Pain and Alpharma Gain From Purdue's Slip

As reported by the Associated Press last week, privately held Purdue Frederick Company and three of its executives were fined over $630 million after pleading guilty to "misleading the public" and for alleged illegal marketing practices with its pain drug OxyContin.

The fine was part of a settlement deal that Purdue made with the Department of Justice in May after it was accused of "illegally misbranding Oxycontin." As can be seen on this DOJ web page (scroll to middle of the page), Purdue and its top executives "acknowledged that it illegally marketed and promoted OxyContin by falsely claiming that OxyContin was less addictive, less subject to abuse and diversion, and less likely to cause withdrawal symptoms than other pain medications."

OxyContin abuse has been soaring in recent years, as the Drug Enforcement Agency notes. Since 1996, deaths related to the drug have jumped 400%. In Appalachian states like West Virginia, up to 90% of patients admitted into drug treatment centers "identified OxyContin as their primary drug of abuse."

As part of the deal with the DOJ, Purdue agreed to strict monitoring of its business and marketing practices for OxyContin. Having its hands (rightfully) tied behind its back when marketing OxyContin means that if competitors like Pain Therapeutics (Nasdaq: PTIE  ) or Alpharma (NYSE: ALO  ) can successfully bring their abuse-resistant drugs onto the market, then they stand to have an easier time gaining market share versus Purdue.

With the DEA, DOJ, and many doctors and pharmacies all crying out for OxyContin to be made more difficult to illegally abuse, the market is only getting bigger for whichever drug developers can bring harder-to-abuse versions of the drug through the regulatory process.

Now that Pain Therapeutics has finally completed patient enrollment in the pivotal phase 3 study for Remoxy, with results expected in the fourth quarter, the company looks to be in a good position to be the first to finish this race to develop a less abusable version of oxycodone. Alpharma is running neck and neck with Pain, though, and expects its unique abuse-resistant opioid to be awaiting FDA regulatory review in the first half of 2008.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.


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