Recently, it was announced that Endo Health Solutions, Inc. will pay up to $465 million to settle the United States’ law enforcement, tax, and health care cost claims, over the course of ten years. The settlement resolves criminal and civil settlements over its sales and marketing practices for its opioid drug, Opana ER with INTAC.
Endo International and several of its affiliates (including Endo Health Solutions, Inc) started Chapter 11 bankruptcy proceedings in August 2022. One critical component to the resolution is that Endo would cease to function in its current form and would not emerge from the bankruptcy. Additionally, Endo’s affiliates have agreed to a Voluntary Operating Injunction that restricts opioid marketing and sales and would require Endo to turn over millions of documents connected to its role in the opioid crisis for publication in a public online archive.
The settlements are subject to the approval of the United States Bankruptcy Court in the Southern District of New York.
Criminal Plea
One part of the settlement involves an plea agreement and admission from Endo that from April 2012 through May 2013, certain Endo Health Solutions sales representatives marketed Opana ER to prescribers by promoting the drug’s purported abuse deterrence, tamper resistance, and/or crush resistance, despite a lack of clinical data supporting those claims. The approved labeling for the drug did not provide adequate information for health care providers to safely prescribe Opana ER for use as an opioid that is abuse deterrent, and therefore, according to the plea agreement, Endo was responsible for the misbranding of Opana ER by marketing the drug with a label that failed to include adequate directions for its claimed abuse deterrence use, in violation of the Federal Food, Drug, and Cosmetic Act.
Opana ER was withdrawn from the market voluntarily by Endo in 2017.
Civil Settlement
The civil settlement resolves allegations that from 2011 to 2017, Endo used a marketing scheme that targeted health care providers that the company knew were prescribing Opana ER for non-medically accepted indications. As less than 10% of all Opana ER prescribers wrote more than half of all Opana ER prescriptions, Endo allegedly focused its marketing on the health care providers who prescribed the highest levels of opioids and Opana ER. When certain Endo employees raised concerns about these tactics, Endo allegedly ignored or minimized the concerns and continued with their targeted marketing efforts.
Additionally, Endo allegedly partnered with a consulting company to “drive incremental growth” of Opana ER prescriptions via a “sales force blitz,” in which 3,000 priority targets were added to its sales representatives’ call lists, with nearly all of those targets chosen for their high volume of opioid prescribing (or high volume of Opana ER prescribing). Endo allegedly used sales goals and contests to ensure sales representatives targeted these prescribers, which included some prescribers who were previously excluded from Endo’s call lists due to risks of abuse and diversion.
Bankruptcy Settlement
The bankruptcy settlement allows a group of Endo’s secured lenders to purchase Endo’s assets and operate the business under a new corporate structure. The new business will then pay the $364.9 million to the United States over the course of 10 years. It encompasses not only the claims from the criminal and civil settlements, but also tax claims and claims of various federal agencies (including the Defense Health Agency, the Office of Personnel Management, and the Department of Veterans Affairs).
Under the settlement, the new company will not be permitted to acquire any unused tax credits or other beneficial tax attributes of Endo and the new company will also be required to fund voluntary trusts in settlement of opioid-related claims against Endo – including public trusts that will pay more than $450 million to state, local, and Tribal entities to fund programs to help solve problems created by the opioid crisis. Up to $450 million of those payments can be credited against the agreed-upon forfeiture amount.
Tax Settlement
The United States Internal Revenue Service (IRS) filed significant tax claims against Endo in the bankruptcy proceeding, based on ongoing audits. The audits included concerns about Endo’s valuation of assets that were transferred to foreign affiliates and its payment of a large loan pre-payment penalty to a foreign affiliate for which it sought a tax deduction.
Federal Health Care Agencies
Several federal health care agencies also asserted claims in the bankruptcy proceeding, including Centers for Medicare and Medicaid Services (CMS), Indian Health Service, and the Department of Veterans Affairs. These claims stemmed from medical care provided to individuals who used Opana ER and other opioids manufactured and sold by Endo that suffered from opioid-use disorder as a result.
Statements
“Chapter 11 is an important tool for businesses to preserve value for their stakeholders. Bankruptcy protections are not a free pass to evade responsibility for criminal misconduct, civil fraud, or taxes,” said U.S. Attorney Damian Williams for the Southern District of New York. “Today’s settlement ensures that Endo takes responsibility for its past misconduct, pays its federal debts, helps abate the nation’s opioid crisis by funding evidence-based treatment programs at the state and local level and distributes payments to individuals harmed by the opioid epidemic.”
In a statement regarding the settlement, Endo notes that “Since 2013, Endo has proactively strengthened its U.S. compliance program, including by adopting new policies, enhancing others and developing additional training and risk management procedures. In addition, as part of its restructuring proceedings, the Company agreed to a Voluntary Operating Injunction in November 2022 that continues through August 2030. The Company remains committed to operating with integrity and maintaining a culture of compliance and ethics. The DOJ resolutions do not subject post-emergence purchaser entities to additional compliance-related or integrity obligations.”