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Purdue Pharma Reaches Deal to Settle Oklahoma Opioid Case

Purdue Pharma Reaches Deal to Settle Oklahoma Opioid Case

(Bloomberg) -- Purdue Pharma LP and the Sackler family will pay $270 million to settle Oklahoma’s claims that illegal marketing of the Oxycontin painkiller devastated local communities, an accord that could influence the results of thousands of lawsuits faced by the company and others.

The settlement comes two months before the scheduled start of a trial against Purdue, Johnson & Johnson and Teva Pharmaceutical Industries Ltd. in Norman. Oklahoma is the first state in the nation to try claims against opioid makers, and the trial against the other two companies will proceed.

The settlement resolves a sliver of the massive legal liability that has led Purdue to threaten bankruptcy protection as a way of managing its legal costs. The drugmaker is owned by the billionaire Sackler family, and states and local governments have recently targeted the family’s wealth to recoup billions spent on the social costs of opioid addiction.

“This agreement is only the first step in our ultimate goal of ending this nightmarish epidemic,” Oklahoma Attorney General Mike Hunter said in a press release. The state is pressing ahead to “hold other defendants in this case accountable for their role in creating the worst public health crisis our state and nation has ever seen.”

Representatives of Teva and J&J didn’t immediately respond to requests for comment.

What Bloomberg Intelligence Says

“Purdue’s reported settlement could be a prelude to others. Opioid makers in multi-billion-dollar lawsuits over the abuse epidemic aren’t favored, but the threat of bankruptcy could give some companies settlement leverage because a bankruptcy protection means recoveries could be diminished. A global settlement for the largest companies could range from $5-50 billion.”

-- Holly Froum, litigation analyst
Click here to review the research

“I see this as a one-off tied to Purdue’s limited financial resources,” said Richard Ausness, a University of Kentucky professor who teaches about mass-tort law. “I think these other companies will wait to see the outcome of some of these test trials before they get serious about settling.”

At a news conference Tuesday, Hunter said the Purdue settlement is structured in a way to ensure the state still gets paid even if the drugmaker has to seek Chapter 11 protection from creditors. Purdue gave Oklahoma officials “a commitment that they’re not filing for bankruptcy in the near term,’’ he said.

Those companies and others are battling claims by three dozen states and 1,600 U.S. cities and counties, but those suits are pending in other courts and the first test trial isn’t until the fall. Purdue’s settlement could give other states a road map for resolving their cases if they want to avoid trial, said Carl Tobias, a University of Richmond professor who teaches about product-liability law.

Shares of J&J closed up 1.4 percent at $138.57. Bonds of drugmaker Endo International Plc, which is being sued elsewhere, rose as well. The company’s senior unsecured notes due 2025 rose more than 4 cents on the dollar to 73.75 in New York, according to Trace bond trading data.

In its suit, Oklahoma sought $25 billion in damages and penalties over Purdue’s and other opioid makers’ push to lure doctors into prescribing their drugs for unauthorized uses to generate billions of dollars in profits for the company. While doctors have wide discretion to prescribe medicines beyond what they’ve been approved to treat, drugmakers are limited to marketing their products for ailments approved by regulators.

The Sackler family is accused of taking home billions over the abuse of Oxycontin that the Stamford, Connecticut-based company’s marketing allegedly fueled. The family made more than $4 billion between 2008 and 2016, according to a recently unsealed opioid suit filed by the Massachusetts Attorney General.

Craig Landau, Purdue’s chief executive officer, has said bankruptcy was one way the company could deal with the litigation. A Chapter 11 filing would shield Purdue by imposing a stay on all U.S. suits and allow the privately held drugmaker to consolidate its legal costs and expenses. Experts say putting the cases before a single bankruptcy judge likely would allow Purdue to pay less in settlements.

The settlement will allow Purdue to avoid bankruptcy at least for now.

No Delay

Lawyers for Oklahoma and Purdue have been in talks for months, according to people familiar with the negotiations. The talks were overseen by a court-appointed mediator.

Oklahoma sued opioid manufacturers in 2017 over their marketing campaigns for painkillers. The companies have asked Judge Thad Balkman to break up the case and hold multiple trials rather than have all defendants face jurors at the same time.

In 2016, there were 444 opioid-related overdose deaths in Oklahoma, which ranked it 28th in the U.S. for such deaths, according to data analyzed by the Centers for Disease Control and Prevention. The year before, Oklahoma doctors wrote more than 4 million opioid prescriptions, exceeding the state’s population. State officials noted more residents have died from overdoses than car accidents since 2009.

The state’s suit sought damages to offset the costs of dealing with the epidemic and as well as funding for counseling, health care and social services for recovering addicts and children orphaned by overdoses.

Among the terms of the settlement, Purdue will pay $103 million to establish the National Center for Addiction Studies and Treatment at Oklahoma State University, donate $20 million worth of medicine to the center and contribute $72 million for counties and cities and the cost of the litigation. The Sacklers, whose total fortune has been estimated at $13 billion, have pledged $75 million to the center over five years though they weren’t named as defendants.

“The agreement reached today will provide assistance to individuals nationwide who desperately need these services -- rather than squandering resources on protracted litigation,” the family said in an emailed statement.

For about two years, Purdue has unsuccessfully sought to negotiate a separate settlement with other attorneys general who’ve sued the company over its Oxycontin marketing. Another opioid maker, Endo International Inc., has had no luck coming up with its own settlement for suits filed by U.S. cities and counties.

The case is State of Oklahoma v. Purdue Pharma LP, No. ZCJ-2017-816, Oklahoma District Court for Cleveland County (Norman).

--With assistance from Laurel Calkins, Margaret Cronin Fisk, Cynthia Koons and Katherine Doherty.

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story: Heather Smith at hsmith26@bloomberg.net, Peter Jeffrey

©2019 Bloomberg L.P.