Set Emotion Aside in the Purdue OxyContin Settlement
(Bloomberg Opinion) -- The quick, knee-jerk response to the proposed bankruptcy settlement filed by Purdue Pharma LP late Monday is that the Sackler family got off too easy.
The Sacklers, of course, founded Purdue, and three generations have served on the board. (The last of the Sackler board members stepped down in early 2019.) And Purdue, of course, is the company that for more than two decades aggressively marketed OxyContin, resulting in tens of thousands of opioid addicts and sparking a national crisis. Inundated with lawsuits from cities, counties, states and other aggrieved parties, the company filed for bankruptcy in September 2019.
“The Sacklers became billionaires by causing a national tragedy and now they’re trying to get away with it,” Massachusetts Attorney General Maura Healey said. “It’s not a settlement, it’s an insult.”
New York Attorney General Letitia James said in a statement, “While our country continues to recover from the pain and destruction left by the Sacklers’ greed, this family has attempted to evade responsibility and lowball the millions of victims of the opioid crisis.”
“That’s the most disturbing, the idea that they’ll walk away with impunity,” said Nan Goldin, the art photographer who has been pushing museums to disassociate themselves from the Sacklers. “To me, this is the one percent twisting justice.”
Get past the emotion, however, and it’s entirely plausible that the settlement’s opponents are harming their own cause.
The Sacklers are said to be worth $10.8 billion, and though they no longer sit on the Purdue board, they still own the company. In 2019, when Purdue first proposed a plan that would allow it to emerge from bankruptcy, the Sacklers offered to put up $3 billion of their own wealth in addition to handing the company, which was worth about $10 billion, over to the claimants. Some 24 attorneys general signed on to the plan — but two dozen others, including Healey and James, did not, arguing that the Sacklers’ contribution was too small.
Under the latest proposal, the company’s assets would be handed over to trusts that would parcel the money out to states, cities, counties and tribes to help people — and entities — harmed by the opioid crisis. A new company, whose top officials would be selected by the claimants, would continue to sell OxyContin — it can be a useful pain drug if it’s not abused — while also working to bring new overdose reversal medications to market. Revenue from the new company would be turned over to the trusts during the next decade.
And the Sacklers? They agreed to increase their contribution, bringing their total to more than $4.2 billion — and giving the overall deal a value that exceeds the 2019 proposal. The Sacklers’ money, too, would be paid out over a decade. The family would not have to admit any wrongdoing.
Does giving up 40% of their net worth amount to getting off easy? Clearly, Healey, James — and 22 other attorneys general who have also objected to Purdue’s proposed settlement — think so. Yes, the AGs have complaints about the way the settlement is structured — they want more money allocated at the front end, for instance, and some of them, such as Healey, want to wind the company down instead of allowing it continue selling opioids.
But their main objection is that the Sacklers will still be rich if the settlement is approved. They want to see the family stripped of most, if not all, of its net worth. Anything short of that, they believe, isn’t punishment enough.
As satisfying as that outcome might be, it raises a few problems. The first is that the bankruptcy court is not the right forum for meting out punishments. Bankruptcy is supposed to lead to a negotiation that will allow a company to emerge with a new lease on life — or to liquidate.
The bankruptcy process is indifferent to whether the Sacklers wind up with $10 billion or $50,000. It is not set up to either punish or reward. If Healey and the other objecting AGs want to extract more money from the family, they should do it outside the bankruptcy process by suing them directly. In fact, many of them have.
I can’t help but think the reason the dissenting attorneys general are fighting so hard to get more money out of the Sacklers through bankruptcy is because they know it would be difficult to prove their culpability in court. I’m not saying that the Sacklers who served on the board have no culpability. I am saying that people at the top of institutions can often insulate themselves from the crimes committed by underlings. And I’m reliably told that the Sacklers feel confident that they can prove they didn’t do anything wrong if it comes to that.
Here’s the other issue. Thousands of people and hundreds of communities need the money Purdue and the Sacklers plan to hand over to them. They needed it in 2019 when Purdue first floated a settlement plan, and they need it even more now. Because of the Covid-19 pandemic, the opioid crisis doesn’t get the attention it once did. But it still plagues the country.
The dissenting AGs will object to this settlement in front of the bankruptcy court. If they win, Purdue and the Sacklers will have to start over again — and it could take a long time to negotiate another settlement. Even if the judge approves the current plan, the AGs could drag things out for months.
Attempting to bring down the Sacklers is no doubt a satisfying endeavor. And it’s good politics since the Sacklers have become public enemy No. 1 in the opioid crisis. But the harsh truth is that in their desire to nail the Sacklers, the dissenting attorneys general could end up harming the very people they say they are trying to help.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."
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