Purdue Pharma's Bankruptcy Is Far From Opioid Closure
(Bloomberg Opinion) -- A bankruptcy declaration and large settlement are supposed to bring some degree of closure. Purdue Pharma LP’s bankruptcy filing and $10 billion plan to settle litigation over its alleged role in fueling the opioid crisis, announced Sunday night, may not provide much.
The proposal from Purdue, which made billions selling the highly popular opioid OxyContin, would see control of the company handed over to a trust controlled by suing states and counties. Its owners, the billionaire Sackler family, will pay at least $3 billion in cash as part of the settlement. For a supposedly global resolution, the deal isn’t all that popular: More than 20 states oppose the offer, which was initially anticipated to be worth as much as $12 billion, and will fight for more money in front of bankruptcy Judge Robert Drain. Some states have vowed to continue pursuing the company and the allegedly hidden personal assets of the Sacklers regardless.
Purdue’s situation is unique in many ways relative to other exposed drugmakers and suppliers. The company and its owners the Sackler family became the unsympathetic faces of the epidemic, drawing extra scrutiny and legal ire. Still, to the extent there are broader implications, there’s little that’s reassuring about this settlement for companies in the early stages of their legal battle.
The fact that Purdue is closely held likely gave the company’s lawyers more flexibility in negotiating a settlement. It’s unlikely that public companies will be able to make deals that are this asset-heavy, cash-poor, and unique. Purdue also reportedly used the threat of an unnegotiated “free-fall” bankruptcy as leverage in negotiations, which would have made any financial recovery significantly more complicated. That’s likely not going to be an option for larger public companies.
Purdue’s aggressive OxyContin sales tactics are seen as a big instigator of the opioid crisis. It’s worth noting, however, that the company had a relatively small market share by some measures. A settlement with a $10 billion floor sets an expensive precedent for higher volume drugmakers and distributors. Bloomberg Intelligence analyst Holly Froum points out in a recent note that the Purdue settlement may leave other firms to shoulder a larger burden.
The fact that so many states are unsatisfied highlights how difficult it will be, particularly for more complex businesses, to negotiate deals with hundreds of parties that truly end their risks. One of the scariest things about opioid litigation is the lack of certainty about the size and distribution of corporate liabilities. Companies and investors know a bit more than they did last week, but it should be scant comfort.
To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.
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