For the 3rd year in a row the life expectancy in the US has declined. Why? A major contributor is the opioid crisis. In the past 20 years it has claimed 400,000 lives in the US and now, in the UK and the US, the odds of dying from an opioid overdose far exceed the odds from dying in a vehicle crash.

Overdose deaths in preceding 12 months

Source: CDC

How has this happened and what can be done about it?
The perfect conditions have been created: Pharmaceutical companies have been using aggressive marketing techniques, mix that with the enthusiasm of certain medical professionals to prescribe, and add in a lack of reporting of suspicious orders by representatives and pharmacies. Suddenly it’s simple to see why ordinary people are becoming addicted to these powerful drugs. For many, what starts as a genuine need for pain relief escalated into full blown addiction and a progression to harder illegal drugs. This is not the first time the pharmaceutical industry has got into hot water over its sales strategies (e.g. see recent article on Insulin prices, here and here.)

What is happening about this?
Currently in the US there are 22 opioid makers, distributors and pharmacies trying to negotiate settlements with 2000 municipalities pursuing them. It is expected that one of the cases being brought in Ohio by means of a “negotiation class” in October will have a significant impact on those negotiations and future legal actions.

Some well-known names have been caught up in all this. Johnson and Johnson was recently ruled as a “public nuisance” by an Oklahoma judge and ordered to pay $572mequivalent to a year’s worth of services needed to combat the epidemic in Oklahoma. Reckitt Benckiser agreed to pay a $1.4bn settlement with the Department of Justice and the Federal Trade Commission over the way a subsidiary marketed a painkiller.

Until recently, you probably wouldn’t have heard of Purdue Pharmaceutical. But as the manufacturer of OxyContin, Purdue is one of the biggest players in this whole situation. The company previously settled with the Department of Justice over aggressive marketing techniques in 2007. Unfortunately, it seems the leopard did not change its spots. Purdue is accused of continuing to market OxyContin as having lower addiction risk than other opioids, with drug salespeople aggressively remunerated.  Purdue owners, the billionaire Sackler family, have found their philanthropic activities increasingly in the spotlight.

A few weeks ago Purdue filed for bankruptcy and established a framework agreement with 27 states to set up a new company that will continue to sell OxyContin but with all proceeds going to the plaintiffs. The Sackler family themselves will have to contribute $3bn cash with the entire settlement being worth somewhere in the region of $10-12bn… albeit with no admission of wrongdoing.

The sums are enormous. But still small in comparison to the estimated total “economic burden” of prescription opioid misuse in the United States.

The estimated cost of Opioid misuse in the US currently sits at a staggering $78.5 billion a year, including the costs of healthcare, lost productivity, addiction treatment, and criminal justice involvement.

About the author

Miranda Beacham is Corporate Governance Manager in the ESG Research team. She is responsible for monitoring, engaging and voting of investee companies in line with our Responsible Investment Policy. She joined us in 1994 as a research assistant in the UK equity team and has 25 years’ industry experience (as at 30 April 2019). Miranda studied Chemistry at Napier University and has the IMC professional qualification.

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