Purdue Pharma and Its Owners Want to Resolve Opioid Cases through Bankruptcy

Opioid Ordeal

Taking a different approach to being blamed for fueling the opioid crisis, OxyContin maker Purdue Pharma and its owners, the Sackler family, are exploring a resolution that would involve placing the company into bankruptcy and putting the proceeds toward municipalities filing the lawsuits. The deal involves more than 2,000 opioid cases and a settlement of between $10 billion and $12 billion.

As part of a mediation effort to stop the increasing litigation against Purdue, which is based in Stamford, Connecticut, the talks have been going on for more than a year. The most recent proposal, which emerged from settlement talks in Cleveland, would enable Purdue to emerge as a public benefit trust corporation. The Sackler family, owners of Purdue since its founding in the 1950s, would cede ownership. Members of the family have been asked to contribute $3 billion under the current proposal, which includes the sale of Mundipharma, a major international pharmaceutical operation owned by the Sacklers. If the sale goes well, the Sacklers might be asked to contribute more.

Purdue is facing litigation that accuses the company of helping to start America’s opioid-addiction crisis because of misleading and deceptive marketing of the painkiller OxyContin. Some of the lawsuits have individually named Sackler family members. One suit brought by the Massachusetts attorney general implied that some family members had helped to shape marketing strategies for promoting OxyContin, but the company and its owners have denied the allegations.

Purdue was facing a Friday deadline to provide an update on the discussions to U.S. District Judge Dan Polster in Cleveland. Polster, who is overseeing the bulk of the opioid lawsuits, has made it known that he wants the company to settle the cases. State attorneys general also are involved in the discussions.

In October there could be a trial in cases filed by two Ohio counties in Judge Polster’s courtroom if a settlement is not reached by then. In March Purdue settled a case in an Oklahoma state court for $270 million instead of taking the claims to trial.

The proposal states that the public benefit trust would remain in place for seven to 10 years and collect money from the continued sale of OxyContin and other drugs, insurance proceeds, cash on hand and intellectual property. Three trustees designated by the bankruptcy court would administer the trust.

According to Purdue, “The people and communities affected by the opioid crisis need help now. A constructive global resolution is the best path forward, and Purdue is actively working with the state attorneys general and other plaintiffs to achieve this outcome.”

Other drugmakers, wholesalers and retail pharmacy chains have been hit with lawsuits brought by states and local municipalities intending to hold them accountable for the opioid crisis. Recently, an Oklahoma judge ordered Johnson & Johnson to pay $572 million for contributing to the state’s opioid-addiction crisis there. The company said it plans to appeal.

Purdue, which has sold more than $35 billion of OxyContin, since its introduction in 1996, has been under enormous financial pressure to settle the cases and move forward. Purdue let go of its whole sales force last year. The company now has approximately 500 employees, down from 1,700 in 2015. According to The Wall Street Journal, Purdue’s revenue is expected to drop below $1 billion this year for the first time in more than 10 years.