Compliance and Ethics

Compliance Program Description • Declaration Clause for California
Code of Business Ethics

Compliance Program Description

I.   Introduction

Purdue Pharma L.P. and certain of its Independent U.S. Associated Companies (Purdue) are committed to establishing and maintaining an effective compliance program in accordance with the “Compliance Program Guidance for Pharmaceutical Manufacturers,” published by the Office of Inspector General, U.S. Department of Health and Human Services (the “HHS-OIG Guidance”). Our Ethics and Compliance Program is one of the key components of our commitment to the highest standards of corporate conduct.

The purpose of our Ethics and Compliance Program is two-fold: to prevent and detect violations of law, regulations or Company policies, and to promote an ethical culture within the organization. It is Purdue’s expectation that employees will comply with our Code of Business Ethics, and the policies established in support of such Code, as well as our Healthcare Law Compliance Policies. As the HHS-OIG Guidance recognizes, however, the implementation of such a program cannot guarantee that improper employee conduct will be entirely eliminated. In the event that Purdue becomes aware of violations of law or company policy, we will investigate the matter and, where appropriate, take disciplinary action and implement corrective measures to prevent future violations.

Purdue has described below the fundamental elements of its Corporate Compliance Program. As HHS-OIG calls for in its Guidance, we have tailored our Compliance Program to fit the unique environment of our company. Moreover, our Compliance Program is dynamic; we regularly review and enhance our Compliance Program to meet our evolving compliance needs.

II.   Overview of Compliance Program

1. Leadership and Structure.
   
   

   Vice President, Corporate Compliance.We have selected Bert Weinstein as our Vice President, Corporate Compliance, to serve as the primary contact for compliance activities. We are committed to ensuring that Mr. Weinstein has the ability to effectuate change within the organization as necessary and to exercise independent judgment. Mr. Weinstein is charged with the responsibility for developing, operating, and monitoring the Compliance Program. He reports to the President and Chief Executive officer of Purdue, is a member of Purdue’s Executive Committee, and has direct access to the Board of Directors.

   Compliance Committees. Purdue has established Compliance Committees in Sales & Marketing, Research & Development, Manufacturing & Quality, and Administration Departments to advise the Vice President, Corporate Compliance and assist in the implementation of the Compliance Program. These Compliance Committees meet regularly to identify and manage areas of risk and areas of critical focus for our Company.

2. Written standards.
   
   
   • Purdue’s Code of Business Ethics is our statement of ethical and compliance principles that guide our daily operations. The Code establishes our expectation that management, employees, and agents of the company act in accordance with all law, regulations and company policies. The Code articulates our fundamental principles, values, and framework for action within our organization.
     
     
   • The HHS-OIG Guidance has identified several potential risk areas for pharmaceutical manufacturers, and called on companies to develop compliance policies in these risk areas. These risk areas are (1) data integrity pertaining to government reimbursement polices; (2) kickbacks and other illegal remuneration; and (3) compliance with laws regulating drug samples. Purdue has published and trained our employees on our Healthcare Law Compliance Policies to help address these risks and we expect Purdue employees to act in accordance with these Policies.
     
     
   • We also have established annual spending limits for certain promotional activities directed toward healthcare professionals who prescribe or may influence prescribing in California. At the present time, our annual spending limit is $750.00. Examples of items that fall within this spending limit are: infrequent, modest in-service breakfasts and/or lunches for healthcare providers and their staff; infrequent modest dinners in connection with product specific and non-product educational programs; small giveaways such as pens and sticky pads; items of use to a healthcare professional in their practice or to their patients and reprints of journal articles and related information. This amount does not include cash or cash equivalents, non-medical items such as sports tickets or equipment; or entertainment items such as theatre tickets or bottles of wine. Purdue Pharma L.P. does not and will not provide any item of value to any healthcare provider with the intent of influencing that healthcare provider’s prescribing habits.
     
     

3. Education and Training. A critical element of our Compliance Program is the education and training of our employees on their legal and ethical obligations under applicable federal health care program requirements among other things. Purdue is committed to taking all necessary steps to effectively communicate our standards and procedures to all affected personnel. Moreover, Purdue will continue to regularly review and update its training programs, as well as identify additional areas of training on an “as needed” basis.

4. Internal Lines of Communication. Purdue is committed to fostering dialogue between management and employees. Our goal is that all employees, when seeking answers to questions or reporting potential instances of fraud and abuse or other violations, should know whom to turn to for a meaningful response, and should be able to do so without fear of retribution. To that end, we have adopted open-door policies, as well as confidentiality and non-retaliation policies. We have a confidential, toll-free Purdue Ethics and Compliance Hotline (1-877-PURDUE1) through which employees and any person outside of our company may report any concerns or suspected violation of law, regulation or Company policy.

5. Auditing and Monitoring. Purdue’s Ethics and Compliance Program includes efforts to monitor, audit, and evaluate compliance with the Company’s compliance policies and procedures. We note that in accordance with the HHS-OIG Guidance, the nature of our reviews as well as the extent and frequency of our compliance monitoring and auditing varies according to a number of factors, including new regulatory requirements, changes in business practices, and other considerations.

6. Responding to Potential Violations. Purdue’s Ethics and Compliance Program includes clear disciplinary policies that set out the consequences of violating the law or company policy. Although each situation is considered on a case-by-case basis, we will consistently undertake appropriate disciplinary action to address inappropriate conduct and deter future violations.

7. Corrective Action Procedures. A compliance program increases the likelihood of preventing, or at least identifying unlawful and unethical behavior. However, HHS-OIG recognizes that even an effective compliance program may not prevent all violations. As such, our Ethics and Compliance Program requires the Company to respond promptly to potential violations of law, regulation or Company policy, take appropriate disciplinary action, assess whether the violation is in part due to gaps in our policies, practices, or internal controls, and take action to prevent future violations.

Declaration Clause for California, as on July 1, 2007

Purdue Pharma L.P. hereby declares that to the best of our knowledge, and based on our good faith understanding of the statutory requirements, we have established a Comprehensive Compliance Program (CCP) compliant with the requirements of California Health and Safety Code §§ 119400-119402. The owners, management and employees of Purdue Pharma L.P. are committed to conducting our business according to the highest ethical standards. While we cannot completely eliminate the possibility that an individual employee will violate these standards, our program is reasonably designed to prevent and detect violations of state and federal laws as well as our own internal policies and procedures. As of July 1, 2005, the above-referenced compliance program was in place, and we are continually reassessing our compliance program to improve it, and it is possible (and likely) that we will do so in the coming year.