U.S. v. Purdue Frederick Co., Inc.

• Decision Date: 23 July 2007
• Docket Number: No. 1:07CR00029.,1:07CR00029.
• Citation: 495 F.Supp.2d 569
• Parties: UNITED STATES of America v. The PURDUE FREDERICK COMPANY, INC., et al., Defendants.
• Court: U.S. District Court — Western District of Virginia

495 F.Supp.2d 569

UNITED STATES of America v. The PURDUE FREDERICK COMPANY, INC., et al., Defendants.

No. 1:07CR00029.

United States District Court, W.D. Virginia, Abingdon Division.

July 23, 2007.

John L. Brownlee, United States Attorney, Rick A. Mountcastle and Randy Ramseyer, Assistant United States Attorneys, Roanoke, VA, for United States.

Howard M. Shapiro and Kimberly A. Parker, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, for The Purdue Frederick Company, Inc.

Mark F. Pomerantz, Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York City, for Michael Freidman.

Mary Jo White, Debevoise & Plimpton LLP, New York City, for Howard R. Udell.

Andrew Good, Good & Cormier, Boston, MA, for Paul D. Goldenheim.

OPINION AND ORDER

JONES, Chief Judge.

The issue before the court is whether or not to accept the plea agreements in this case.¹

The Purdue Frederick Company, Inc. ("Purdue") has pleaded guilty to misbranding OxyContin, a prescription opiod pain medication, with the intent to defraud or mislead, a felony under the federal Food, Drug, and Cosmetic Act. 21 U.S.C.A. §§ 331(a), 333(a)(2) (West 1999). The individual defendants, Michael Friedman, Howard R. Udell, and Paul D. Goldenheim, have pleaded guilty to the misdemeanor charge of misbranding, solely as responsible corporate officers.² U.S.C.A § 333(a)(1) (West 1999); see United States v. Park, 421 U.S. 658, 676, 95 S.Ct. 1903, 44 L.Ed.2d 489 (1975). The individual defendants are not charged with personal knowledge of the misbranding or with any personal intent to defraud.

The Information in this case charges, among other things, that

[b]eginning on or about December 12, 1995, and continuing until on or about June 30, 2001, certain PURDUE supervisors and employees, with the intent to defraud or mislead, marketed and promoted OxyContin as less addictive, less subject to abuse and diversion, and less likely to cause tolerance and withdrawal than other pain medications as follows:

a. Trained PURDUE sales representatives and told some health care providers that it was more difficult to extract the oxycodone from an Oxy-Contin tablet for the purpose of intravenous abuse, although PURDUE's own study showed that a drug abuser could extract approximately 68% of the oxycodone from a single 10mg OxyContin tablet by crushing the tablet, stirring it in water, and drawing the solution through cotton into a syringe;

b. Told PURDUE sales representatives they could tell health care providers that OxyContin potentially creates less chance for addiction than immediate-release opioids;

c. Sponsored training that taught PURDUE sales supervisors that OxyContin had fewer "peak and trough" blood level effects than immediate-release opioids resulting in less euphoria and less potential for abuse than short-acting opioids;

d. Told certain health care providers that patients could stop therapy abruptly without experiencing withdrawal symptoms and that patients who took OxyContin would not develop tolerance to the drug; and

e. Told certain health care providers that OxyContin did not cause a "buzz" or euphoria, caused less euphoria, had less addiction potential, had less abuse potential, was less likely to be diverted than immediaterelease opioids, and could be used to "weed out" addicts and drug seekers.

(Information ¶ 19.) Purdue has agreed that these facts are true, and the individual defendants, while they do not agree that they had knowledge of these things, have agreed that the court may accept these facts in support of their guilty pleas. (Agreed Statement of Facts ¶ 46.)

The plea agreements have been submitted pursuant to Federal Rule of Criminal Procedure 11(c)(1)(C), which allows the parties to agree to a specific sentence to be imposed. The court is not bound by the plea agreements, and may reject them. If a plea agreement is rejected, that defendant must be given an opportunity to withdraw the guilty plea. Fed.R.Crim.P. 11(c)(5)(B). The government has agreed in this case that if the court rejects any of the plea agreements, the government will dismiss the Information filed in the case, without prejudice to the government's right to later indict the defendants or any other entity or individual on any charge. (Plea Agreements ¶ 2.) Accordingly, if the court rejects any of the plea agreements, the present case may end, and it will be up to the government to decide whether to reprosecute the defendants, or any of them.

In addition to a lengthy hearing on the present issue, the parties were required to submit extensive written material, including financial information, for the court's consideration.

The Supreme Court has held that defendants have "no absolute right to have a guilty plea accepted." Santobello v. New York, 404 U.S. 257, 262, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971). The Court stated, "A court may reject a plea in exercise of sound judicial discretion." Id. "[I]t is not only permitted but expected that the court will take an active role in evaluating the agreement." United States v. Kraus, 137 F.3d 447, 452 (7th Cir.1998). But as the Sixth Circuit stated, "By leaving the decision whether to accept or reject a plea to the exercise of sound judicial discretion, the Supreme Court did not intend to allow district courts to reject pleas on an arbitrary basis." United States v. Moore, 916 F.2d 1131, 1136 (6th Cir.1990) (internal quotations and citation omitted).

While the court's decision must not be arbitrary, "Rule 11 does not limit the reasons for which the district court may reject a proposed plea agreement." United States v. Skidmore, 998 F.2d 372, 376 (6th Cir.1993). "The authority to exercise judicial discretion implies the responsibility to consider all relevant factors and rationally construct a decision." Moore, 916 F.2d at 1136. Rule 11 explicitly states that a court cannot accept a plea if it is not supported by the factual record or if the court believes that that the plea is not voluntary. Fed.R.Crim.P. 11(b)(2),(3). But Rule 11 also allows a district judge to reject a plea agreement if it is too lenient or too harsh. Skidmore, 998 F.2d at 376.

In determining the proper criminal sentence, the court must consider certain factors set forth by statute. I must consider "the nature and circumstances of the offense and the history and characteristics of the defendant," as well as

the need for the sentence imposed — (A) to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense; (B) to afford adequate deterrence to criminal conduct; (C) to protect the public from further crimes of the defendant; and (D) to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner.

18 U.S.C.A. § 3553(a) (West 2000 & Supp. 2004). The court's obligation is to impose "a sentence sufficient, but not greater than necessary, to comply with" these purposes. Id.

Under the law, Purdue is subject to a penalty of five years probation and a fine of up to $500,000. In its plea agreement, Purdue has agreed to substantial additional monetary sanctions totaling $600 million, reported to be one of the largest in the history of the pharmaceutical industry. The amount includes the following:

1. $100,615,797.25 payable to federal government health care agencies under a Civil Settlement Agreement;

2. $59,384,202.75 in escrow for those states that elect to settle their claims against Purdue. These civil settlements to the federal and state government total $160 million, of which the federal government is receiving sixty percent;

3. $3,471,220.68 to Medicaid programs for improperly calculated rebates;

4. $500,000 fine to the United States;

5. $20 million in trust to the Commonwealth of Virginia for operating the Virginia Prescription Monitoring Program;

6. $5.3 million to the Virginia Medicaid Fraud Control Unit's Program Income Fund;

7. $276.1 million forfeiture to the United States;

8. $130 million to settle private civil claims related to OxyContin; and

9. $4,628,779.32 to be expended by Purdue for monitoring costs in connection with a Corporate Integrity Agreement with the U.S. Department of Health and Human Services.

The individual defendants are subject to a punishment of twelve months imprisonment and a fine of up to $100,000. In their plea agreements, they have agreed to pay a total of $34.5 million to the Virginia Medicaid Fraud Unit's Program Income Fund.³ In return, the government has agreed to sentences for them without any imprisonment.

There have been several reasons suggested why the court should reject the plea agreements.

Lack of Restitution. The plea agreements preclude restitution other than as set forth in the agreements and a number of alleged victims object to this provision, contending that the amounts allocated to private parties are insufficient, compared to the recovery by governmental victims. BlueCross BlueShield of Tennessee has filed a Request for Notice, an Opportunity to be Heard at Sentencing, and an Order of Restitution. Other third-party health care payors have joined in this motion. In addition, an individual who considers herself a victim because of her addiction to OxyContin has objected to the plea agreements and has filed a formal Motion to Assert Victim's Rights, in which she complains about restitution, as well as other matters.

These parties have received notice of this present proceedings and the court has allow them an opportunity to speak.⁴

The government and the defendants, in agreeing to preclude other restitution, rely on the Victim and Witness Protection Act of 1982 ("VWPA"), which states in relevant part as follows:

To the extent that the court determines that the complication and prolongation of the sentencing process resulting from the fashioning of an order of restitution under this section outweighs the need to provide restitution to any victims, ...