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Press Release

United States Reaches Settlement Of Law Enforcement, Tax, And Healthcare Cost Claims In Endo International Bankruptcy Case

For Immediate Release
U.S. Attorney's Office, Southern District of New York
United States Will Receive up to $464.9 Million in Payments for Its Claims

Damian Williams, the United States Attorney for the Southern District of New York; Brian M. Boynton, the Principal Deputy Assistant Attorney General and head of the Department of Justice’s Civil Division; Patrizia Cavazzoni, M.D., the Director of the Center for Drug Evaluation and Research of the Food and Drug Administration (“FDA”); Michael Rogers, the Associate Commissioner for Regulatory Affairs of the FDA; Christi A. Grimm, the Inspector General of the Department of Health and Human Services (“HHS-OIG”); Robert P. Storch, the Inspector General of the Department of Defense (“DOD”); Michael J.  Missal, the Inspector General of the Department of Veterans Affairs (“VA”); and Derek M. Holt, the Special Agent in Charge of the Office of Personnel Management – Office of Inspector General (“OPM OIG”), announced today that the United States has reached an agreement to resolve its monetary claims — including claims arising from criminal and civil investigations — against ENDO INTERNATIONAL PLC and its affiliates (together, “ENDO”), a large pharmaceutical company that previously manufactured Opana ER, a powerful branded opioid drug, in its Chapter 11 bankruptcy proceeding.  As part of ENDO’s bankruptcy plan, a group of ENDO’s secured lenders will purchase ENDO’s assets and operate the business under a new corporate structure.  The agreement provides that this new business will pay the United States $364.9 million over 10 years, which can be prepaid at $200 million on the bankruptcy plan’s effective date, plus up to an additional $100 million contingent on the business performance of the new company.  The bankruptcy settlement, which is subject to court approval, resolves multiple federal claims against ENDO, including criminal and civil fraud claims, healthcare agency claims, and tax claims.

As part of the overall settlement, the Department of Justice announced that Endo Health Solutions, Inc. (“EHSI”), one of ENDO’s affiliates, has agreed to resolve criminal and civil investigations related to the company’s sales and marketing of the opioid drug Opana ER with INTAC (“Opana ER”).  The payments required by the civil and criminal agreements will be paid as claims in the Chapter 11 bankruptcy proceedings. 

Under the proposed global resolution, EHSI agreed to plead guilty in federal court in the Eastern District of Michigan to a one-count misdemeanor information charging it with violating the Federal Food, Drug, and Cosmetic Act (“FDCA”) by introducing misbranded drugs into interstate commerce.  The criminal resolution includes the second-largest set of criminal financial penalties ever levied against a pharmaceutical company, including a criminal fine of $1.086 billion and an additional $450 million in criminal forfeiture.  The proposed resolution includes a corporate criminal release regarding conduct relating to the sale, marketing, and distribution of Opana ER, but does not release any individual criminal liability.

EHSI also has agreed to a civil settlement of $475.6 million to resolve its civil liability under the False Claims Act.  The civil settlement will address alleged losses to federal healthcare programs that paid for Opana ER. 

When ENDO filed for bankruptcy in August 2022, it proposed to sell substantially all of its assets in a manner that contravened key requirements of the Bankruptcy Code.  ENDO’s original proposal would have provided virtually no recovery to the federal government on account of its claims, while improperly paying several other creditor groups on account of their claims, even though they were entitled to lower or equal priority as the Government’s claims.  This settlement was achieved after the Government objected to the proposed sale in Bankruptcy Court.  Through the settlement, the Government has ensured both that it is compensated for its claims and that ENDO does not run afoul of the Bankruptcy Code by paying only certain of its creditors or violating the Bankruptcy Code’s priority scheme.

U.S. Attorney Damian Williams said: “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.  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.”

Principal Deputy Assistant Attorney General Brian M. Boynton said: “Companies that profit from the opioid abuse epidemic by misrepresenting the safety of their opioid products and using reckless marketing tactics to increase sales threaten the health and safety of Americans.  With today’s announcement of a criminal guilty plea and a substantial civil settlement, the Department of Justice re-affirms its commitment to holding accountable those whose illegal conduct contributed to the opioid crisis.”

FDA Director Patrizia Cavazzoni, M.D. said: “Combatting the opioid epidemic remains a top public health priority for the FDA.  This case demonstrates FDA and DOJ’s commitment to work collaboratively to hold drug manufacturers accountable if they fail to share accurate information with health care professionals about the risks and benefits of opioids.”

FDA Associate Commissioner Michael Rogers said: “The metrics of the opioid crisis are staggering.  When companies do not provide accurate information about the safety and abuse potential of their products, they put patients at risk of abuse and addiction.  Such conduct will not be tolerated, and we will aggressively pursue and bring to justice those who endanger the public health in this manner.”

HHS-OIG Inspector General Christi A. Grimm said: “The opioid crisis remains a public health emergency nationwide, and those impacted are at the forefront of our work.  HHS-OIG is staunchly committed to protecting the millions of people served by federal healthcare programs from schemes such as this, while also striving to ensure they have access to necessary treatment.”

DOD Inspector General Robert P. Storch said: “The misbranding of opioids negatively impacts the integrity of TRICARE, the military’s healthcare system relied on by more than nine million service members, retirees, and their families.  Today’s settlement demonstrates the ongoing commitment of the Defense Criminal Investigative Service and its law enforcement partners to promote accountability and transparency throughout the pharmaceutical industry and prosecute those who put profits ahead of patient welfare.  The delivery of quality healthcare is too important to let a single dollar go to waste.”

VA Inspector General Michael J. Missal said: “Veterans and their families expect and deserve the highest quality health care delivered in a safe and accountable setting.  False or misleading claims about potentially dangerous drugs put veterans’ care at risk.  The VA Office of Inspector General is committed to working with our law enforcement partners to ensure the safety of those who entrust their health care to the providers and staff at VA’s 1,300 medical facilities.”

OPM OIG Special Agent in Charge Derek M. Holt said: “Protecting the health and safety of Federal employees, annuitants, and their families is a top priority for OPM OIG.  Today’s criminal and civil resolutions demonstrate the exemplary work of our investigative staff, law enforcement partners, and colleagues at the Department of Justice in holding manufacturers accountable for actions that contribute to the opioid epidemic.”

The Bankruptcy Resolution

As part of ENDO’s bankruptcy plan, a group of ENDO’s secured lenders will purchase ENDO’s assets and operate the business under a new corporate structure.  The agreement provides that this new business will pay the United States $364.9 million over 10 years, which can be prepaid at $200 million on the bankruptcy plan’s effective date, plus up to an additional $100 million contingent on the business performance of the new company.  The bankruptcy settlement resolves multiple federal claims against ENDO, including the criminal and civil fraud claims, as well as additional healthcare agency claims and tax claims. 

In addition to the Justice Department’s criminal and civil claims, the HHS Centers for Medicare and Medicaid Services (“CMS”), HHS’s Indian Health Service, and the VA have asserted claims against ENDO for the costs these programs incurred in providing medical care to treat individuals who suffer from opioid-use disorder as a result of their use of Opana ER and other opioids manufactured and sold by ENDO.  CMS has also filed a claim to recover costs it incurred based on Medicare beneficiaries’ use of other ENDO products, including transvaginal mesh and ranitidine.

Finally, the Internal Revenue Service (“IRS”) filed substantial tax claims against ENDO based on ongoing audits.  These audits concerned, among other things, ENDO’s valuation of assets it 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.  A substantial majority of these payments were entitled to priority in bankruptcy over ENDO’s other unsecured claims.  The health care agency and IRS claims have also been resolved though the bankruptcy settlement.

In the settlement agreement, the Government will receive up to a total of $464.9 million to satisfy all of these categories of claims in the bankruptcy.  First, the Government will receive $364.9 million in 10 annual payments that can be prepaid at either party’s request.  If prepaid on the effective date of the bankruptcy plan, the Government will receive $200 million.  The Government will also receive up to an additional $100 million if the new company substantially exceeds its revenue projections in the next several years.  The settlement agreement further precludes the new company from acquiring any unused tax credits or other beneficial tax attributes of ENDO.

Besides paying government claims, the bankruptcy plan has other significant features.  Earlier in the bankruptcy case, ENDO agreed to stop promoting opioids to prescribers and to turn over millions of documents related to its role in the opioid crisis for publication in a public online archive.  The new ENDO business will also make significant payments to state, local, and tribal governments to fund programs to help abate the opioid crisis.  The Government has agreed to credit these payments, which will support programs to treat and prevent opioid-use disorder, against ENDO’s criminal forfeiture judgment.

In addition, one important condition in the resolution is that ENDO would cease to operate in its current form and would not emerge from the bankruptcy.  Moreover, as part of its resolution with bankruptcy opioid claimants, ENDO’s affiliates have agreed to a Voluntary Operating Injunction that restrains opioid marketing and sales and requires ENDO to turn over millions of documents related to its role in the opioid crisis for publication in a public online archive.

The settlement is contingent on Bankruptcy Court approval of ENDO’s Chapter 11 plan.  U.S. Bankruptcy Judge James M. Garrity has scheduled a hearing on March 19, 2024, to consider approving this plan.

The Criminal Plea

As part of the criminal plea, EHSI will admit that from April 2012 through May 2013, certain EHSI sales representatives marketed Opana ER to prescribers by touting Opana ER’s purported abuse deterrence, tamper resistance, and/or crush resistance, despite a lack of clinical data supporting those claims.  According to the plea agreement, certain EHSI sales managers were aware that the sales representatives were making claims of purported abuse deterrence, tamper resistance, and/or crush resistance during sales calls, including hitting demonstration “blister packs” of non-medicated sample pills with hammers and conducting other demonstrations to convey the message that Opana ER was, in fact, crush proof and tamper resistant.  The approved labeling for Opana ER did not provide adequate information for healthcare providers to safely prescribe Opana ER for use as an opioid that is abuse deterrent.  According to the plea agreement, EHSI 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 FDCA.

EHSI voluntarily withdrew Opana ER from the market in 2017.

The Civil Settlement

The civil settlement announced today resolves allegations that, from 2011 to 2017, EHSI used a marketing scheme that targeted healthcare providers that EHSI knew were prescribing Opana ER for non-medically accepted indications.  Aware that fewer than 10% of Opana ER prescribers wrote more than half of all Opana ER prescriptions, EHSI allegedly sought to increase its revenue from Opana ER prescriptions by focusing its marketing on those healthcare providers who prescribed the highest levels of opioids in general and Opana ER in particular.  When EHSI employees raised concerns about prescribers believed to be engaged in abuse, diversion, or pill mill prescribing, EHSI allegedly ignored or minimized such concerns and continued to directly market Opana ER to such prescribers.

The allegations resolved by the civil settlement relating to EHSI’s marketing activities include that in 2015, after marketing the reformulated Opana ER for years, EHSI sought to further increase prescriptions by partnering with a consulting company to “pull[] all the levers” it could “to drive incremental growth” of Opana ER prescriptions.  In what it termed a “sales force blitz,” EHSI allegedly added 3,000 priority targets to its sales representatives’ call lists, with nearly all of these priority targets chosen because they prescribed a high volume of opioids in general or Opana ER in particular.  EHSI allegedly used sales goals and contests to ensure that its sales representatives targeted these outlier prescribers, including prescribers who previously had been excluded from EHSI’s call lists as posing risks of abuse and diversion.

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Mr. Williams thanked the U.S. Department of Justice’s Tax Division and Civil Division’s Commercial Litigation Branch, Corporate/Financial Litigation and Civil Fraud Sections, and Consumer Protection Branch; the U.S. Attorney’s Office for the Southern District of Florida; the IRS; the Office of the U.S. Trustee for Region 2; the HHS Office of General Counsel, CMS, and Indian Health Service; and the VA for their assistance in achieving this settlement agreement.

This bankruptcy case is being handled by the Office’s Tax & Bankruptcy Unit.  Assistant U.S. Attorneys Jean-David Barnea, Peter Aronoff, and Tara Schwartz are in charge of the case.

Except to the extent that EHSI’s admissions are part of its criminal resolution, the claims resolved by the civil settlement are allegations only and there has been no determination of liability.

Contact

Nicholas Biase, Lauren Scarff
(212) 637-2600

Updated February 29, 2024

Topics
Bankruptcy
Consumer Protection
Opioids
False Claims Act
Press Release Number: 24-075