OxyContin in the Crosshairs Again

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Some regions of the country have had such a hard time combating OxyContin abuse that the drug has gained the unflattering moniker "hillbilly heroin." Now Kentucky is doing something about it. Yesterday, the state's attorney general sued OxyContin developer Purdue Frederick over the monetary burden that abusers of the drug place on counties within the state.

OxyContin is privately held Purdue's sustained-release version of the opioid painkiller oxycodone. The FDA approved the drug in 1995, and Purdue has been cited for numerous violations since then in its aggressive marketing of the drug. (See this 2003 GAO report, a PDF, for just one example.)

The Kentucky lawsuit follows a $630 million settlement that Purdue made with the U.S. Department of Justice earlier this year, over charges of illegally marketing and promoting the drug.

I'm not enough of a legal scholar to know what chance Kentucky has to collect damages from Purdue related to OxyContin abuse. But I do know the tactic is similar to one that New York and other states have taken with Merck (NYSE: MRK) to recoup the expenses that their states' Medicaid programs paid for Vioxx -- which was yanked over health concerns and remains the focus of numerous lawsuits.

Sales of OxyContin were nearly $2 billion for the 12 months ended August 2005. Now several drugmakers have been developing abuse-resistant versions of OxyContin, because of the prevalent abuse of the drug and its large market potential.

Pain Therapeutics (Nasdaq: PTIE) and Alpharma (NYSE: ALO) are leading the way with their abuse-resistant versions of the drug. Most of the abuse-resistant class of opioids in development use an active ingredient similar to the already-approved oxycodone, so their efficacy and safety probably won't be in doubt.

The big issue is whether insurers and government health programs will be willing to pay the premium price for an abuse-resistant drug, and whether doctors will prescribe such drugs over their more easily abused counterparts.

With states suing on behalf of their law-enforcement agencies and Medicaid programs to recoup the costs associated with OxyContin abuse, I think we have the answer as to whether government health programs will cover the costs of these abuse-resistant drugs. Count this as one less hurdle for Pain Therapeutics, Alpharma, and the other developers of these abuse-resistant compounds.