Purdue’s Sackler Family Gets Court Win on Opioid Settlement

Bookmark

Some members of the billionaire Sackler family that own Purdue Pharma LP can make a $225 million payment as part of a U.S. government settlement over civil claims tied to illegal opioid marketing without trampling the rights of the drugmaker’s other creditors, a judge concluded.

U.S. Bankruptcy Judge Robert Drain, overseeing Purdue’s Chapter 11 case, ruled Tuesday the payment won’t “frustrate enforcement” of any future judgments and may help reach a deal to wipe out Purdue’s opioid liability.

“Making this payment would not materially impede the mediation” between states, local governments and Purdue aimed at resolving more than 2,000 lawsuits seeking to hold the company accountable for helping fuel the U.S. opioid crisis.

Purdue officials have proposed turning over the company, which makes the controversial opioid painkiller OxyContin, to states and local governments along with as much as $3 billion in cash from members of the Sackler family.

The family would no longer own the drugmaker under the deal, which has been valued at about $10 billion. A group of state attorneys general and opioid victims have objected to having governments forced to get into the drug business to generate funds to beef up opioid-treatment programs.

The $225 million settlement resolved allegations board members -- including Richard Sackler, David Sackler, and Mortimer Sackler --pressured Purdue executives to pump up OxyContin sales in 2012 when the legitimate market for the drug had dwindled, prosecutors said in connection with the deal. The Sacklers have denied wrongdoing.

‘Medically Unnecessary’

Under a plan the family members approved, Purdue’s sales representatives stepped up their OxyContin marketing to high-volume prescribers, which resulted in the addictive pills being used in ways that were “unsafe, ineffective and medically unnecessary,” the government said in court filings.

The handover is mandated by Purdue’s guilty plea to three felonies as part of a $8.3 billion resolution of U.S. Justice Department probes of its OxyContin marketing practices over a decade starting in 2007.

“The DOJ settlement mandates the preservation of the OxyContin business under the government’s protection,” according to court filings by a group of families victimized by the opioid epidemic. “This requirement in the settlement is improper, corrosive to public faith in government, and offensive to the tens of thousands of families who have been harmed,” the group added.

At an earlier hearing, Drain questioned how federal officials planned to use the $225 million from the Sacklers and whether it would be spent on opioid-treatment programs.

In a letter filed in the court docket, Assistant U.S. Attorney Lawrence Fogelman noted the funds will go into the coffers of federal health care programs, such as Medicare and Medicaid, which provide opioid treatment. “Damaged agencies in False Claims Act settlements are generally entitled to recover their damages caused by the false claims,” he noted.

Wealth Questioned

At today’s hearing, Drain rejected objectors’ calls for members of the Sackler family involved in running Purdue be forced to turn over evidence in the bankruptcy case of the extent of their wealth. In court filings by the Raymond Sackler and Mortimer Sackler wings of the family, the billionaires said states and local governments “already know” their financial details.

“Sacklers’ wealth has been sufficiently vetted and it’s clear they have materially more than the $225 million,” Drain said during the hearing in White Plains, New York.

A representative of the Mortimer Sackler wing of the family declined to comment. A spokesman for the Raymond Sackler wing didn’t immediately return an email for comment.

Drain also approved a reduced bonus of more than $700,000 for Purdue Chief Executive Officer Craig Landau at the hearing. Landau had originally sought a $1.3 million bonus.

The case is Purdue Pharma LP, 19-23649, U.S. Bankruptcy Court for the Southern District of New York (White Plains).

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.