March 26, 2020
LAUNCESTON, AUSTRALIA — As the United States was succumbing to an epidemic of addiction, the Johnson & Johnson family of companies became the leading maker of narcotics for popular opioid pills, a dominance achieved through decades of innovation, navigation of U.S. drug policy, and the cultivation of poppies in this remote haven on the other side of the world.
Johnson & Johnson’s supply chain began in Tasmania, an island 150 miles south of mainland Australia, where scientists in the mid-1990s altered the genetics of thousands of plants to engineer a “super poppy” that was particularly rich in opiates.
Tasmanian farmers grew the novel plants, enticed by flashy incentive prizes — a Mercedes, a Jaguar, a BMW — that a Johnson & Johnson subsidiary awarded for growing the best crop.
The poppies were then exported to the United States where another Johnson & Johnson subsidiary refined them into oxycodone and hydrocodone, and the narcotics were shipped as white crystalline powders to the nation’s pillmakers.
Critical to the globe-spanning effort were years of company lobbying to help persuade the U.S. government to loosen a key rule on narcotics imports, allowing the U.S. subsidiary to produce rising amounts of opioids out of Tasmanian poppies, according to records and interviews reviewed by The Washington Post.
From 2013 to 2015, near the peak of U.S. opioid production, the Johnson & Johnson subsidiary in Tasmania was harvesting thousands of acres of poppies and the U.S. subsidiary was manufacturing enough oxycodone and hydrocodone — the two most abused prescription opioid drugs — to capture half or more of the U.S. market, according to company documents.
So while Purdue Pharma, Mallinckrodt Pharmaceuticals and other manufacturers are often linked to the opioid crisis, it was two subsidiaries of Johnson & Johnson, a brand better known for baby powder and Band-Aids, that were producing the narcotics in many of the abused pills.
One was Tasmanian Alkaloids, the poppy-processing outfit that worked with farmers in Australia, and the other was Noramco, a U.S. company that processed the Australian poppy materials into drugs such as oxycodone and hydrocodone. As a crackdown on opioid production was underway in 2016, Johnson & Johnson sold off both companies.
Attorneys for Johnson & Johnson say its opioid-producing subsidiaries did not cause the United States’ addiction crisis, that they were heavily regulated, and that such companies play only a “peripheral role in the multibillion-dollar market for prescription opioids.”
The company didn’t make officials available for on-the-record interviews but provided a “fact sheet” and responded to some questions in writing through an outside counsel, Sabrina Strong of the law firm O’Melveny.
“Every gram of raw material and active pharmaceutical ingredient that [the subsidiaries] sold was expressly authorized and strictly supervised by the federal government to fulfill quotas based on the DEA’s evaluation of national medical needs,” Strong wrote.
But what Johnson & Johnson viewed as a business that eased the pain of countless patients looked to critics more like a big company ignoring the rising number of fatal overdoses to ramp up production and profits.
As far back as 2011, advocates and victims were calling on the Drug Enforcement Administration to lower the quota of drugs that may be produced in the United States by Noramco and other narcotics suppliers.
By that time, according to the Centers for Disease Control and Prevention, enough prescription painkillers were being prescribed annually “to medicate every American adult around-the-clock for a month.”
Many of the resulting pills were being used for illicit purposes.
Yet between 1994 and 2015, the amount of oxycodone the DEA allowed to be manufactured grew 36 times over; the amount of hydrocodone rose 12 times over.
The DEA “was slow to respond to the dramatic increase in opioid abuse,” according to a September 2019 report from the Justice Department’s inspector general.
DEA officials declined requests for on-the-record interviews about agency decisions to allow more opioid production but they pointed to a statement last year by acting administrator Uttam Dhillon.
“The aggregate production quota set by DEA each calendar year ensures that patients have the medicines they need while also reducing excess production of controlled prescription drugs that can be diverted and misused,” the statement said.
Tasmania and the U.S. epidemic
While the prescription opioid epidemic precipitated innumerable personal tragedies in the United States, its chemical source lies in fields of wavering, long-stemmed mauve flowers.
An island of meadows and rugged mountains, Tasmania is roughly the size of West Virginia, though its population — about a half million — is more sparse.
The case was widely reported in Tasmania.
It is poppies, however, that have earned attention from around the world. The landmark opioid litigation in Oklahoma, led by attorney Bradley Beckworth, ended with the judge ordering Johnson & Johnson to pay hundreds of millions of dollars to address the state’s opioid crisis, and his decision cited the island’s role in opioid production.
In response, “there’s been an almost embarrassed silence,” said Peter Whish-Wilson, a senator from Tasmania. “I think it shocked quite a few people that a little quiet backwater like Tasmania — which, by the way, is one of the greatest places on Earth — has now been put in the spotlight in big court cases in the U.S. talking about the death and addiction of hundreds of thousands of people.”
One rainy Saturday in November, Robert French, a 66-year-old who has twice won luxury cars from Tasmanian Alkaloids for the quality of his poppy crop, was pulling out of his driveway with his corgi, Max, beside him.
When two U.S. journalists approached, he rolled down the window of his pickup.
“You’re not here to denigrate the Tasmanian poppy industry, are you?” he asked.
Like other farmers here, he rejected questions about whether Tasmanians should reconsider growing poppies for drug companies.
Any problems with the crop, he noted, occurred long after the plants left his field.
“If anyone wants to know, the problem was not the farmers,” French said.
Tasmania’s ‘super poppy’
Though poppy plants have been cultivated in Tasmania since the 1960s, it wasn’t until the emergence of Johnson & Johnson’s innovative poppy that it became a boom crop on the island, one that would provide the world with the raw material to make a wave of painkilling drugs.
Oxycodone and hydrocodone had been synthesized by scientists as far back as 1920, but manufacturing them in commercial quantities had proven costly.
Then, in the mid-90s, an invention by Tasmanian Alkaloids, the Johnson & Johnson subsidiary, helped reduce the costs: Scientists created a new poppy.
By treating thousands of seeds with chemicals to randomly change their genetic information, the scientists made a poppy that had two special properties. First, the new poppy had ample amounts of an opiate known as thebaine — a substance from which oxycodone and hydrocodone could be readily manufactured. Second, unlike traditional opium poppies, this poppy had no morphine, meaning that the purification process was simpler.
“It was a ‘super poppy’ from the point of view that it produces a heck of a lot more thebaine,” said Peter Facchini, a biochemistry professor at the University of Calgary whose lab specializes in studying the poppies. “The cost of thebaine — and the cost of all pharmaceutical ingredients that come from it — dropped. These prescription medicines became much more accessible, and then you had a series of cascading effects, including addiction.”
The man credited with the discovery, Anthony J. Fist, an agricultural scientist, was given Johnson & Johnson’s highest award for scientific research and innovation, the Johnson Medal, in 2000.
“The new poppy variety is a major turning point,” Fist wrote at the time. “For the first time, thebaine can be produced efficiently without concomitant production of morphine.”
He wrote that the project had been undertaken to “meet the anticipated demand” and noted that the new poppy could be grown without risk of diversion for illicit purposes.
The Tasmanian subsidiary bought the new poppies from farmers and then shipped concentrated poppy products to Delaware-based Noramco, which processed the narcotic raw materials into oxycodone, hydrocodone and other opioids at its plant in Wilmington.
As Noramco officials would later boast in a 2003 internal company presentation introduced in the Oklahoma trial: The “patented, high-thebaine poppy was a transformational technology that enabled the growth of oxycodone.”
Oxycodone and hydrocodone have been the most abused prescription opioids in the United States, according to federal statistics on emergency room visits involving nonmedical use of pharmaceuticals.
While Johnson & Johnson officials declined to disclose how much their subsidiaries produced, documents that surfaced in the Oklahoma trial indicate that the companies dominated the bulk opioids business: By 2015, Noramco supplied 65 percent of the oxycodone, 54 percent of the hydrocodone and 60 percent of the morphine and codeine used by drugmakers in the U.S. market, according to an October 2015 sales presentation introduced in the Oklahoma trial.
Strong, Johnson & Johnson’s outside counsel, said that the new poppy “was not a driving force behind the opioid crisis.” Instead, she said, the increased supply of opioids “was driven by domestic medical trends.”
The development of the new poppy coincided with the introduction in 1996 of OxyContin, the oxycodone-based pill made by Purdue that was widely abused as the addiction epidemic unfolded.
An affiliate of Purdue, PF Laboratories, became one of the first major customers of the new product from Johnson & Johnson’s subsidiary.
“Noramco will work with PF Laboratories to secure its entire worldwide requirements,” a Noramco executive, Michael B. Kindergan, wrote to PF Laboratories in October 1998 as the pillmaker was ramping up production.
Former Food and Drug Administration chief David A. Kessler, who has been retained as an expert for governments suing drug companies, also linked the rise of OxyContin to the new Tasmanian poppy.
“OxyContin would not have been driven without Tasmanian Alkaloids and super poppy,” Kessler said in a deposition earlier this year. “Without Tasmanian Alkaloids . . . you wouldn’t have supply the way we had supply.”
Fist, the inventor, also noted the timing of the new poppy and the growing demand in the United States.
He wrote that the poppy’s development had coincided with the introduction of “a slow release formulation of oxycodone in the USA . . . and there was greatly increased demand.”
Getting farmers onboard
Before Tasmanian Alkaloids could fully realize the benefits of the novel poppy, however, managers across the supply chain needed to solve a couple of problems.
The first challenge involved persuading farmers to grow the new poppy, which can be risky and difficult, and to raise them to maximize their potency.
A company then called Glaxo, now part of GlaxoSmithKline, operated the other poppy processor in Tasmania and was offering fancy watches as incentives for farmers, Tasmanian Alkaloids officials recalled.
The managers at Tasmanian Alkaloids considered upping the ante: What if they were to give away luxury cars to farmers as incentives? Would it be worth it to have more poppies?
The company had accountants study the question, recalled Rick Rockliff, one of the first employees of Tasmanian Alkaloids. Getting more poppies from farmers, it turned out, would be worth much more than a luxury car.
“The accountant said if you could fill the factory up [with poppies], we could give them a 747, you know,” Rockliff recalled, grinning.
For several years, the roughly 500 poppy growers producing for Tasmanian Alkaloids competed for the “top crop” — the one with the highest percentage of opiates, or naturally occurring opioids, per acre. In addition to a Jaguar, a few Mercedes-Benzes and a BMW, the company also offered luxury vacations.
“Everybody wanted to have the top crop,” said Phil Loane, 54, who drives a motorbike from field to field on his farm in East Devonport. He and his wife won a Mercedes in 2002.
Luxury cars aside, farmers point out that while thebaine poppies were profitable in the early days, for the most part, the big money was not flowing to farmers.
“It used to bug me that that press would go around and they’d call it the ‘lucrative poppy crop.’ It might have been on the other side of the world. But for a grower it was never that lucrative,” Loane said.
These days, he said, it’s not even that profitable compared to other options for farmers here. A variety of factors — rising global production, the slumping U.S. opioids market — have pushed profits down.
“Potatoes are the most profitable crop that we grow, followed by cauliflower, and then carrots,” he said “The bottom line is, it doesn’t matter what crop you’re growing. They’re not going to pay you any more than what they have to.”
Overcoming the ‘80/20 rule’
With its novel poppy and newly motivated farmers, Tasmanian Alkaloids had one more barrier to overcome.
For decades, international and U.S. drug officials sought to stifle the global trade in illicit narcotics by restricting where poppies may be grown.
Toward this end, a U.S. regulation issued in 1981 dictated that at least 80 percent of “narcotic raw materials” should come from the traditional producers, India and Turkey. While the regulation did not limit the total amount of narcotics imported — that was separately regulated — it capped the share of narcotic materials that Australia and other countries could supply to the United States at 20 percent. It became known as the “80/20 rule.”
Even before the creation of the high-thebaine poppy, Australian government officials, farmers and Johnson & Johnson company representatives were arguing against the rule.
Tasmania was a better place to grow poppies than India and Turkey, they said: The Tasmanian industry was better regulated, more efficient and, because it was on an island, posed special barriers to smugglers, they said.
In 1990, Raymond J. Stratmeyer, vice president of Johnson & Johnson International, told a House subcommittee that the DEA should consider abolishing the import rule and opening up the market.
In 1996, Tasmanian Alkaloids invited Robert Gelbard, a high-ranking Clinton diplomat, to a farm where he was informed about the company’s recent development of the thebaine poppy. He rode a tractor.
Still, nothing happened.
The Australians continued to complain about the limit, and the issue grew more critical as the industry in the late ’90s began to exploit the advantages of the “super poppy” and its payload of thebaine.
Some argued that thebaine should not be counted under the 80/20 rule on imports because while it is a narcotic raw material, it was less prone to abuse and trafficking than other opiates. The text of the 80/20 rule did not list specific opiates, such as thebaine, that should be counted under the rule.
“The real question for us was: Does the rule apply to thebaine?” recalled a retired Tasmanian Alkaloids official who spoke on the condition of anonymity because of the negative publicity surrounding opioids.
Then, in November 2000, came a breakthrough, according to local press accounts and interviews. After lobbying by Glaxo, Tasmanian Alkaloids and Australian government officials, U.S. officials said that they would not count thebaine under the import rule.
The Hobart Mercury, a leading newspaper on the island, recorded the excitement of local officials.
“Tasmania’s $200 million poppy industry has been given unlimited access to the huge United States market for thebaine, the strongest alkaloid extracted from the narcotic plant,” it reported. “The export coup follows a U.S. Department of Justice decision to relax its rules for thebaine following pressure from pharmaceutical companies and lobbying by the industry and Tasmanian and Australian governments.”
A federal form showed that two Johnson & Johnson employees lobbied that year regarding “narcotic raw materials.” Among the federal government entities the Johnson & Johnson lobbyists approached was the DEA, which is under the Department of Justice.
One of the Johnson & Johnson employees who lobbied, Shannon Salmon, then vice president of federal affairs, is retired and said she does not remember working on the issue. The other lobbyist, Craig Kramer, was a director of government affairs and is still with Johnson & Johnson. Johnson & Johnson officials declined to make Kramer available for an interview.
“There was lobbying to keep thebaine out of the 80/20 rule,” said Peter Patmore, the attorney general for the state of Tasmania at the time, who led government efforts and noted the role of Glaxo and Tasmanian Alkaloids. But “the main lobbying was done by the pharmaceutical companies — they could outgun us in money and clout any day.”
Strong said that excluding thebaine from the 80/20 rule made sense because it is more difficult to transform into illicit drugs.
“Thebaine is not subject to the rule, and for good reason,” she wrote. “Unlike morphine, codeine, and some other alkaloids, thebaine is not abusable in its raw form, because it is poisonous.”
Raising the quota
Another factor crucial to the growth of the opioid supply chain was the annual DEA production quotas.
Each year, manufacturers such as Noramco were required to submit a request to the DEA for permission to produce more of each opioid.
More often than not, the DEA refused to grant Noramco its full request, according to people familiar with the process who spoke on the condition of anonymity because they had not been authorized to speak.
Nevertheless, Noramco was allowed to produce greater amounts of opioids at its main plant in Wilmington.
Between 2006 and 2015, the quantity of opioids produced there more than doubled, from about 132,000 pounds to 308,000 pounds, according to a bar chart included in the company presentation filed in the Oklahoma trial.
Johnson & Johnson officials declined to provide Noramco’s annual production requests, or the communications between Noramco and the DEA.
But according to evidence introduced at the trial, company officials spoke of influencing key agencies, including the DEA and International Narcotics Control Board, an organization that monitors compliance with international drug control conventions.
Noramco has “played a significant role influencing INCB, DEA policies,” according to the 2003 internal Noramco presentation. The presentation noted that the DEA regulates production quotas, narcotic raw material imports and other issues.
“Noramco was required to give the DEA information about sales and inventories as part of Noramco’s requests for individual quotas to produce opioid ingredients,” Strong, Johnson & Johnson’s outside counsel, wrote. “But it does not follow that Noramco influenced the DEA’s evaluation of the nation’s overall medical needs, much less the agency’s ultimate national quota decisions.”
In part, according to DEA officials, they felt compelled to allow more opioid production in order to keep pace with the rising demand for opioids, which was spurred by massive marketing efforts by pharmaceutical firms, including Johnson & Johnson companies, to encourage doctors to prescribe opioids, and for patients to take them.
Among the marketing tactics by Johnson & Johnson companies cited in the Oklahoma lawsuit were a website called “Prescribe Responsibly” and a brochure called “Finding Relief.”
The Prescribe Responsibly website, run by another Johnson & Johnson company, Janssen, advised patients that “while [addiction] concerns are not without some merit, it would appear that they are often overestimated.”
Janssen also distributed a patient guide in 2009 that sought to counter the “myth” that opioids are “always addictive.” Instead, the brochure said, they are “rarely addictive” when used properly.
“The facts show Defendants engaged in false and misleading marketing of both their drugs and opioids generally,” the judge ruled.
Strong said that the company is appealing the judge’s decision. Further, she noted that the marketing in question was conducted by another Johnson & Johnson subsidiary, not by Tasmanian Alkaloids or Noramco.
The website and patient guide, Strong said in a statement, “provided extensive information about the treatment of pain – both with and without opioid medications – that was and still is supported by scientific literature.”
The DEA’s process for setting quotas could be complicated and subject to company pressure, current and former DEA officials said.
Under the federal regulations then in place, the DEA was supposed to set quotas by considering how much of each substance was being used, inventories and “other factors . . . as the Administrator finds relevant.”
Those “other factors” could include how much of a substance was being “diverted” for illicit use.
“There were former DEA personnel hired by manufacturers who would call a section in order to seek guidance or special favor that was not that section’s ability or place,” Stacy Harper-Avilla, chief of the agency’s quota section, said during an April deposition related to opioid litigation in Ohio.
Harper-Avilla also said that in setting quotas, the agency considered how much was being used and “known diversion, known abuse.” The information came from drug seizure data and from state and local law enforcement, she said.
Some DEA officials have argued that it was difficult to cut the production quotas because it was unknown whether such cuts might deprive patients rather than addicts. Moreover, they said, the amount of diversion was difficult to measure.
Critics, on the other hand, have argued that the abuse was so widespread that the companies and the DEA should have known the quotas were too high.
A rough estimate in a 2017 study by the National Academies of Sciences, Engineering and Medicine offered that as much as a quarter of all opioids may be diverted to nonmedical uses.
Peter W. Jackson, who founded an advocacy group of parents who had lost children to opioids, urged the DEA in 2011 to cut the quotas: “The time has come for the DEA to do the right thing — it must roll back the production quotas to save lives,” he wrote.
Jackson’s 18-year-old daughter, Emily, died of an oxycodone overdose in 2006. She was among the 17,000 Americans who died of drug overdoses that year.
“There was no reason for making more — the drugs were winding up in the wrong hands, and everyone knew it,” Jackson said in an interview. “But the companies wanted more and the government let them.”
At a House hearing in April 2011, then-Rep. Mary Bono Mack (R-Calif.) told then-DEA chief Michele Leonhart that the agency seemed too concerned with potential shortages of the drugs for patients.
“I just wish I would hear you focus more on the people who are dying from these narcotics and painkillers than worrying about getting more out there,” Bono said. “To me the problem is there’s 30,000 a year dying.”
“The joke was that they called it a ‘quota,’ ” Bono told The Post recently. “To be more accurate, the DEA should have simply called it ‘demand.’”
Larry P. Cote, an attorney at the agency from 2006 to 2012 and who has represented some drug companies, said there seemed to be a contradiction between DEA warnings about the dangers of opioids and the rising quotas it permitted.
“We at the DEA were out there banging the drum about the dangers of the epidemic,” he said. But by raising the quotas as the death toll climbed, “DEA actually became complicit in the problem.”
‘Looks like we sold at the right time’
By 2015, the U.S. government was taking more aggressive actions on prescription opioids and Johnson & Johnson officials put Noramco and Tasmanian Alkaloids up for sale.
They were sold the next year to SK Capital, a private-equity firm. The proceeds from the sale amounted to $650 million. Johnson & Johnson had also sold off the rights to another opioid drug, known as Nucynta, for $1 billion.
In March 2016, two officials at Johnson & Johnson companies who had been involved in the Nucynta sale traded emails about news of government restrictions on opioids.
“Looks like we sold at the right time,” one wrote in an email presented during the Oklahoma trial.
“:-) Yep,” was the response.
After the sale of Noramco and Tasmanian Alkaloids, the DEA quotas for oxycodone and hydrocodone underwent significant cuts.
In Tasmania, those quota cuts have led to shrinking poppy fields. At the height of the poppies boom here in 2013, the crop covered about 74,000 acres on the island. Today, that figure has been cut roughly in half.
“America sneezed and we caught pneumonia,” said Keith Rice, chief executive of the farmers group Poppy Growers Tasmania.
The shift away from poppies means more sheep and more vegetables. But it also leaves farmers wondering how the fields of beautiful flowers here could have contributed to thousands of deaths in America.
The drugs should have been a benefit for mankind, French and other farmers noted, in addition to helping farmers when prices were higher.
“In the good years, which were approximately from 1996 to 2010, the financial returns enabled smaller farmers like myself to stay viable,” French said, striking an elegiac tone. “But those were the halcyon days.”