OXYCONTIN MAKER PLEADS GUILTY

Purdue Frederick to Pay $634.5 Million Settlement For Hiding Addiction

In one of the largest drug-company criminal settlements, the maker of
narcotic painkiller OxyContin will pay $634.5 million after guilty
pleas by Purdue Frederick Co. and three of its executives.

The company pleaded guilty to misbranding the drug with the intent to
defraud and mislead the public about its addictive qualities. The
three executives pleaded guilty to misbranding the drug.

The guilty pleas cap a five-year criminal investigation by the U.S.
attorney in the Western District of Virginia over closely held
Purdue's sales and marketing of its top-selling painkiller. According
to U.S. Attorney John Brownlee, the company promoted OxyContin as less
addictive and less subject to abuse than it really was. The company
trained its sales force to falsely inform health-care providers that
it was difficult to extract oxycodone, the drug's active ingredient,
from the drug for purposes of abuse. The pleas come as the drug
industry is under government scrutiny for its sales and marketing
practices. Meanwhile, prescription-drug abuse is rising. OxyContin was
one of the most frequently abused prescription drugs among teens, with
4.3% of 12th graders reporting nonmedical use of the drug, according
to recent data from the Office of National Drug Control Policy. "It's
a very grim day for the pharmaceutical industry," said David Siesko,
of Siesko Partners, a consulting firm on insurance and risk-management
issues. "The level of executives involved in guilty pleas and
misrepresentations is just chilling on the industry when you think of
how things will start to move forward."

The three executives -- Chief Executive Michael Friedman, General
Counsel Howard Udell and former Chief Medical Officer Paul Goldenheim
- -- will pay personal fines ranging from $7.5 million to $19 million.
None of the three will serve a jail term, which rankled some industry
watchdog groups. "Hundreds of thousands of people are languishing in
jail for relatively minor drug possession or distribution crimes
involving illegal drugs or, in a smaller number of cases, prescription
drugs such as OxyContin," Sidney Wolfe, of Public Citizen, said in a
prepared statement. Mr. Brownlee said in an interview that "proving
intent to a jury beyond reasonable doubt at that level of a
corporation is very difficult. Corporate conduct is different than
individual. Making them plead guilty was significant."

OxyContin was brought to market as a painkiller in 1996. By 2003 it
had annual sales of $1.6 billion. The drug -- which delivers the
opiate oxycodone in a controlled release over 12 hours -- became
abused by people who grind it up to overcome the controlled-release
mechanism and snort or inject the drug to get high.

People who have suffered from OxyContin dependence welcomed news of
the guilty pleas and fines. "My heart leapt," said Douglas Northrup,
46 years old, of Littleton, Colo. "I thought, finally, someone has
figured this out, that this is poison." Mr. Northrup started taking
the drug in 2002 for back pain and says he became dependent on the
drug within a month. He says that his health and marriage suffered and
that he was unable to function. This year, he entered a treatment
program. Mr. Northrup says he has been clean two months.

This week, the Stamford, Conn., drug maker said it had agreed to pay
$19.5 million to 26 states and the District of Columbia to settle
complaints over its promotion of OxyContin, especially to doctors. The
states had complained that the company had encouraged physicians to
prescribe the drug for use every eight hours instead of every 12
hours, as approved by the U.S. Food and Drug Administration.