The McDowell County Courthouse in downtown Welch, W.Va., where documents from Purdue Pharma were kept under seal.

WELCH, W.Va. — The warning signs of what would become a deadly opioid epidemic emerged in early 2001. That’s when officials of the state employee health plan in West Virginia noticed a surge in deaths attributed to oxycodone, the active ingredient in the painkiller OxyContin.

They quickly decided to do something about it: OxyContin prescriptions would require prior authorization. It was a way to ensure that only people who genuinely needed the painkiller could get it and that people abusing opioids could not.

But an investigation by STAT has found that Purdue Pharma, the manufacturer of OxyContin, thwarted the state’s plan by paying a middleman, known as a pharmacy benefits manager, to prevent insurers from limiting prescriptions of the drug.

The financial quid pro quo between the painkiller maker and the pharmacy benefits manager, Merck Medco, came to light in West Virginia court records unsealed by a state judge at the request of STAT, and in interviews with people familiar with the arrangement.

“We were screaming at the wall,” said Tom Susman, who headed the state’s public employee insurance agency in the early 2000s and led the push to limit OxyContin prescribing in West Virginia.

“We saw it coming,” he said of the opioid epidemic, which today causes 28,000 overdose deaths a year in the United States. “Now to see the aftermath is the most frustrating thing I have ever seen.”

Overprescribing of OxyContin and other opioid painkillers is blamed for helping to plant the seeds for the current opioid crisis. West Virginia has been hit harder than any other state: It suffers the highest per capita drug overdose death rate in the country — more than double the national average. It also has one of the highest rates of painkiller prescribing.

The Southern Highlands Community Mental Health Center in Welch, W.Va., which offers addiction treatment services.

In McDowell County, where the court records from a state lawsuit against Purdue were unsealed, the local sheriff said prescription pill abuse is so rampant that the county plans to file a new lawsuit against painkiller makers.

The strategy to pay Merck Medco extended to other big pharmacy benefit managers and to many other states, according to a former Purdue official responsible for ensuring favorable treatment for OxyContin. The payments were in the form of “rebates” paid by Purdue to the companies. In return, the pharmacy benefit managers agreed to make the drug available without prior authorization and with low copayments.

“That was a national contract,” Bernadette Katsur, the former Purdue official, who negotiated contracts with pharmacy benefit managers, said in an interview. “We would negotiate a certain rebate percentage for keeping it on a certain tier related to copay or whether it has prior authorization. We like to keep prior authorization off of any drug.”

Katsur said prior authorization programs do little to eliminate inappropriate prescribing by “bad doctors” and usually just create needless paperwork for doctors working in the best interest of patients. She said some doctors simply won’t deal with the hassle of a prior authorization program, resulting in some legitimate patients not getting the medication they need.

“You don’t want to make it harder for a doctor to prescribe when they are doing the right thing,” she said.

It is common for drug companies to pay rebates to gain preferential treatment from companies hired by insurance plans to manage prescription drug benefits, but in this case the arrangement removed a key safeguard in the system that may have slowed the growth of OxyContin as it became a national bestseller that eventually peaked at annual sales of $3 billion.

The former Merck Medco was purchased by Express Scripts in 2012. A spokesman for Express Scripts said no one currently at the company had knowledge of the West Virginia contract. A spokesman for Purdue Pharma said the company had no comment.

Prior authorization programs typically require doctors to get approval from an insurer before they can prescribe the drug to a patient. As part of such programs, insurers will often limit the conditions for which a drug can be used and the length of time the drug can be prescribed.

A study published this month by the Centers for Disease Control and Prevention detailed how a private insurer’s prior authorization plan in Massachusetts reduced the prescribing of opioids by 15 percent.

“We were screaming at the wall.” Tom Susman, former head of West Virginia's public employee insurance agency

The West Virginia court records reveal an agonizing situation in which several West Virginia health and insurance officials were early to spot the growing threat of OxyContin addiction and moved to blunt its impact. The well-intentioned bureaucrats, however, were no match for Purdue Pharma or its paid allies.

In early 2001, the pharmacy director for the state employee health plan said her office noticed coroners listing oxycodone as the cause of death for some plan members. This occurred as the number of OxyContin prescriptions written for plan members skyrocketed; spending on the drug went from $11,000 in 1996, the first full year it was on the market, to $2 million in 2002. Purdue, aided at the time by its marketing partner Abbott Laboratories, aggressively marketed OxyContin to doctors with the claim, later shown to be false, that the risk of addiction was low. STAT reported last month that the unsealed West Virginia court records showed that an Abbott sales rep won over an orthopedic surgeon with a box of doughnuts and snack cakes arranged to spell OxyContin.

“We felt a need to put some type of management on the prescription because we saw death claim certificates come in with the cause of death of oxycodone,” said plan Pharmacy Director Felice Joseph in a 2004 deposition that was among the unsealed court records. The employee health plan contracted with Merck Medco to manage its pharmacy benefits, and when state officials asked Merck to put in place a plan to limit OxyContin prescribing, “basically they were refused,” she testified.

The box containing sealed documents in the state of West Virginia’s case against Purdue Pharma that were made public by a judge at STAT’s request. (Photo: David Armstrong/STAT)

The medical director for the state plan, Dr. Sandra Joseph, told a similar story in her deposition.

“They felt strongly, and they were very, very reluctant or resistant, for whatever reason,” she said of Merck. “They did not want to put any limits or prior authorization criteria on that.”

Merck downplayed concern about OxyContin abuse, Joseph testified, saying the company “referred to other areas where there were not that many prescriptions for OxyContin, it was not that much of a problem.”

The pharmacy director testified that the state initially wanted to limit OxyContin to terminally ill cancer patients only.

“It was because we felt there was a high abuse potential for its inappropriate use for short-term use,” she testified.

She said a Merck official calculated that the company would lose $128,000 in rebate payments if OxyContin prescribing was limited in West Virginia. It was not specified if that was an annual or one-time loss.

The extent of Purdue’s rebate arrangements with Merck and other benefit managers in other states is not detailed in the West Virginia court records.

Katsur, who left Purdue in 2005, said the payment of rebates was part of a strategy to keep insurers from limiting OxyContin prescriptions. She said such arrangements were common in the industry and not unique to Purdue.

In addition to keeping OxyContin from being subject to prior authorization, the rebates paid to pharmacy benefit managers were used to guarantee favorable status for OxyContin on their listings of approved drugs, she said. PBMs commonly place drugs in different tiers on these lists, called formularies. Some tiers are more restrictive and require higher copayments. Purdue wanted OxyContin placed in the least restrictive tier — and succeeded.

The relationship with Merck Medco was so important that Purdue moved Katsur to New Jersey so she could be close to Merck’s national headquarters, she said.

The court documents make clear that blocking any limits on OxyContin prescribing was a top priority for Purdue. In a memo listing the 2001 goals of Purdue’s West Virginia sales team, the first listed item under Medicaid is “Stop any preauthorization efforts for OxyContin.” In a separate memo, Purdue officials reported meeting with a state official to “interrupt” any efforts to require prior authorization of OxyContin.

And in a presentation prepared for a 2001 West Virginia district sales meeting, a Purdue official wrote in regard to the state employee insurance plan that the company was “working with Medco (PBM) to try to make parameters less stringent.”

The internal memos and the actions of Merck contradicted claims by Purdue at the time that it was working with the state to curb abuse of OxyContin, lawyers for the state argued in a motion that was unsealed by the West Virginia court.

“Contrary to the picture of helpfulness and cooperation Purdue attempts to paint, Purdue’s employees were actively and secretly trying to prevent West Virginia from imposing any control on the sale of OxyContin,” the state claimed. The case with Purdue was settled in 2004 when the company paid $10 million to West Virginia. Portions of the case file, including documents about marketing of the drug and Purdue’s attempts to ward off limits on prescribing, remained sealed until STAT filed a motion in May to open the records.

Nearly two years after the state insurance plan asked Merck to put a prior authorization plan in place for OxyContin, it finally got what it wanted. But the agency succeeded only after it brought in a new company to manage its prescription plan.

Wyoming Street as seen from the steps of the McDowell County Courthouse in Welch, W.Va.

By then, OxyContin and other painkillers had gained a firm grip on West Virginia, especially in McDowell County, where the state brought its lawsuit against Purdue.

In 2001, the county was a proverbial canary in a coal mine when it came to the emerging national opioid crisis. The rate of accidental prescription drug overdose deaths in West Virginia was relatively low at the time — about 6 deaths per 100,000 residents. In McDowell, however, the rate was 38 deaths per 100,000. Since 2001, the death rate in the state has more than tripled to 21 deaths per 100,000 in 2012.

McDowell Sheriff Martin West said lawyers contracted by the county are preparing a new lawsuit against pain-pill makers. He said the county is considered a “third-world country” by state officials doling out funds to fight opioid abuse.

“Listen to the scanner here every night,” he said. “It’s first responders out every night going up and down hollers for an overdose. It’s pitiful what is going on.”