Purdue Pharma LP filed for bankruptcy with a more than $10 billion plan to settle claims that it fueled the U.S. opioid epidemic by illegally pushing sales of its addictive OxyContin painkiller.
The Chapter 11 filing on Sunday in White Plains, New York, is designed to short-circuit more than 2,000 lawsuits against Purdue and its owners, the billionaire Sackler family. The settlement calls for the Sacklers to hand over Purdue to a trust controlled by the states, cities and counties that have sued to recoup billions of dollars they spent battling opioid addictions and overdoses.
Officials originally envisioned raising as much as $12 billion with the plan, which is backed by more than two dozen U.S. states and territories, along with many cities and counties that sued Purdue. In an emailed statement, Purdue officials reduced the potential settlement amount to more than $10 billion.
The company listed as much as $10 billion in assets, including $1.2 billion in cash, and $1 billion in debts in its Chapter 11 filing. Purdue officials said Sunday the costs of dealing with waves of opioid suits made a bankruptcy inevitable, and the company projected it will spend about $263 million on legal and related professional costs in 2019.
The Sacklers guaranteed they’ll pay a minimum of $3 billion toward the settlement, with most of the sum generated by selling Purdue’s U.K.-based drugmaker Mundipharma.
The family has rejected calls by some state attorneys general to boost their guarantee to $4.5 billion. Of the 48 states that have court actions pending against the company in some forum, half have refused to sign on to the settlement. States that aren’t satisfied with Purdue’s proposal will get a chance to voice their opposition before a bankruptcy judge approves the accord.
The plan calls for Purdue officials to set up a trust responsible for operating the company, which would generate money that governments could use to bolster drug treatment and policing budgets. That entity, run by trustees appointed by a bankruptcy judge, also will oversee payouts to state and local governments that sued.
“This unique framework for a comprehensive resolution will dedicate all the assets and resources of Purdue for the benefit of the American public,” Steven Miller, the drugmaker’s board chairman, said in an emailed statement.
To make its plan work, the company said it will soon ask the judge overseeing the case to halt lawsuits brought by local and state governments that are not part of the current deal. Typically, such government regulatory actions are allowed to continue while a company is in bankruptcy, while private lawsuits are halted.
Who Gets What
The court that will oversee Purdue’s case has the thorny task of trying to figure out how to apportion monies generated by the plan among thousands of states, cities and counties seeking reimbursement for tax dollars spent on the crisis.
That allocation “will be one of the main tasks in the case,” Miller said Sunday. Lawyers for cities and counties have created computer programs that calculate how much a municipality could get under the deal based on the amount of opioids circulated in the area.
U.S. Bankruptcy Judge Robert Drain has been assigned to oversee Purdue’s Chapter 11 case. His White Plains court is about a 20-minute drive from Purdue’s Stamford, Connecticut headquarters.
A veteran bankruptcy judge, Drain has handled similar high-profile filings, including that of Sears Holding Corp., which was sold to hedge fund manager Eddie Lampert’s ESL Investments Inc. He also oversaw the sale of some of Delphi Corp.’s assets in 2009 after the auto-parts maker and ex-General Motors Co. spinoff sought protection from creditors.
The Sackler family said it backed the proposed settlement in hopes of finding a way to provide “critical resources” to address an epidemic that some attorneys general have accused them of spawning.
“This process will bring the thousands of claims into a single, efficient forum where the settlement can be finalized, reviewed by the bankruptcy court to ensure it is fair and just and then implemented,” the family said in an emailed statement.
Opponents argue Purdue’s plan isn’t enough of a reckoning for the Sacklers, who made billions from the over-prescribing of OxyContin that was spurred by the company’s allegedly illegal marketing. It also won’t provide enough reimbursement for hundreds of thousands of overdose deaths and addiction damage inflicted on millions of U.S. families, opponents say.