Sackler family set to pay $4.5bn to settle opioid claims after judge approves plan

 Sackler family set to pay $4.5bn to settle opioid claims after judge approves plan

Conditional approval for plan to organize drugmaker into new company with board appointed by public officials

Wed 1 Sep 2021 22.33 BST

The settlement sets up a compensation fund that will pay some victims of drug addiction an expected $3,500 to $48,000 each. Photograph: Douglas Healey/A

A US federal bankruptcy judge on Wednesday conditionally approved a sweeping, potentially $10bn plan submitted by the OxyContin maker Purdue Pharma to settle a mountain of lawsuits over its role in the opioid crisis that has killed a half-million Americans over the past two decades.

Under the settlement reached with creditors including individual victims and thousands of state and local governments, the Sackler family will give up ownership of the company and contribute $4.5bn but will be freed from any future lawsuits over opioids.

The drugmaker will be reorganized into a new company with a board appointed by public officials and will funnel its profits into government-led efforts to prevent and treat opioid addiction.

Also, the settlement sets up a compensation fund that will pay some victims of drug addiction an expected $3,500 to $48,000 each.

US bankruptcy judge Robert Drain said on Wednesday he would approve the plan as long as two technical changes were made.

If so, he said, he will formally enter the decision on Thursday.

He said before his ruling that while he does not have “fondness for the Sacklers or sympathy for them”, collecting money from them through litigation would be complicated.

The settlement comes nearly two years after the Stamford, Connecticut-based company filed for bankruptcy under the weight of about 3,000 lawsuits from states, local governments, Native American tribes, hospitals, unions and other entities. They accuse Purdue Pharma of fueling the crisis by aggressively pushing sales of its bestselling prescription painkiller.

The Sacklers were not given immunity from criminal charges, though there have been no indications they will face any.

State and local governments came to support the plan overwhelmingly, though many did so grudgingly, as did groups representing those harmed by prescription opioids.

Nine states, Washington DC, Seattle and the US bankruptcy trustee, which seeks to protect the nation’s bankruptcy system, opposed the settlement, largely because of the protections granted to the Sackler family.

At least some of them were expected to appeal and the Washington state attorney general, Bob Ferguson, quickly announced he would appeal against the plan, calling it inadequate.

The bankruptcy judge, based in White Plains, New York, had urged the holdouts to negotiate an agreement, warning that drawn-out litigation would delay getting settlement money to victims and the programs needed to address the epidemic.

“Bitterness over the outcome of this case is completely understandable,” Drain said. “But one also has to look at the process and the issues and risks and rewards and alternatives of continued litigation versus the settlement laid out in the plan.”

He noted that the payout issue was mediated by Kenneth Feinberg, who oversaw the government’s September 11 Victim Compensation Fund.

Most states have sued Purdue, claiming it aggressively marketed OxyContin, contributing to an opioid overdose and addiction epidemic that has been linked to more than 500,000 deaths in the US.

Some of the deaths have been attributed to OxyContin and other prescription opioids, but most are from illicit forms of opioids such as heroin and illegally produced fentanyl. Opioid-linked deaths in the US continued at a record pace last year, hitting 70,000.

The crisis crushed the reputation of the Sackler family, major philanthropists whose name was once emblazoned on the walls of museums and universities around the world. With the settlement, family members who have owned the company will still be worth billions.

Whether the deal provides enough accountability for the Sacklers was the most contentious question through the proceedings. Many state attorneys general and advocacy groups working on behalf of opioid victims pushed for the family members to pay more and initially fought against the liability waiver.

They succeeded in boosting the amount the Sacklers would pay from a likely $3bn to a guaranteed $4.5bn over a decade.

David Sackler, a former Purdue board member, had testified that family members would not accept the agreement unless it protected them from lawsuits.

Otherwise, he said, the family would defend itself in litigation that could drag on for years, with the company’s and the family’s assets eaten up by lawyers’ fees rather than used to help address the crisis.

His father, Richard Sackler, a former Purdue president and board chairman, said under questioning that he, his family and the company did not bear responsibility for the opioid crisis.

Drain noted that none of the four Sacklers who testified offered an explicit apology. “A forced apology is not really an apology, so we will have to live without one,” he said.

The settlement also requires members of the Sackler family, who are scattered across the US, Britain and elsewhere in Europe, to get out of the opioid business worldwide.

Several attorneys general won another provision that will create a massive public repository of company documents, including communications with lawyers that normally would be protected by attorney-client privilege.

Purdue’s bankruptcy has been the highest-profile case in a complicated universe of opioid litigation.

Drugmaker Johnson & Johnson and the three largest US drug distribution companies recently announced a settlement that could be worth up to $26bn if state and local governments agree.

Individual trials also remain, including one scheduled to start in October in Cleveland over the role pharmacies played in the crisis. Other trials have been held this year in California, New York and West Virginia, though verdicts have not yet been reached.

https://www.theguardian.com/us-news/2021/sep/01/purdue-pharma-sackler-family-settlement-judge-approves-opioid-crisis

‘People wanted to believe’: reporter who exposed Theranos on Elizabeth Holmes’ trial

 

Elizabeth Holmes in 2015. Her company, Theranos, rose during the ‘unicorn boom’ of the time, John Carreyrou said. Photograph: CNBC/NBCU Photo Bank via Getty Images

As blood testing startup founder’s fraud trial looms, John Carreyrou says hero worship is still a problem in Silicon Valley

Kari Paul in San Francisco

Sun 29 Aug 2021 06.00 BST

The unraveling of Theranos began with a 2015 article in the Wall Street Journal that revealed how the revolutionary technology promoted by the blood testing startup wasn’t exactly what it seemed.

Over the proceeding months, the reporter John Carreyrou exposed how the testing devices the Silicon Valley darling said could perform a variety of medical tests with just a drop of blood were not actually being used to perform most of the analyses. Investors and consumers, Carreyrou found, were being fooled.

Theranos dissolved in 2018 and its star founder, Elizabeth Holmes, will face trial in a San Jose courtroom next week.

Carreyrou’s book about the rise and fall of Theranos, meanwhile, became a bestseller and the author is hosting a new podcast, Bad Blood: the Final Chapter, as the trial begins.

He spoke with the Guardian about the lies Holmes pulled off and the larger questions about Silicon Valley culture that Theranos raised.

What do readers need to know about the particular moment in Silicon Valley culture when Theranos rose to prominence?

Theranos rose to prominence between 2013 and 2015, during the beginning of what I call the “unicorn boom” – Silicon Valley’s second enormous boom after the dotcom boom of the late 90s.

This boom started with the emergence of Facebook and Twitter and then metastasized with the appearance of these other big unicorns like Uber and Airbnb. Theranos at one point was worth even more and was the most valuable private startup in Silicon Valley back in 2014.

This was all before the backlash against big tech. People did not come down hard on Facebook until the 2016 election, when they realized the roles that Facebook and Twitter had played and the way those platforms were manipulated by Russian hackers. The disposition of the country and of the press towards Silicon Valley was still positive. When I broke the Theranos scandal, in a small way, it contributed to the backlash against tech that began to transpire.

Why do you think it was able to go unchecked for so long?

As Holmes herself has said, Theranos was in stealth mode in its first 10 years, so the company was not on anyone’s radar. It was really only in the limelight for two years before I wrote my first story on the scandal. You could argue that even that was too long because these unreliable and inaccurate blood tests were already available in Walgreens.

There is still a willingness to worship geniuses in Silicon Valley

Sunny [Ramesh Balwani, former president of Theranos, who was also charged with fraud] and Elizabeth were very secretive – they managed that company like it was the CIA. The threat of litigation was always in the air, so employees were worried about speaking out.

It seems like the collection of high-profile people on the board, many of whom did not actually have scientific expertise, played into the hype. How was Holmes able to secure such supporters?

She very much did that in a calculated way. Early on, she started associating with these older men who could give her more credibility. It started out with Channing Robertson, the well-regarded Stanford engineering professor who would join her board, encouraging her and putting her in touch with people he knew around the Valley.

Then George Schultz was key in terms of being able to put together the last iteration of the board. He introduced her to all those luminaries; many of them were fellows at the Hoover Institution. And so she milked it. She was able to meet Gen Mattis, ex-cabinet members like Kissinger, and on and on.

The [Securities and Exchange Commission] has a term for this, and it’s affinity fraud. It’s associating yourself with people who are credible and well regarded by society to give yourself credibility. And that is a big part of the Theranos story.

Could you talk a little bit about the mythos surrounding Elizabeth Holmes and why people were attracted to that?

There are two parts to it. One is a myth that survives to this day, popularized by the incredible success of Steve Jobs, that Silicon Valley every few years can produce these young genius startup founders and that they can do no wrong.

[Holmes] served that myth, but there was also a gender component to it. She was going to be the first woman who reached billionaire status and join the pantheon of these tech leaders. People were really rooting for her – young girls were writing her letters.

A lot of people wanted to believe this fairytale, because it would have represented real progress in this very male-dominated world of Silicon Valley. Unfortunately, it was a fairytale that wasn’t true.

Ramesh ‘Sunny’ Balwani leaves court in San Jose, California, in 2019. Photograph: Justin Sullivan/Getty Images

Do you think that those myths around people or those personas still play a big role and who gets funding in Silicon Valley?

Yes, absolutely. To this day there is a willingness to worship geniuses in Silicon Valley. It is a very American phenomenon – I am half French and I think Europeans tend to be a little bit more cynical, but Americans are eternally optimistic, eternally willing to worship new heroes.

That is especially true in Silicon Valley, where there’s this magical thinking that some people are geniuses and just can’t be wrong. It may have been tempered in the past years because of Theranos, but I believe it still very much exists.

When you broke the story you were also based on the east coast – do you think coming from outside the bubble of Silicon Valley helped in your reporting?

That is part of it, but it’s also the fact that I’d been doing investigative reporting about healthcare for a decade before I stumbled on Theranos. Holmes framed herself as being part of a tech lineage when in fact her company was a healthcare company. So I had just the right background to see through it.

Given that the media played such a large role in building up the company, do you think tech media is doing any better now?

Especially after we learned the way Facebook and Twitter were exploited during the 2016 election and how these companies have become virtual monopolies, there’s a lot more skeptical and critical coverage nowadays than there was back then.

In terms of the culture of Silicon Valley itself changing, I still think it’s going to take a guilty verdict.

How do you think the outcome of the case will impact Silicon Valley and startup culture more broadly?

If she’s convicted and does significant prison time, it’s going to be a shot across the bow to venture capitalists and startup founders in the Valley that there are limits to how much bullshitting you can do, to how much exaggerating and hyping you can do and how many rules you can break.

There has long been a culture of faking it until you make it in Silicon Valley, and she is a product of that culture. To reform that, it is going to take a conviction and people realizing if you cross too many lines, you will end up in prison.

The flip side of that is that if she’s acquitted you’ll have young entrepreneurs running around Silicon Valley saying: “Yeah, I push the envelope but look at what Elizabeth Holmes got away with – she did worse than what I am doing and didn’t do a day in prison.”

Scams are compelling in general, and US capitalism is really good at producing them

Do you think she will testify?

If I had to bet, I think she will testify. Not just because of what I have said about her tolerance for risk and her confidence, but because it looks like her strategy is going to be to blame Sunny and say he was abusive.

If that is the strategy, I don’t think it will be enough to put psychologists on the stand. To convince the jurors, they will want to hear from her how Sunny abused her, what effect that had on her, and how it affected her judgment.

Maybe I will be proven wrong. In most criminal cases defense lawyers advise their clients not to testify because it is a huge gamble. It opens you up to cross-examination from the prosecution, which can backfire in a huge way. If she does testify, it will certainly go against the grain of what usually happens.

Given the defense that we’re kind of anticipating , what is your take on her relationship with Balwani?

He definitely was a bad influence - but the notion that he controlled her, to me, is laughable. They were in this together in a partnership of equals. If anything, when they disagreed, she had the final say.

I know this not only from the six years of reporting I have done on this, and all the people I have interviewed who saw them operate together up close, but I have perused five years of text messages between them that were exhibits in the SEC case [against Theranos].

You also have to remember the fact that she had 99.7% of the voting rights of this company. She was in full control. Was she living with him and were they consulting each other all the time? Yes. But I do not buy this notion that he was the puppeteer and she was the puppet.

This story has inspired a lot of movies, books and other media. Why do you think that it’s so compelling to people?

Scams are compelling in general, and US capitalism is really good at producing them.

In this case, people are fascinated with the psychology of Holmes. How did she rationalize behaving the way she did? How was she able to pull off these lies for so long? How was she able to manipulate people for so long? The way she deepened her voice at times, the clothes she wore – she is a real chameleon.

She’s also got this extraordinary tolerance for risk, because to pull off what she pulled off – going live with a blood testing device that didn’t work – that takes chutzpah. Even how she is handling the case now – most people would have pled out four years ago. She has chosen to take this trial to court, to roll the dice.

https://www.theguardian.com/technology/2021/aug/28/elizabeth-holmes-theranos-trial-john-carreyrou

 

EPA is falsifying risk assessments for dangerous chemicals, say whistleblowers

Agency scientists say management silences and harasses them to appease chemical industry

‘Managers seem to think their job is to get as many new chemicals on the market as fast as possible,’ Kyla Bennett said. Photograph: Andrew Kelly/Reuters

Tom Perkins

Fri 27 Aug 2021 08.00 EDT

Whistleblowers say the US Environmental Protection Agency has been falsifying dangerous new chemicals’ risk assessments in an effort to make the compounds appear safe and quickly approve them for commercial use.

Over the past five years, the EPA has not rejected any new chemicals submitted by industry despite agency scientists flagging dozens of compounds for high toxicity. Four EPA whistleblowers and industry watchdogs say a revolving door between the agency and chemical companies is to blame, and that the program’s management has been “captured by industry”. The charges are supported by emails, documents and additional records that were provided to the Guardian.

“The depth of it is pretty horrifying,” said Kyla Bennett, New England director of Public Employees for Environmental Responsibility (PEER), a non-profit whose attorneys are representing the four scientists. “I don’t sleep at night knowing what I know from the whistleblowers.”

Their July allegations, which were sent to lawmakers and federal oversight bodies, sparked an investigation by the EPA’s inspector general into the office of chemical safety and pollution prevention, and the House of Representatives this month requested information from the new EPA administrator, Michael Regan. The whistleblowers say similar problems existed during the Obama administration, accelerated under Trump, and have persisted under Biden.

Congress enacted legislation in 2016 designed to tighten oversight of the toxic chemical approval process. Instead, career EPA managers have worked to sabotage the process by altering risk assessments, waging harassment campaigns against employees, internally accelerating the approval process and retaliating against staff who raise concerns, according to the four agency scientists.

The charges also reveal how management has systematically undermined scientists while working to quickly rubber-stamp dangerous chemicals as safe for use by industry and in consumer products. The managers in question are employees rather than political appointees, making the situation more difficult to address because they don’t turn over with a new administration, Bennett said.

The alterations to risk assessments mostly involved the deletion of health hazards without the authors’ knowledge after assessments were submitted. Documents show that in one file managers deleted all references to a chemical’s carcinogenicity. In other cases, managers asked scientists with less expertise on a subject to sign off on changes without informing the assessment’s author.

The chemical industry has regularly objected to EPA scientists’ conclusions about the dangers of new chemicals, and whistleblowers say it was clear that companies were pressuring management to make changes. In one case, a manager allegedly yelled that a company “went apeshit” over a risk assessment that flagged a chemical’s carcinogenicity, and demanded that the scientist delete that portion, a request that was refused. The scientist was soon transferred out of the division.

Documents show that cases in which scientists and industry were at odds were labeled “hair on fire”, and taken over by a manager who would expedite the approval process and overrule EPA chemists. A management schedule showed managers on daily “HOF duty”, highlighting how frequently industry and scientists disagreed.

In one case, management requested a “button”, or software function, to bypass scientific review in “hair on fire” cases, a November 2020 recording of a conversation between an information technology consultant and managers revealed.

Management also appeared to sabotage the review process by barring staff from talking with other agency experts about a new chemical, which scientists say is critical to developing a complete risk assessment. Whistleblowers said management punished employees who didn’t complete the assessments within 90 days, which scientists say is too short a timeframe.

“Managers seem to think their job is to get as many new chemicals on the market as fast as possible,” Bennett said.

Those who pushed back against management were often berated, threatened and insulted, one former scientist who declined to use their name for fear of retaliation told the Guardian. In one instance, a manager allegedly threw a memo at a chemist. Emails show that management asked a scientist to make bogus harassment charges against another chemist who wouldn’t make changes to a risk assessment that managers had demanded.

Managers’ motivation appeared to be financial, Bennett said. They regularly bounce between the EPA and industry, and the access to the EPA helps them land lucrative private sector jobs. “They’re selling their soul,” Bennett said. “It’s money, it’s greed, but it doesn’t make sense. Don’t these people have any children or grandchildren? Don’t they care?”

The EPA did not respond to requests for comment.

In an interview with the Guardian, a whistleblower with a PhD in toxicology detailed confrontations with management. In one instance, the whistleblower found that a single dose of a chemical could cause malformation in a rodent’s brain. Workers would be handling the chemical five days a year, so the risk assessment draft included a warning about the danger of exposure to a single dose.

That would have caused restrictions to be placed on the chemical’s use, but a manager claimed that the malformation would happen only after repeated exposures, and objected to the inclusion of the warning because workers wouldn’t be handling the chemical on consecutive days. Management instead wanted to change the assessment to say that the chemical presented a low risk, the whistleblower said, which was too vague and put workers in danger.

“It’s frustrating because the majority of people who I work with, including myself, came to the EPA to carry out the agency’s mission of protecting human health and the environment, and to have this kind of pushback in the agency – it makes no sense,” the whistleblower said.

In another instance, managers wouldn’t let the whistleblower use an analog chemical because they were concerned the analog was too toxic. Analogs are existing chemicals that are structurally similar to new chemicals and used to assess a new chemical’s potential health risks. Using an underprotective, less toxic analog could underestimate the new chemical’s health threat. The whistleblower said a manager berated them in front of co-workers for using the more toxic analog, telling them that they weren’t qualified for their position.

“The managers basically said that the company was going to think that we were bad at our jobs and [management wasn’t] going to defend us,” the whistleblower added.

The assault on the division’s scientific process has left its scientists demoralized. A 2020 survey of EPA employees found the chemical division had the most negative view of management and the highest overall dissatisfaction rate in the agency.

Whistleblowing in this situation was “a matter of common good” and EPA employees were facing an ethical obligation to speak out, said Joan Harrington, director of social sector ethics at Santa Clara University.

“The reason we have whistleblower statutes is to reveal this kind of thing, so assuming the allegations are correct … they are sort of ethically obligated to come forward and reveal this information, because the harm that could come by not fairly evaluating these chemicals is extraordinary,” Harrington said.

The EPA inspector general appeared to be conducting a serious evaluation, Bennett said, and it will eventually make corrective recommendations to the EPA, though she added that the agency has a history of ignoring them. The inspector general could forward the case to Congress for action if the EPA doesn’t act.

The House committee on energy and commerce letter to Regan, the EPA director, called the whistleblowers’ allegations “troubling”.

“We … firmly believe EPA’s scientific staff must be able to perform their work of protecting human health and the environment free from inappropriate interference and retaliation,” the letter reads. It questions whether EPA leadership grasps the situation’s gravity and whether any chemicals that have been approved will be reassessed. The committee could potentially open a full investigation and hearing.

In response to concerns raised by PEER, EPA chemical program leadership claimed that it eliminated management’s rule that barred employees from speaking to one another, though Bennett said it was unknown whether the rule has been changed in practice. She added that PEER was “not confident but hopeful” that EPA leadership will take more meaningful action and remove the managers.

“We’re banking on the Biden administration doing the right thing by holding people accountable. We’re not 100% confident that that’s going to happen, but we’re trying,” Bennett said.

https://www.theguardian.com/environment/2021/aug/27/epa-whistleblowers-falsifying-risk-assessments-dangerous-chemicals