As has been well-documented, the United States in the middle of an “epidemic” involving the abuse of prescription and non-prescription opioids. The companies that manufacture and distribute these drugs have been hit with a “barrage” of lawsuits, filed by states, counties, and cities. Just last week, the state of Arizona filed a lawsuit against a drug company alleging that the company had fraudulently marketed a powerful opioid painkiller.  As this lawsuit wave has grown, shareholders and others have also climbed on the litigation bandwagon. In recent days, shareholders have filed a series of lawsuits against opioid manufacturers and distributors and their directors and officers. Just as the number of lawsuits filed by governmental entities seems likely to continue to grow, the number of investor suits against opioid drug companies seems likely to grow as well.


Depomed: The first of these investor lawsuits against opioid drug companies was filed on August 18, 2017, when a plaintiff shareholder filed a securities class action lawsuit in the Northern District of California against Depomed, Inc. and three of its current and former officers. Depomed is a pharmaceutical company. Depomed’s portfolio includes the opioids Nucynta (tapentadol) and Lazanda (fentanyl). The complaint, a copy of which can be found here, alleges that the “Defendants made false and/or misleading statements and/or failed to disclose that: (i) Depomed engaged in questionable practices in connection with the sales and marketing of the Company’s opioid products; (ii) the foregoing conduct, when it became known, would likely subject the Company to heightened legal and regulatory scrutiny; and (iii) as a result, Depomed’s public statements were materially false and misleading at all relevant times.”


The complaint alleges further that when the company disclosed that it had received information requests from a Congressional committee and subpoenas from the Maryland Attorney General and the U.S. Department of Justice concerning its opioid sales and marketing, its share price fell by over 33%.


Endo International: The second of these lawsuits was filed on August 18, 2017 in the Eastern District of Pennsylvania against Endo International plc and several of its current and former officers. The complaint, a copy of which can be found here, asserts securities fraud allegations based on the company’s purported representations regarding its branded pharmaceutical Opana. A reformulated version of Opana the company introduced in 2011 purportedly was formulated to be crush-resistant  and therefore resistant to accidental or intentional abuse by snorting or injecting.


The complaint alleges that the defendants made misleading statements or failed to disclose that (i) reformulated Opana was not resistant to crushing; (ii) reformulated Opana was not an abuse-deterrent and its use carried an “inherent risk of abuse by grinding, snorting and injecting”; (iii) reformulated Opana was contributing to an “opioid public health crisis”; (iv) the company would ultimately remove Opana from the market; and (v) that as a result of the foregoing Endo’s public statements were false and misleading. The complaint alleges that when the company withdrew the drug in response to FDA pressure, its share price fell.


PetMed Express: The third of the opioid-related securities lawsuits was filed on August 25, 2017 in the Southern District of Florida against PetMed Express, Inc. and two of its officers. PetMed Express is a veterinary pharmaceutical company. The complaint, a copy of which can be found here, alleges that on August 23, 2017, a research analyst released a report stating that the company is pushing a “dangerous and addicting synthetic opiate” named Tramadol, a drug that is prescribed by vets to animals as well as by doctors to human cancer patients.  The analyst’s report also stated that PetMed is exploiting the opioid crisis through a broad marketing blitz that features Tramadol in ads that specifically target human opiate users. The analyst report expressed concern that PetMed’s marketing was likely to capture the attention of regulators, including the FDA and DEA.


The complaint alleges that Defendants failed to disclose: “(1) that the Company was marketing dangerous and addictive animal drugs to humans; (2) that, as such, the Company is vulnerable to potential civil or criminal liability, as well as other regulatory action; (3) that, as a result of the foregoing, Google may halt the Company’s advertising activities; and (4) that, as a result of the foregoing, Defendants’ statements about PetMed’s business, operations, and prospects, were false and misleading and/or lacked a reasonable basis.” The complaint alleges further that on the release of the analyst’s report the company’s share price declined more than 8%.



It is not uncommon for pharmaceutical companies to be named as defendant in securities class action lawsuit. Indeed, as I noted in my mid-year review of 2017 YTD securities class action lawsuit filings, pharmaceutical companies collectively represent the industry group most frequently hit with securities suits. But these three companies have more in common than just the fact that they are all three pharmaceutical companies. All three are involved in manufacturing and distributing opioid drugs that have been alleged to be a part of or contributing to the opioid epidemic.


Just as it seems likely that there will be further lawsuits against the opioid drug companies brought by state and local governments, it seems likely that other opioid companies will face investor lawsuits, particularly those that are subject to adverse publicity suggesting that the companies contributed to or are a part of the opioid epidemic. The opioid drug companies appear to represent something of a heightened risk class, even within the heightened risk class of pharmaceutical companies.


It probably should be emphasized that these lawsuits have only just been filed. They may or may not prove to be meritorious. Obviously, the mere fact that a company is involved in the manufacture or distribution of opioid drugs does not mean that the company or any of its directors or officers have committed securities fraud. The plaintiffs’ lawyers will have to show that the company misled investors in some way with respect to its opioid drug activities.


The rash of securities suits against these opioid drug companies represents something of its own filing phenomenon, but the suits are also representative of the kinds of lawsuits that are driving the recent increase in the pace of securities lawsuit filings. Indeed, in her August 22, 2017 Wall Street Journal article about the elevated pace of securities suit filings YTD in 2017 (here), Sara Randazzo led her article with a description of the securities suit filed against Depomed, as representative of the rise in securities suit filings that “is being driven by enterprising plaintiffs’ firms bringing more, arguably weaker cases under the perceived strategy that companies will settle early to make a case go away.”