Reckitt Benckiser to pay $1.4bn fine over opioid treatment sales

The opioid crisis in the United States has wreaked havoc on millions of lives with many addicts succumbing to drugs

The opioid crisis in the United States has wreaked havoc on millions of lives with many addicts succumbing to drugs

On Thursday, the 11th of July 2019, Reckitt Benckiser Group Plc., a British multinational consumer goods business headquartered in Slough, United Kingdom, had agreed to pay about $1.4 billion in order to iron out all US Federal probs on its sales and marketing of an opioid addiction treatment launched earlier by its former prescription pharmaceutical business, Indivior.

Though UK-based RB maintains it did nothing wrong, the board opted to make peace with feds in the best interests of the company and shareholders.

In a statement, Reckitt said that while it denies all wrongdoing, it had decided the settlement - while hefty - avoids the costs, uncertainty and distraction associated with continued investigations, litigation and the potential for an indictment.

Laxman Narasimhan, who was chief commercial officer at PepsiCo, will succeed Rakesh Kapoor at the helm of the pharmaceuticals, personal care and "home hygiene" (Air Wick, Lysol, Calgon, Woolite, Vanish) company on September 1.

Shares in Reckitt, whose products range from Mucinex cold medicine and Lysol cleaners, closed up 2.5%.

Reckitt is in the process of separating its business into two divisions, one focusing on health, and the other on hygiene and household products.

The federal investigation centred on a former Reckitt pharmaceutical subsidiary - spun off in 2014 and renamed Indivior - and marketing practices it deployed for Suboxone between 2006 and 2015.

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RB said it had reached agreements with the US Department of Justice and the Federal Trade Commission to resolve the long-running investigation.

Investors had feared the US probes could hinder the transformation. Thursday's settlement was only with RB Group, and not Indivior.

The US Justice Department had accused Indivior of illegally boosting prescriptions for the opioid addiction treatment, called Suboxone Film. In a statement, it acknowledged Reckitt's settlement but said it had no new information on the case.

"The danger is that Narasimhan will be operating with one hand tied behind his back", Mould told the Reuters news agency.

Indivior also raised its full-year profit and revenue guidance after Suboxone lost market share at a slower pace than expected, sending its shares 35% higher.

Admittedly, the settlement will act as a drag on cash flow at a time when Reckitt Benckiser is looking to shift the debt taken on to fund its 2017, $18bn acquisition of Mead Johnson, but bulls will be hoping that its strongly cash-generative business model ensures it can still reduce leverage while raising the dividend in the years to come.

The company said it would increase its provision related to the investigations to $1.5 billion to cover both the cost of the settlement and "any remaining litigation exposures".

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