Big pharma files for bankruptcy to settle $10bn opioid crisis claims

Elias Hubbard
September 16, 2019

But legal battles still lie ahead for Stamford, Connecticut-based Purdue, which is spending millions on legal costs as it defends itself in lawsuits from 2,600 government and other entities.

Purdue Pharma, the maker of OxyContin, filed for Chapter 11 bankruptcy protection Sunday night, just days after striking a settlement with more than 2,000 local governments over its alleged role in creating and sustaining the deadly opioid crisis. Under the proposal's terms, the restructured Purdue would be permanently bound by so-called injunctive relief, which includes restrictions on the promotion and sale of opioids. The company used aggressive, allegedly misleading, sales tactics to push physicians to prescribe millions of doses of its dangerously addictive pills.

Purdue's proposed settlement envisions it becoming a trust that would contribute to USA communities, at little or no cost, tens of millions of doses of drugs the company developed to combat opioid overdoses and addiction, the company said.

The family agreed to pay at least $3 billion in the settlement plus contribute the company itself, which is to be reformed with its future profits going to the company's creditors.

The proposed settlement requires the company to file for bankruptcy, which it ultimately did on Sunday.

"The controversial piece is going to be about how much the Sacklers need to kick in for the deal to work, " said Adam J. Levitin, a professor specializing in bankruptcy at Georgetown Law. But the settlement valuation is in dispute, and a number of states have balked at those terms.

The outcome of Purdue's attempted bankruptcy reorganisation and settlement negotiations will help determine how much money U.S. communities receive to address harm from opioids.

"Like families across America, we have deep compassion for the victims of the opioid crisis", Sackler family members said in the statement, which called the settlement plan a "historic step towards providing critical resources that address a tragic public health situation".

Purdue Chairman Miller says the company has not admitted to any wrongdoing as part of settlement negotiations.

Thousands of cities and counties, along with almost every state, have sued Purdue and, in some cases, its owners the Sackler family. Forbes has estimated the Sackler family's total worth at $13 billion.

The family is expected to argue that billions of dollars moved out of Purdue Pharma were legitimate dividends. The Sackler family members said they're still trying to get more states to sign on.

"I don't think there's enough money in that company to pay for the damages that are claimed", said Jonathan Novak.

In a statement reported by Reuters, members of the Sackler family said: "It is our hope the bankruptcy reorganisation process that is now under way will end our ownership of Purdue and ensure its assets are dedicated for the public benefit".

Purdue and the Sacklers have denied the allegations in the lawsuits.

In recent years, there have been more deaths involving illicit opioids, including heroin and fentanyl, than the prescription forms of the drugs.

Well over 400,000 people died of opioid overdoses in that period, while the pharmaceutical companies involved raked in billions of dollars in profits. Another 200,000 have died from overdoses attributed to heroin and illegally obtained fentanyl. The company paid more than $600 million in fines and other payments.

Yet, Purdue Pharma, under the family's tight control, continued to aggressively market OxyContin and kept fueling the growing epidemic of narcotic addiction, according to a raft of litigation filed against the company. Lawsuits also are pending against generic oxycodone manufacturers, distributors and retail pharmacy chains.

One lawyer who is suing Purdue on behalf of clients including the city of Albuquerque, New Mexico, and the state of Utah, which has signed on to the tentative settlement, said it's always been a consideration that Purdue could not afford to pay the massive amounts being sought in the lawsuits.

Mr Miller said Purdue plans to argue to opposing states that fighting the proposed settlement will likely result in protracted litigation, increasing legal fees and depleting value that could be steered to USA communities reeling from opioid abuse.

Such transfers were cited last week by some of the 26 states that rejected the tentative settlement agreement. Those states also said the $10 billion to $12 billion price tag put on the settlement appears inflated.

Other reports by Click Lancashire

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