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Reckitt Accepts to pay $1.4 billion penalty to close opioid treatment sales Investigation

5 years ago

Reckitt Benckiser agrees to pay a penalty of worth $1.4 billion to settle the investigation of opioid addiction treatment.

Nurofen and Durex manufacturer mentioned that the company has managed to reach a deal with the Department of Justice and Federal Trade Commission of US so as to solve the long-running investigation related to marketing and sales of an opioid medicine Suboxone Film.

Reckitt Benckiser’s subsidiary, Indivior marketed an opioid drug used to treat people addicted to painkillers. The US federal officers allege that the business acquired by Reckitt till 2014, made baseless allegations of advanced version, Suboxone, which is an anti-addiction medicine from 2006 to 2015.

The agreement reached is one of the biggest deals reached by any other drug company. Back in 2007, another company, Purdue Pharma, was the second largest company to pay a penalty of worth $600 million. Purdue manufactured OxyContin also an opioid medicine.

The deal reached is worth more than $400 million that was maintained separately by the consumer goods group in order to cover the investigations amount; expert mentions it might allow the new CEO of the firm to consider across turnaround plan.

JP Morgan experts mentioned in a note “As new CEO Laxman Narasimhan steps in (effective Sept. 1), this clarifies the legal environment for RB and should allow the new management to focus on the RB 2.0 transformation.”

The US federal grand jury of Virginia had stated Indivior and ordered to pay a penalty of around $3 billion across claims that it requested to increase Suboxone sales; it is one of the best-selling medicines along with a false marketing scheme.

Centers for Diseases Control and Prevention mentions that the Reckitt’s deal is the largest one till now and has taken lives of around 200,000 US citizens, and almost 2 million Americans are suffering from opioid use disorder.

Reckitt was successful in resolving the case with the US officials and did not agree of any wrongdoing.

Reckitt stated in a statement,

While RB acted lawfully at all times and expressly denies all allegations that it has engaged in any wrongful conduct, after careful consideration, the board of RB determined that the agreement is in the best interests of the company and its shareholders.

The FTSE 100 Company stated, after careful examination, the board members considered that the deal is in the interest of the company and its shareholders. It eliminates the costs, uncertainty, and disturbance related to continued inquiry and the potential for an allegation.

Reckitt shares increased to 3.3 percent on Thursday.

So as to regain the confidence of its investor after facing difficulties including safety scam in South Korea, unsuccessful product launch and a cyber-attack,  existing CEO Rakesh Kapoor decided to launch a plan by dividing the group into two separate units, one unit related to health and another for hygiene and home products.

But investors were worried about the US investigations that could hamper the transformation of the company.

Investment director of AJ Bell, Russ Mould has appreciated the agreement reached by the company and mentioned that the amount could restrict the new CEO Narsimhan’s capability to take essential investments in RB.