Tuesday, August 22, 2017 7:07 PM PT
Depomed Shares Tumbled on News of DOJ Probe, Shareholders Claim

     (CN) - Shareholders filed a class action against painkiller producer Depomed over the collapse of its stock price after news broke that the Department of Justice launched a probe into the company's opioid drug marketing practices.
     The federal lawsuit in the Northern District of California claims Depomed and its lead executives failed to timely disclose to shareholders that the company had engaged in "questionable practices" in connection with sales and marketing of its opioid medications, which include Nucynta (tapentadol) and the highly potent narcotic Lazanda (fentanyl).
     On Aug. 7, after the market closed, Depomed's quarterly SEC filing revealed that the company had received subpoenas in which the Maryland Attorney General and the U.S. Department of Justice requested information about its opioid marketing.
     The company also revealed that it "recently received a request for information from the ranking minority member of the United States Senate Committee on Homeland Security and Governmental Affairs related to the promotion of opioids."
     Depomed's stock lost a third of its value the next day, closing at $6.15 cents a share on Aug. 8.
     Plaintiff Inchen Huang is seeking class action certification for two counts of alleged Exchange Act violations.
     Huang is represented by the law firm of Pomerantz LLP's attorneys Jennifer Pafiti in Beverly Hills, Patrick Dahlstrom in Chicago, along with Jeremy Leiberman and J. Alexander Hood in New York City.
     In SEC filings cited in the complaint, Depomed included an industry-standard warning to shareholders that embedded in its business was a potential risk of regulatory action over its drug marketing.
     During the class period, the company also warned that it may be adversely affected by mounting state and federal efforts to increase regulatory restrictions on prescription drugs, and that the Drug Enforcement Agency "continues to increase its efforts to hold manufacturers, distributors, prescribers and pharmacies accountable through various enforcement actions as well as the implementation of compliance practices for controlled substances."
     The plaintiffs claim, however, that the warnings did not go far enough to disclose how Depomed's drug marketing practices ran the risk of coming under scrutiny from federal investigators.
     Depomed was initially listed as a defendant in a 2014 City of Chicago lawsuit blaming drug manufacturers for getting patients hooked on painkillers. The city claimed the defendant drug companies used "highly deceptive and unfair marketing" to expand the market for painkillers so that the drugs would be used not just in short-term acute pain treatment, but also for chronic pain treatment.
     According to the company's SEC filings, counts for damages against Depomed in the Chicago lawsuit were dropped.
     Nationwide, Depomed is one of several drug makers whose painkiller sales tactics are being probed by attorneys general.
     In June, attorneys general from more than 20 states, from California to New York, announced their participation in the investigation.
     In May, the Ohio Attorney General sued Endo (maker of Percocet), Purdue Pharma (maker of Oxycontin), Johnson & Johnson and Teva Pharmaceuticals, among others, alleging they committed healthcare fraud and improperly downplayed the risk of addiction to prescription opioids.
     Recent media attention has brought renewed national focus onto the opioid addiction epidemic, which has been plaguing many areas of the U.S. for more than a decade.
     According to the Centers for Disease Control, in 2015, nearly half of the record 33,000 narcotic-related deaths in the country involved prescription opioids such as oxycodone.