Addicted Babies, Blue Cross Drive Billions in New Purdue Claims

(Bloomberg) -- Some of the biggest names in health care, including the Blue Cross & Blue Shield Association, will serve alongside mothers of addicted babies on a committee of creditors in the bankruptcy of Purdue Pharma LP.

The unusual alliance is well positioned to play an outsized role in the coming bankruptcy battles between the pharmaceutical company and its opponents. Judges often rely on such official creditor committees to test the reorganization plans of bankrupt companies.

The Purdue committee could play a kingmaker role in the case because a proposed settlement framework has the support of only about half of the states that are suing the company for allegedly helping spark the American opioid epidemic, said Robert J. Gayda, a bankruptcy attorney with the law firm of Seward & Kissel.

“The role of the committee in the Purdue Pharma bankruptcy will be particularly interesting and potentially critical considering case dynamics,” Gayda, who is not involved in the case, said in an email. “The creditors’ committee could be pivotal in bridging the gap between those positions or tilting the balance one way or the other.”

Committee Allegations

Panel members say Purdue owes them more than $75 billion, mostly for alleged wrongdoing they say resulted in everything from overpaid insurance bills to unpaid pharmacy rebates and nuisance claims filed by hospitals. Opioid victims want Purdue to set up life-long medical monitoring for addicted babies and pay damages to adults who blame their addiction on the company.

Although government agencies are involved in the vast majority of the 2,600 lawsuits that pushed Purdue into bankruptcy, no state or city was included on the panel, which was picked by the Office of the U.S. Trustee, an arm of the Justice Department that monitors corporate bankruptcies.

State and local governments aren’t allowed to serve on official creditor panels, according to the U.S. Trustee, a position backed by bankruptcy judges who have been asked to weigh in on the policy. The governments’ lawyers are mulling whether to ask U.S. Bankruptcy Judge Robert Drain to set up a separate committee so the municipalities’ view of any reorganization plan will be considered.

Purdue didn’t immediately respond to a request for comment.

The panel members include:

• Blue Cross and Blue Shield, which lists claims stemming from excessive payments for prescriptions and for covering the costs of illnesses, injuries and addiction resulting from Purdue’s drugs
• Ryan Hampton, a former White House staffer for President Bill Clinton, who later fell victim to opioid addiction and eventually became homeless and addicted to heroin
• A grandfather of two babies who were born addicted to opioids, and a mother whose son became addicted after a hernia operation and died at age 23 of an overdose, leaving her to care for his young daughter
• West Boca Medical Center, which was named as a “bellwether for hospital cases” in the massive opioid suit taking place in Ohio. The hospital is part of Tenet Healthcare
• The Pension Benefit Guaranty Corporation, which is often in bankruptcy cases where a company sponsors a retirement plan that may have unfunded liabilities
• LTS Lohmann Therapy Systems Corp., which supplies Purdue with transdermal patches used in treating pain

Blue Cross’s claims are tied to arguments that Purdue should be forced to reimburse the insurer for “payments of excessive amounts for prescription medications used by members” of the health plan tied to the company’s illegal promotion of its OxyContin painkiller, according to court filings. The drugmaker also should be on the hook for “addiction costs” spawned by the over-promotion of the medicine, the filing said.

Florida-based West Boca Medical Center has sued Purdue for racketeering, fraud and other alleged missteps tied to its OxyContin marketing. Lawyers for facility contend the drugmaker should be held liable for “unreimbursed costs” tied to emergency care provided to “individuals suffering from opioid overdoses and other opioid-related conditions,” according to the filings.

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

Story Link: Purdue Creditors Reveal Billions in Claims, Defend Committee

--With assistance from Jef Feeley.

To contact the reporters on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net;Jeremy Hill in New York at jhill273@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Dawn McCarty, Christopher DeReza

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