close up shot of medicines on white surface

How do Companies Respond When a Competitor Gets Sued for Bad Behavior?

By J Katherine Bahr

Decades of research and real-world examples show that when we protest, boycott, or sue a company for its questionable actions, its competitors will take note and change their ways. These actions have worked in everything from arms manufacturing to financial misconduct. However, a new study of the prescription opioid industry in the Strategic Management Journal depicts an exception to the rule. In the wake of Kentucky’s 2007 lawsuit against Purdue Pharma, competing drug companies increased — not decreased — their aggressive opioid promotion.

How the Commonwealth of Kentucky v. Purdue Pharma Affected OxyContin Sales

Purdue Pharma settled the suit in December 2015, but before the settlement, the case was set to be the first lawsuit against Purdue relating to the opioid crisis to go to trial. It was also the first time a member of the Sackler family, who owned Purdue, was deposed about the company’s role in the opioid epidemic. Finally, because the judge unsealed the court documents, public outrage soared, and other potential plaintiffs against Purdue across the country gained access to evidence revealed by the case.

To measure the settlement’s effect on opioid marketing, the study’s co-authors, David Tan, an associate professor of management at the University of Washington, and Nicole V. West, an assistant professor at the University of Texas, Dallas, cross-referenced data on prescribing behavior from more than 670,000 physicians found in the CMS Part D Prescriber database with data from Open Payments, which tracks payments to physicians for drug promotion. From 2014 to 2015, Purdue spent $1.5 million on food and beverage to promote OxyContin during sales representative visits to prescribers. In the two years following the settlement, that dropped to $54,000 — a decrease of 94%. By contrast, their competitors increased spending from $911,000 to $2.4 million, a 160% increase.

How Did Competitors Respond to the Kentucky v. Purdue Settlement in 2015?

To identify competitors, the authors used a list of drugs and manufacturers included in the US Food and Drug Administration’s (FDA) opioid analgesic Risk Evaluation and Mitigation Strategy (REMS) program, which includes branded and generic forms of oxycodone, hydrocodone, and fentanyl. REMS is a drug safety program that the US FDA can require for certain medications with serious safety concerns to help ensure the benefits of the medication outweigh the risks.

Authors tested the data to see if competitors attempted to avoid association with OxyContin or opioid overdoses. They used the CMS Part D Prescriber database’s measure for patients’ underlying health to rule out an increase in promotion related to legitimate opioid needs. To measure competitors’ avoidance of association with OxyContin, they tracked promotions to physicians prescribing OxyContin and to physicians Purdue previously targeted. The results clearly demonstrate that in the wake of Purdue’s 2015 settlement, competitors actively sought out Purdue’s prescriber sales targets for OxyContin.  

(Vertical dashed line represents December 2015 settlement date.)

The authors used CDC data on opioid-related overdoses to see if Purdue’s competitors avoided marketing their drugs in counties where the opioid epidemic was more severe or where prescription opioids were responsible for more opioid overdoses. The increases in spending occurred across all counties, suggesting competitors did not attempt to avoid association with overdoses. In fact, the researchers noted their results suggest competitor spending was specifically aimed at capturing profit from Purdue’s OxyContin business.  

Why Didn’t Punitive Measures Against a Competitor Work in This Case?

After the 2015 settlement, competitor drug companies seemed to increase the very questionable behavior Purdue had been sued for — promoting opioids to prescribers in communities where the opioid epidemic was known to be severe. The authors posit that the case created an opportunity for competitors by weakening Purdue’s marketing grasp. Despite growing scrutiny around the prescription opioid industry’s role in the opioid epidemic, the prospect of capturing Purdue’s most lucrative market appeared to outweigh any heightened fear of litigation. The idea sets an ominous precedent for regulating bad business behavior.

 Strategic Management Journal, published by the Strategic Management Society, is the world’s leading mass impact journal for the highest quality research on a diverse mix of topics relevant to strategic management.

Based upon:

Tan, D., & West, N.V. (2023). Bad medicine: Litigation, competition, and the marketing of prescription opioidsform: The wild, wild west? Strategic Management Journal

J Katherine Bahr is a Knoxville-based freelance writer and content marketer with an advanced degree in creative writing and a decade working in publishing and marketing.