Christine Gagnon of Southington, Conn. protests with other family and friends who have lost loved ones to OxyContin and opioid overdoses at Purdue Pharma LLP headquarters in Stamford, Conn., on Aug. 17, 2018. IAP Photo/Jessica Hill)
Company That Makes Prescription Painkiller OxyContin Files for Bankruptcy Protection Amid Lawsuits
September 15, 2019 Updated: September 16, 2019
NEW YORK—OxyContin maker Purdue Pharma LP filed for bankruptcy protection in New York Sunday night, succumbing to pressure from more than 2,000 lawsuits alleging the company helped fuel the deadly U.S. opioid epidemic.
Purdue’s board met Sunday evening to approve the long-expected bankruptcy filing, which the company is pursuing to restructure under terms of a proposal to settle the widespread litigation.
Purdue reached a tentative deal to resolve lawsuits with 24 states and five U.S. territories, as well as lead lawyers for more than 2,000 cities, counties and other plaintiffs, the company said.
Two dozen states remain opposed or uncommitted to the proposed settlement, setting the stage for contentious legal battles over who bears responsibility for a public health crisis that has claimed the lives of nearly 400,000 people between 1999 and 2017, according to the latest U.S. data.
Thousands of cities and counties, along with nearly every state, have sued Purdue and, in some cases, its controlling Sackler family. The lawsuits, seeking billions of dollars in damages, claim the company and family aggressively marketed prescription painkillers while misleading doctors and patients about their addiction and overdose risks.
Purdue and the Sacklers have denied the allegations.
Opposing states, including Massachusetts, New York and Connecticut, want the Sacklers to guarantee more of their own money will go toward a settlement, and have questioned Purdue’s calculations valuing the overall deal at more than $10 billion.
The Sacklers, who would cede control of Purdue in the proposed settlement, have offered $3 billion in cash and an additional $1.5 billion or more through the eventual sale of another company they own, called Mundipharma, according to the company and people familiar with the terms. The Sacklers have declined to revise their offer.
“This is the fork in the road. There are only two ways to go from here,” said Purdue Chairman Steve Miller in an interview with Reuters.
Miller said Purdue plans to argue to opposing states that fighting the proposed settlement will likely result in protracted litigation, increasing legal fees and depleting value that could be steered to U.S. communities reeling from opioid abuse. He described bankruptcy proceedings as the “best hope for finalizing and implementing a global resolution to this litigation.”
In a statement, members of the Sackler family controlling Purdue said they hoped those opposing the current settlement offer would eventually change their minds. “It is our hope the bankruptcy reorganization process that is now underway will end our ownership of Purdue and ensure its assets are dedicated for the public benefit,” the family said.
The outcome of Purdue’s attempted bankruptcy reorganization and settlement negotiations will help determine how much money U.S. communities receive from the company and the Sacklers to address harm from opioids. A reorganization and settlement would ultimately need to be approved by a U.S. bankruptcy judge.
States suing the Sacklers, including several over the past week, allege the family improperly reaped billions of dollars from opioid sales despite knowledge of their harmful effects. The Sacklers, some of whom previously served on the Purdue’s board and are well-known wealthy philanthropists, have denied the allegations.
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Purdue’s proposed settlement envisions it becoming a trust that would contribute to U.S. communities, at little or no cost, tens of millions of doses of drugs the company developed to combat opioid overdoses and addiction, the company said.
Purdue values the drugs at $4.45 billion over a decade, the people familiar with the matter said. Under the proposal’s terms, the restructured Purdue would be permanently bound by so-called injunctive relief, which includes restrictions on the promotion and sale of opioids.
States opposing the settlement offer have vowed to fight attempts by Purdue and the Sacklers to use bankruptcy proceedings to contain the litigation.
On Friday, New York Attorney General Letitia James said she uncovered roughly $1 billion in wire transfers “between the Sacklers, entities they control and different financial institutions, including those that have funneled funds into Swiss bank accounts.”
The information, in records an unnamed financial institution produced in response to a subpoena from James’s office, detailed financial transfers involving former Purdue board member Mortimer D.A. Sackler, according to court documents her office filed.
He allegedly used shell companies “to shift Purdue money through accounts around the world and then conceal it in at least two separate multimillion-dollar real estate investments back here in New York, sanitized (until now) of any readily-detectable connections to the Sackler family,” a lawyer in James’ office said in one of the court filings.
“There is nothing newsworthy about these decade-old transfers, which were perfectly legal and appropriate in every respect,” a spokesman for Mortimer D.A. Sackler said in a statement.
“This is a cynical attempt by a hostile AG’s office to generate defamatory headlines to try to torpedo a mutually beneficial settlement that is supported by so many other states and would result in billions of dollars going to communities and individuals across the country that need help,” the statement added.
Purdue, meanwhile, plans to ask a bankruptcy judge to halt active litigation so it can negotiate a final settlement, the people said. But the company is preparing for states to argue their lawsuits cannot be halted by a Chapter 11 filing because their legal actions were brought to enforce public health and safety laws – exempting them from the usual bankruptcy rules that would stop their complaints.
Another thorny legal question involves the Sacklers and under what circumstances Purdue could use bankruptcy law in an attempt to also halt lawsuits against them.
Those legal skirmishes could take some time to develop, as Purdue initially must seek court approval to continue paying employees and address routine operating expenses.
By Mike Spector
Frank Franklin II/AP
Purdue Pharma, Accused Of Fueling Opioid Crisis, Files For Chapter 11
Purdue Pharma, the maker of OxyContin, filed for Chapter 11 bankruptcy protection Sunday night, just days after striking a settlement with more than 2,000 local governments over its alleged role in creating and sustaining the deadly opioid crisis.
The filing in New York follows the Sackler family agreeing to relinquish ownership of the lucrative company. The family also agreed to provide $3 billion in cash over several years and future revenue from the sale of OxyContin to assist communities hardest hit by the opioid epidemic.
On Sunday, Purdue's board of directors approved the settlement, which includes 24 state attorneys general who sued the company, accusing it of fueling the nationwide addiction crisis by aggressively marketing OxyContin while downplaying its potential for addiction.
Following Sunday's bankruptcy filing, the company's board members said the deal struck with the thousands of state and local governments will provide billions to combat the country's opioid crisis.
"This settlement framework avoids wasting hundreds of millions of dollars and years on protracted litigation, and instead will provide billions of dollars and critical resources to communities across the country trying to cope with the opioid crisis," said Steve Miller, chairman of Purdue's board of directors, in a statement to NPR.
"We will continue to work with state attorneys general and other plaintiff representatives to finalize and implement this agreement as quickly as possible," he added.
The drugmaker said the value of the settlement is about $10 billion, but 26 states opposed to the deal have contested that estimate, vowing to take the Sackler family to state courts in an attempt to tap into the family's fortune.
The bankruptcy filing follows a statement by New York's state attorney general, Letitia James, alleging that investigators discovered nearly $1 billion in wire transfers made by Purdue to Swiss bank accounts — allegedly to shield the family's wealth from litigation.
Purdue has pointed out that its products were approved by the Federal Drug Administration and that doctors were prescribing them to address patient pain. But the plaintiffs in the suits argue that company officials intensively marketed opioids and downplayed their addictive risks, laying the groundwork for the opioid crisis, which has claimed tens of thousands of lives and is often described as a national emergency.
Purdue Chairman Miller says the company has not admitted any wrongdoing as part of settlement negotiations.
"The resumption of litigation would rapidly diminish all the resources of the company and would be lose-lose-lose all the way around," he said in the statement. "Whatever people might wish for is not on the table now."
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