Purdue Moves to Unload Opioid Claims Via $10 Billion Plan
(Bloomberg) -- Purdue Pharma LP has floated a settlement plan calling for members of the billionaire Sackler family to pay more than $4.2 billion to help resolve the thousands of lawsuits that drove the maker of OxyContin opioid painkillers into bankruptcy.
Court papers filed late Monday by Purdue call for the drugmaker to hand over the company’s assets to trusts for the benefit of states, cities and counties suing to recoup billions spent dealing with the U.S. opioid crisis. Combined with the cash payment by the Sacklers -- the company’s current owners -- the Chapter 11 reorganization plan may be worth more than $10 billion, according to court filings.
In exchange for the company and the cash, slated to be paid out over nine years, Purdue and the Sacklers would be legally insulated from existing and future opioid lawsuits. Some states, cities and counties that sued the drugmaker oppose the proposal, arguing it doesn’t do enough to hold Purdue’s owners accountable.
“Purdue has delivered a historic plan that can have a profoundly positive impact on public health by directing critically needed resources to communities and individuals nationwide who have been affected by the opioid crisis,” said Steve Miller, Purdue’s board chairman. “The company has worked closely with a broad and diverse group of stakeholders to guarantee billions of dollars will be used exclusively for abatement purposes and not diverted elsewhere.”
The plan calls for an initial $500 million payment to opioid claimants following its approval. The drugmaker is then expected to generate some $1 billion through the end of 2024, which would -- along with the payments from Purdue’s owners -- be funneled to trusts established for states and cities, hospitals, Native American tribes and personal injury plaintiffs, among others. The states and cities are expected to receive about $250 million of the initial $500 million payment, court papers show.
The creation of trusts in exchange for immunity from lawsuits has a history in the public health arena -- the tobacco settlements of the 1990s are a notable example, and a number of asbestos companies have opted for that strategy in bankruptcy. Purdue’s plan is unusual in that nearly all of the payouts are earmarked for abatement of the U.S. opioid crisis.
The filing is a critical step toward Purdue’s emergence from bankruptcy, a process marked by legal fights among the company, its owners and more than two dozen states that snubbed the Sackler family members’ original $3 billion cash offer. Bloomberg News reported in January that state attorneys general were seeking as much as $7 billion from family members involved with the company.
“Today marks an important step toward providing help to those who suffer from addiction, and we hope this proposed resolution will signal the beginning of a far-reaching effort to deliver assistance where it is needed,” members of the Mortimer Sackler and Raymond Sackler families said in an emailed statement.
Since filing for bankruptcy in 2019, Purdue has pleaded guilty to three felonies and agreed to pay $8.3 billion to settle federal probes of how it marketed OxyContin, a highly addictive painkiller. Members of the Sackler family last year agreed to pay $225 million to resolve government probes regarding their conduct in relation to Purdue’s marketing efforts. The family members deny any wrongdoing.
Purdue officials say the Sacklers’ total contribution to the bankruptcy plan -- which doubles as a settlement for the company’s and family’s opioid liabilities -- is $4.5 billion after the $225 million payment to the federal government is added to the more than $4.2 billion cash contribution.
The settlement requires bankruptcy court approval. Judge Robert Drain has signaled a desire to resolve the suits. “The parties have a tremendous opportunity to end these cases and get the money out and abate the opioid crisis,” Drain said in a September hearing. “They should do it.”
Twenty-four states and a number of cities and counties who’ve sued to recoup billions of tax dollars spent dealing with the opioid epidemic said the plan doesn’t do enough to hold the Sacklers accountable for their role in the public-health crisis.
While the plan “contains improvements over the proposal Purdue announced and we rejected in September 2019, it falls short of the accountability that families and survivors deserve,” the dissenting attorneys general said in a joint release. “Now, the Sacklers and Purdue need to own up to their decades of misconduct and their role in creating this crisis,” the state officials added. The dissenting states include California, New York, Pennsylvania and Delaware.
Purdue and its owners have been targeted by state and local governments over their aggressive marketing of the drugmaker’s opioid-based OxyContin painkiller. They’ve been accused of illegally pushing doctors to widen the use of the painkiller beyond government limits to generate billions in sales.
“The Sacklers became billionaires by causing a national tragedy. Now they’re trying to get away with it,” Massachusetts Attorney General Maura Healey said in a statement. She vowed to keep pushing the drugmaker to improve its settlement plan.
Joe Rice, a South Carolina-based lawyer representing cities and counties suing Purdue and other opioid makers, called the Chapter 11 plan “a step on the ladder of progress,” but warned there are still issues to be negotiated to win the municipalities’ support.
The plan calls for transferring almost all of Purdue’s assets to a newly formed company, which would generate money governments can use to bolster drug treatment and policing budgets. That entity will be indirectly owned by trusts for the benefit of governments and Native American tribes, court papers show.
Other trusts will be created to handle fund disbursements for hospitals, personal injury plaintiffs and families of opioid-addicted babies, according to court filings. The plan calls for, among other things, paying $4 billion to the trust established for the benefit of states and local governments, at least $700 million to personal injury plaintiffs and $250 million to hospitals that claim Purdue owes them money.
The deal, if approved, also means that parties won’t be able to sue Purdue or its owners for opioid-related damages, but would instead have to direct their claim to the appropriate trust.
Some states object to the idea that once Purdue is handed over, it will continue to operate to generate revenue governments can use to combat the opioid epidemic. They’d prefer the company be sold rather than stay on the market. Purdue officials counter continued operation maximizes the value for all creditors.
“A business that killed thousands of Americans should not be associated with government,” the attorneys general of California, New York, Idaho and other states said in a letter to then-U.S. Attorney General William Barr in October.
The bankruptcy case is Purdue Pharma LP, 19-23649, U.S. Bankruptcy Court for the Southern District of New York (White Plains).
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