Purdue Pharma Says Trial Timing Won't Sway Bankruptcy Call

(Bloomberg) -- Purdue Pharma LLP says its decision on whether to file for bankruptcy to avoid being swamped by opioid lawsuits doesn’t depend on the timing of the first trial over its role in the public-health crisis.

A judge in Oklahoma Friday refused Purdue’s, Johnson & Johnson’s and Teva Pharmaceutical Industries Ltd.’s requests to push back a May trial of Oklahoma officials’ suit seeking to recover as much as $25 billion in current and future costs of dealing with the opioid epidemic

The makers of opioid-based painkillers said pre-trial information exchanges have bogged down and there’s no way they can be ready to face a state court jury in Norman, Oklahoma by May 28. Judge Thad Balkman rebuffed companies’ request, saying the case needed to move forward. Balkman also denied the companies’ request to stay the trial while they asked the state’s appellate courts to review his ruling.

Purdue executives said Friday the Oklahoma Attorney General’s office has failed to turn over thousands of documents needed for trial and that “unfairly prejudiced Purdue’s ability to adequately prepare our defenses,” Robert Josephson, a company spokesman, said in an email.

Josephson also reiterated that Friday’s decision won’t have “a determinative effect on the company’s action on whether or not to file for bankruptcy. As previously stated, the company is looking at all of its options, but we have made no decisions, and have not set any timetables.”

Still, Oklahoma’s lawyers have said Purdue has repeatedly threatened to file bankruptcy to get out of having to face an Oklahoma jury over its handling of Oxycontin and wanted to roll the trial back to get more time to prepare its Chapter 11 case.

“Purdue is filing for Chapter 11 bankruptcy, so why do they need this discovery?” Lloyd “Trey” Duck III told Balkman Friday. “Why do they need it if they are just going to filed for bankruptcy?”

A Chapter 11 filing would halt litigation against Purdue and block new cases from moving forward. The company faces suits from 36 states over the marketing of its Oxycontin painkiller as well as more than 1,500 cases filed by U.S. cities and counties seeking to recoup funds spent on the opioid epidemic. The governmental entities are seeking potentially hundreds of billions in damages from makers and distributors of the pills.

The company is hard at work preparing a potential bankruptcy filing, according to people with knowledge of the plans. It’s working with attorneys at Davis Polk & Wardwell LLP, restructuring experts at AlixPartners LLP and investment bankers at PJT Partners Inc., the people said, asking not to be named discussing confidential information.

It began speaking with advisers last year and has used bankruptcy threats for leverage in settlement talks with other states and with lawyers representing cities and counties in the consolidated litigation in federal court in Cleveland, plaintiffs lawyers have said.

The judge in Oklahoma listened to the companies’ plea to push the trial back to September. Oklahoma Attorney General Mike Hunter, who was in court Friday, noted in a March 1 filing that no delay is necessary. Lawyers for Hunter wrote in the filing:

“So here are their choices: 1. File bankruptcy (Purdue) 2. Settle (all 3) 3. Try to move the trial date (all 3).”

Bankruptcy would shield Purdue from litigation by imposing a stay on all U.S. suits and allow the privately held drugmaker to consolidate its legal costs and expenses. Experts say taking the cases out of the regular court system and putting them before a single bankruptcy judge likely will allow Purdue to pay less in settlements.

Although suits against Purdue would be on hold during a bankruptcy, cases against J&J, Teva and other defendants named in the suits would continue. The drugmakers deny they improperly marketed the medicines and contend they are being blamed unfairly for causing the public-heath crisis over opioid addiction.

Suits filed by Oklahoma and other states and local governments contend opioid makers understated the risks of prescription painkillers and overstating their benefits, fueling a an epidemic that’s killing more than 100 Americans a day. Overdoses claimed the lives of more than 700,000 between 1999 and 2017, according to the Centers for Disease Control and Prevention. Two-thirds of that number was related directly to opioid use.

Hunter, Oklahoma’s top law-enforcement official, said his state wasn’t pushing to be the first to bring claims against opioid makers for headlines. He said people are dying everyday of opioid overdoses and “time is not on our side.”

Balkman added he didn’t care if the state was “the first, second or last” to have an opioid trial, but he had a responsibility to see that the state’s claims against the company were heard in a timely fashion.

The case is: State of Oklahoma v Purdue Pharma LP, No. ZCJ-2017-816, Oklahoma District Court for Cleveland County (Norman).

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