdose rates—even from heroin and fentanyl—are markedly lower than in states where Purdue did the full marketing push. The study concludes that “the introduction and marketing of OxyContin explain a substantial share of overdose deaths over the last two decades.”

Given this context, the Practice Fusion investigation seemed like it might be a prelude to a definitive showdown between federal prosecutors and Purdue. But the company has a talent for evading meaningful retribution. It pleaded guilty to federal charges once before, in 2007, when prosecutors in Virginia alleged that the company had deceived doctors about the dangers of OxyContin. At the time, prosecutors wanted to indict three Purdue executives on numerous felonies. But the company hired influential lawyers who appealed to the political leadership in the Justice Department of President George W. Bush. Purdue ended up pleading guilty to felony “misbranding” and got off with a fine of six hundred million dollars—at the time, the equivalent of about six months’ worth of OxyContin revenue. Separately, the three Purdue executives pleaded guilty to misdemeanors, and the Sacklers kept their name out of the case altogether.

Arlen Specter, then a Republican senator from Pennsylvania, was unhappy with the deal. When the government fines a corporation instead of sending its executives to jail, he declared, it is essentially granting “expensive licenses for criminal misconduct.” After the settlement, Purdue kept marketing OxyContin aggressively and playing down its risks. (The company denies doing so.) Sales of the drug grew, eventually reaching more than two billion dollars annually. The fact that, thirteen years after the 2007 settlement, Purdue is alleged to have orchestrated another criminally overzealous campaign to push its opioids suggests that Specter was right: when the profits generated by crossing the line are enormous, fines aren’t much of a deterrent.

In fact, Purdue is now being accused of a pattern of misconduct extending well beyond the scheme with Practice Fusion. In a little-noticed court filing by the Department of Justice this summer, federal prosecutors indicated that they had several other ongoing investigations into alleged misconduct by Purdue. The filing states that, between 2010 and 2018, Purdue sent sales representatives to call on prescribers who the company knew “were facilitating medically unnecessary prescriptions.” The company also purportedly paid kickbacks to prescribers, motivating them to write yet more opioid prescriptions, and “paid kickbacks to specialty pharmacies to induce them to dispense prescriptions that other pharmacies refused to fill.” Purdue’s alleged conduct, Justice Department officials maintain, “gives rise to criminal liability.”

The company faces other challenges. Last September, Purdue filed for Chapter 11 bankruptcy, and for the past year a judge in White Plains, New York, has been overseeing a process to satisfy the company’s many creditors. Purdue is also a defendant in some three thousand lawsuits, brought by both public and private litigants. Forty-seven states have sued the drugmaker for its role in the opioid crisis; twenty-nine of those have specifically named members of the Sackler family as defendants. Both the family and the company have vigorously disputed the many allegations against them, maintaining that their conduct was always appropriate and blaming their woes on greedy lawyers and hysterical press coverage. In an interview with Vanity Fair last year, David Sackler, a former board member and a son of the company’s one-time president, Richard Sackler, expressed acute grievance over the “endless castigation” of his family.

The Sacklers may be embattled, but they have hardly given up the fight. And a bankruptcy court in White Plains, it turns out, is a surprisingly congenial venue for the family to stage its endgame. Behind the scenes, lawyers for Purdue and its owners have been quietly negotiating with Donald Trump’s Justice Department to resolve all the various federal investigations in an overarching settlement, which would likely involve a fine but no charges against individual executives. In other words, the deal will be a reprise of the way that the company evaded comprehensive accountability in 2007. Multiple lawyers familiar with the matter told me that members of the Trump Administration have been pushing hard to finalize the deal before Election Day. The Administration will likely present such a settlement as a major victory against Big Pharma—and as another “promise kept” to Trump’s base.

If the deal goes forward, it would mark a stunning turn in the decades-long saga of trying to hold Purdue and the Sacklers responsible for their role in the opioid crisis. But even more stunning is the projected outcome of the bankruptcy proceeding in White Plains. At a recent hearing, the judge, Robert Drain, became defensive when a lawyer representing creditors suggested that the Sacklers might “get away with it.” But, if the Sacklers achieve the result that the family’s legal team is quietly engineering, they seem poised to do just that.

The 2007 case was not supposed to end the way it did. For four years, prosecutors in the Western District of Virginia gathered evidence on Purdue, subpoenaing millions of documents. They found a widespread pattern of illegal misconduct in which Purdue systematically misled doctors (and the general public) about the risks associated with OxyContin. In September, 2006, the prosecutors detailed their damning evidence in a hundred-and-twenty-page memo, suggesting that the wrongdoing at Purdue was so pervasive, and so consistent, that it could have been authorized only by the company’s leaders. This memo, an internal government document, was not made public until August, 2019, when the Times published excerpts of it showing that the prosecutors had intended to bring felony charges against three top Purdue executives: Michael Friedman, Howard Udell, and Paul Goldenheim. The full memo, which I have reviewed, describes the Sacklers as “The Family” and notes that the company was owned and controlled by the brothers Mortimer and Raymond Sackler and their heirs. (The heirs of a third Sackler brother, Arthur, sold their interest in the company prior to the introduction of OxyContin.) The company “trained its sales representatives” to use “false and fraudulent” claims about OxyContin, the memo states. The prosecutors noted that the three executives they intended to charge “reported directly to The Family.” (An attorney for Paul Goldenheim said that Goldenheim pleaded guilty to an “unjust misdemeanor,” and that there was no evidence he had “participated in or approved off-label marketing”; Michael Friedman could not be reached for comment; Howard Udell died in 2013.)

The Sacklers have long maintained that they and their company are blameless when it comes to the opioid crisis because OxyContin was fully approved by the Food and Drug Administration. But some of the more shocking passages in the prosecution memo involve previously unreported details about the F.D.A. official in charge of issuing that approval, Dr. Curtis Wright. Prosecutors discovered significant impropriety in the way that Wright shepherded the OxyContin application through the F.D.A., describing his relationship with the company as conspicuously “informal in nature.” Not long after Wright approved the drug for sale, he stepped down from his position. A year later, he took a job at Purdue. According to the prosecution memo, his first-year compensation package was at least three hundred and seventy-nine thousand dollars—roughly three times his previous salary. (Wright declined to comment.)

Before the prosecutors in Virginia could secure indictments in such an ambitious case, they needed approval from Washington. A Department of Justice official, Kirk Ogrosky, studied the evidence in the memo and concluded that the case was not just righteous but urgent. In an internal review of the charges, Ogrosky wrote, “Perhaps no case in our history rivals the burden placed on public health and safety as that articulated by our line prosecutors in the Western District of Virginia. OxyContin abuse has significantly impacted the lives of millions of Americans.” He urged the department to proceed with indictments as soon as possible, noting that Purdue had a “direct financial incentive” to slow the case down, because any further delay “will merely allow the continued fraudulent sales and marketing of OxyContin and substantial additional revenue to the Defendants.”

Purdue had assembled a team of high-powered attorneys, including Mary Jo White, the former U.S. Attorney for the Southern District of New York; Rudolph Giuliani, the former New York City mayor; and Howard Shapiro, the former general counsel of the F.B.I. According to former officials involved in the case, Purdue’s lawyers persuaded the political leadership in the Bush Justice Department to scuttle the prosecution. When the U.S. Attorney for the Western District of Virginia, John Brownlee, announced, in May, 2007, that Purdue had pleaded guilty to felony misbranding and had agreed to pay more than half a billion dollars in fines, he framed the news as a triumph for the department. But it wasn’t. “This is the reason we have the Department of Justice, to prosecute these kinds of cases,” Paul Pelletier, a senior department official at the time, told me. “When I saw the evidence, there was no doubt in my mind that if we had indicted these people—if these guys had gone to jail—it would have changed the way that people did business.”

Purdue has long maintained that it did alter its behavior after the guilty plea, such as by instituting a robust compliance plan for its sales reps, while also suggesting there really wasn’t much that needed changing. Members of the Sackler family and company lawyers have said that there was no systemic problem in the company; rather, it was a case of a few bad apples (or a “number of sales reps,” as David Sackler told Vanity Fair). One indication of how seriously the company regarded its punishments came to light in a 2015 deposition of Richard Sackler. During Purdue’s plea deal eight years earlier, the prosecutors and company lawyers had negotiated a so-called Agreed Statement of Facts: a list of transgressions to which Purdue was ready to concede. It was considerably more modest than the extravagant catalogue of misdeeds contained in the Department of Justice’s prosecution memo; even so, an Agreed Statement of Facts can serve as a useful corrective for a company that has erred, offering a road map to better corporate responsibility. In the deposition, Richard Sackler was asked whether, as a longtime executive and board member of the family company, there was anything in the document that had surprised him.

“I can’t say,” he replied.

“As we sit here today, have you ever read the entire document?” he was asked.

“No,” Sackler said.

In the past few years, it has become significantly more difficult for the Sacklers to display such willful disregard for the conduct of the family company. In January, 2019, the attorney general of Massachusetts, Maura Healey, unveiled a blistering two-hundred-and-seventy-four-page complaint against Purdue, in which she took the unprecedented step of naming not just the company but eight members of the Sackler family as defendants in a civil case. Her filing was studded with damning internal company e-mails revealing that, even in the face of a skyrocketing death toll from the opioid crisis, members of the Sackler family pushed Purdue staff to find aggressive new ways to market OxyContin and other opioids, and to persuade doctors to prescribe stronger doses for longer periods of time. Letitia James, the New York attorney general, soon followed with her own complaint, which also named the Sacklers and presented further evidence of the family’s complicity. (The Sacklers and Purdue have strenuously denied the charges in both complaints.) Museums and universities, which had previously been happy to receive donations from the Sacklers and name buildings and wings after them, have distanced themselves, announcing that they will no longer accept contributions from the family. Tufts University and the Louvre Museum have gone so far as to take down all signs bearing the Sackler name.

In August, 2019, David Sackler flew to Cleveland, where he presented a proposal to a coalition of public and private attorneys who were suing the company. Purdue was facing nearly three thousand lawsuits from states, cities, counties, Native American tribes, school districts, hospitals, and a host of other plaintiffs. The company had just narrowly avoided a trial by settling with the state of Oklahoma, for two hundred and seventy million dollars. But, at the time, Purdue was being sued by forty-five other states, and David Sackler offered to resolve all the cases against the company and the family in a single grand gesture. A wave of headlines reported the news: “PURDUE PHARMA OFFERS $10-12 BILLION TO SETTLE OPIOID CLAIMS.”

This seemed like a significant figure, but the headlines were misleading. According to a term sheet in which attorneys for the Sacklers and Purdue laid out the particulars of this proposed “comprehensive settlement,” the Sacklers were prepared to make a guaranteed contribution of only three billion dollars. Further funds could be secured, the family suggested, by selling its international businesses and by converting Purdue Pharma into a “public benefit corporation” that would continue to yield revenue—by selling OxyContin and other opioids—but would no longer profit the Sacklers personally. This was a discomfiting, and somewhat brazen, suggestion: the Sacklers were proposing to remediate the damage of the opioid crisis with funds generated by continuing to sell the drug that had initiated the crisis. At the same time, the term sheet suggested, Purdue would supply new drugs to treat opioid addiction and counteract overdoses—though the practicalities of realizing this initiative, and the Sacklers’ estimate that it would represent four billion dollars in value, remained distinctly speculative. (A family representative told me that the Sacklers want “to set aside divisive litigation based on misleading allegations to collaborate in working together to find real solutions that save lives.”)

Roughly half of the states embraced the proposal. It was a great deal of money, and many states are reeling from the costs of the opioid crisis. But other attorneys general balked, complaining that the Sacklers were not contributing enough out of pocket. When they pushed the family to make a guaranteed contribution of four and a half billion dollars, the Sacklers refused to budge. According to Josh Stein, the attorney general of North Carolina, who negotiated directly with the family, their position was “take it or leave it.”

It might seem reckless for a family facing potentially ruinous legal exposure to issue such a stark ultimatum, but the Sacklers had an important piece of leverage. Even as David Sackler was making his offer in Cleveland, Purdue Pharma was preparing to file for bankruptcy. If the company declared bankruptcy, it would leave virtually every state—and thousands of other claimants—with no choice but to fight over Purdue’s remaining assets in bankruptcy court. Mary Jo White, who still represents the Sacklers, announced, “Purdue and the Sackler family members, given this litigation landscape, would like to resolve with the plaintiffs in a constructive way to get the monies to the communities that need them.” Take the money now, she warned, or the alternative would be to “pay attorneys’ fees for years and years and years to come.”