British multinational consumer goods firm Reckitt Benckiser Group Plc has agreed to pay up to $1.4bn to resolve United States government claims that its former pharmaceuticals business Indivior carried out an illegal scheme to boost sales of an opioid addiction treatment before Indivior was spun out of the parent company.
The settlement, the largest by any company related to the US opioid epidemic, addresses long-running probes by the US Department of Justice and the Federal Trade Commission (FTC) into the companies’ marketing and sales of the medication Suboxone Film.
The deal came after Indivior in April was indicted and accused of deceiving doctors and healthcare benefit programmes into believing Suboxone Film – itself a type of opioid – was safer and less susceptible to abuse than similar drugs.
The indictment said Indivior also used an internet and telephone programme that had been touted as a resource for opioid-addicted patients to connect them to doctors it knew were prescribing Suboxone and other opioids at high rates and under questionable circumstances.
The Department of Justice said the scheme – which resulted in thousands of opioid-addicted patients using the drug – began before Indivior spun out of Reckitt in 2014.
Opioids, including prescription painkillers and heroin, played a role in a record 47,600 US overdose deaths in 2017, the US Centers for Disease Control and Prevention has said.
Reckitt itself has not been indicted, but the Department of Justice last year joined several whistle-blower lawsuits alleging the British company improperly marketed the drug.
As part of Thursday’s settlement, Reckitt entered into a non-prosecution agreement and agreed to pay nearly $1.35bn to settle the criminal and civil claims.
It will also pay $50m to resolve FTC claims that it engaged in activities aimed at impeding competition from generic versions of Suboxone.
Reckitt said in a statement that it “acted lawfully at all times and expressly denies all allegations that it engaged in any wrongful conduct”. But it said its board had decided the settlement was in the company’s best interests.
Indivior – which is based, like its former parent company, in Slough, England – has pleaded not guilty to conspiracy and fraud charges. In a statement, it acknowledged Reckitt’s settlement but said it had no new information on the case. Its trial in federal court in Abingdon, Virginia is set for May.
Shares in Reckitt, whose products range from Mucinex cold medicine to Lysol cleaners and Durex condoms, closed up 2.5 percent for the day.
While the settlement is significantly higher than the $400m that the company had set aside to cover the cost of the investigations, analysts said it could allow the company’s new chief executive to focus on a turnaround plan.
In an effort to regain investor confidence after setbacks – including a safety scandal in South Korea, a failed product launch and a cyberattack – Reckitt’s outgoing boss, Rakesh Kapoor, launched a plan to split the group into two business units – one for health and another for hygiene and home products.
Investors had feared the US probes could hinder the transformation. Analysts at JPMorgan wrote in a note that the settlement “clarifies the legal environment for RB and should allow the new management to focus on the RB 2.0 transformation”.
While welcoming the settlement, AJ Bell’s investment director, Russ Mould, said the cost could limit incoming CEO Laxman Narasimhan’s ability to undertake much-needed investment in Reckitt’s brands.
“The danger is that Narasimhan will be operating with one hand tied behind his back,” Mould told the Reuters news agency.
Reckitt said it would increase its provision related to the investigations to $1.5bn to cover both the cost of the settlement and “any remaining litigation exposures”. It said the deal would be funded through existing borrowing facilities and cash generation.
Separately, Indivior also raised its full-year profit and revenue guidance, after Suboxone lost market share at a slower pace than expected. Its shares closed 6.73 percent higher on Thursday.