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Analysis: High-Dose Opioid Pills Helped Fuel Purdue Pharma’s Growth

ABI Bankruptcy Brief

September 19, 2019

 
ABI Bankruptcy Brief
 
 
NEWS AND ANALYSIS

Analysis: High-Dose Opioid Pills Helped Fuel Purdue Pharma’s Growth

Purdue Pharma LP’s bankruptcy filing this week punctuates a fall from its perch as one of the pharmaceutical industry’s most recognizable marketers of opioid pain pills, according to an analysis in the Wall Street Journal. At its height, Purdue’s signature OxyContin product notched billions of dollars in annual sales, fueled in part by booming demand for high-dose pills. Purdue made about 10% of pills containing oxycodone — the active ingredient in OxyContin — that were purchased by U.S. pharmacies from 2006-12, according to a Wall Street Journal analysis of opioid sales data maintained by the U.S. Drug Enforcement Administration. But when taking into account the dosage strength of each pill, OxyContin represented a market-leading 27% of total oxycodone sold during the seven-year period reviewed by the Journal. High-dose pills are more prone to abuse, according to physicians and public health and law enforcement officials. The sales data were obtained by plaintiffs’ attorneys representing municipalities in cases against Purdue and other pharmaceutical-supply-chain players for their alleged roles in the opioid crisis, and made public as the result of a lawsuit brought by the Washington Post and HD Media. Purdue and the Sackler family that owns it are trying to resolve some 2,600 lawsuits from states, cities and counties that accuse the company of helping spark the nation’s opioid crisis through its aggressive marketing. Purdue and family members named in lawsuits have broadly denied the allegations and have said they are committed to helping curb opioid addiction.

Usury Lawsuits Put Future of a $563 Billion Bond Market at Risk

A pair of lawsuits targeting entities that JPMorgan Chase & Co. and Capital One Financial Corp. use to bundle credit card loans into bonds could threaten the future of the $563 billion market for debt backed by consumer obligations, Bloomberg News reported. At issue is whether credit card interest rates can be considered usurious. A Civil War-era piece of legislation has long shielded national banks from having to comply with state regulations, some of which cap the maximum rate on loans at as little as 5 percent. But borrowers are arguing that the packaging of credit card debt into notes to sell to investors removes it so far from a bank that the shield shouldn’t apply. The defendants say the suits are baseless because banks still maintain customer relationships and charge interest — even if they’ve bundled rights to receive the interest into securities. Should the plaintiffs prevail, the ruling would chill the market for bonds tied to consumer loans, industry groups say, forcing banks to keep more risk on their balance sheets and stifling their ability to extend credit. The fallout could ultimately extended to the $9 trillion mortgage-backed securities market, causing home loans to fall under a patchwork of state regulations, they warn.



Wall Street Banks Look to Sell More Research to Companies

Goldman Sachs and Morgan Stanley are going head-to-head with the likes of Bain and McKinsey, hoping to sell research services to companies to offset big falls in demand from their traditional clients in asset management, the Financial Times reported. Historically, the reams of research and economic analysis produced by Wall Street’s army of “sellside” analysts has been targeted at hedge funds and fund managers — the “buyside” in industry jargon. But investment groups have come under ferocious fee pressure in recent years and are trying to cut down on costs. At the same time, new regulations stemming from the EU — which have washed over the U.S. — have required banks to charge investors for the research they provide, rather than bundling the cost into commissions for trading. Research divisions within banks often have staffing and resources that dwarf the biggest think tanks and consultancies, churning out huge amounts of industry, economic and financial research, from simple stock recommendations to machine-learning-driven analyses of corporate sentiment. Total commissions paid by U.S. fund managers, covering both research and trading, came to almost $8 billion last year, according to Greenwich Associates, down from a peak of $14 billion in 2009.

Op-Ed: Fed Chairman Jerome Powell Masters the Art of Saying Nothing

Asked Wednesday when the Federal Reserve would be done cutting interest rates, Chairman Jerome Powell answered, “When we think we’ve done enough.” Reminiscent of Supreme Court Justice Potter Stewart’s definition of pornography — “I know it when I see it” — Mr. Powell’s answer was crafted both to convey the imprecision of the task and avoid tying him down with specifics, according to an op-ed in the Wall Street Journal. Indeed, pressed throughout his press conference on what the Fed would do next, he gave variations of that non-answer. Did the Fed have a “bias” on which way rates would move next? He answered, “We made one decision, to lower the federal-funds rate by a quarter of a percentage point.” The immediate reason for this studied unhelpfulness is that the principal risk to the economy — a trade war between the U.S. and China — is impossible to forecast. But there is a larger purpose too: Talking less about the Fed’s intentions minimizes miscommunication while maximizing flexibility when economic and trade-war developments change, according to the op-ed.

Report: Cleanup of Abandoned Oil, Gas Wells Could Cost U.S.

U.S. taxpayers could face potentially hundreds of millions of dollars in cleanup costs from abandoned oil and gas wells on public lands, a government watchdog agency said Wednesday, the Washington Post reported. The Government Accountability Office said in a report that it identified almost 2,300 wells that have not produced oil and gas since 2008 and have not been reclaimed. The report said bankruptcies by well operators could saddle the government with $46 million to $333 million in reclamation liabilities. The wide range reflects the unknown costs of cleaning up the sites. To avoid such a scenario, GAO recommended that officials adjust the amount of bonds companies must post before drilling to better reflect possible cleanup costs. Current rules allow companies to post bonds of $150,000 to cover their wells nationwide. Abandoned wells have been a major issue across much of the West, including Wyoming, where companies have abandoned almost 6,000 oil and gas wells since 2014 amid low natural gas prices that led to a bust in the coal-bed methane industry. U.S. Rep. Raul Grijalva of Arizona, who had requested that GAO investigate oil and gas bonding practices, said the results underscore the need for an overhaul of federal bonding rules. “Much to the pleasure of the oil and gas industry, bond amounts have been ignored for decades, resulting in levels today that are woefully inadequate,” said Grijalva, who chairs the House Natural Resources Committee. (Subscription required.)

U.S. Housing Starts Rose Significantly in August

Home building in the U.S. increased in August to the highest level since June 2007, according to Commerce Department data released Wednesday, the Wall Street Journal reported. The report cues a positive note for the American housing industry in what has been a year marked by lagging home sales and sluggish single-family construction. Housing starts, a measure of new-home construction, climbed 12.3 percent in August from the prior month to a seasonally adjusted annual rate of 1.364 million. “The new-home market is getting a boost this year from lower mortgage rates and the extremely low levels of supply for existing homes.” said Ben Ayres, senior economist at Nationwide. Economists had forecast that starts rose 4.1% to an annual pace of 1.24 million last month. Despite the August jump in housing starts, the market is playing catch-up, said National Association of Home Builders economist Robert Dietz, because single-family housing starts year-to-date are still down 2.7% Housing-starts data are volatile from month to month and can be subject to large revisions. August’s 12.3% increase for starts came with a margin of error of 10.2 percentage points. More broadly, home construction has been weak this year. In the first eight months of 2019, starts were down 1.8% compared with the same period in 2018.

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BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: Student Loans Are Not the No. 1 Source of Millennials' Debt

A recent blog post discusses the results of a survey that found that, excluding mortgages, millennials carry an average of $28,000 in personal debt, most of it on credit cards.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
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