Bankruptcy odyssey for opioid giant Purdue Pharma at its zenith

WHITE PLAINS, N.Y. (CN) — The final checkpoint for Purdue Pharma’s proposed $10 billion opioid crisis settlement deal, nearly half of which to be funded by members of the Sackler family, continued on Monday in federal bankruptcy court.

Nearly two years after Purdue Pharma filed for Chapter 11 protection in September 2019 to resolve thousands of lawsuits accusing it of inflaming America’s opioid addiction crisis through deceptive marketing of the prescription painkiller OxyContin, the Stamford, Connecticut-based business faces a lengthy confirmation hearing to secure approval from the federal bankruptcy court of its restructuring plan and settlement with individuals, states, municipalities, hospitals and others.

U.S. Bankruptcy Judge Robert D. Drain for the Southern District of New York has allotted 11 days for the proceedings, which are being conducted remotely through Zoom video conference due to the ongoing Covid-19 pandemic and commenced Thursday, August 12.Purdue, which pleaded guilty last November for its role in contributing to the nation’s opioid epidemic, is seeking Chapter 11 bankruptcy protection, but the inclusion of legal immunity for members of the Sackler family under nonconsensual third-party releases, is being challenged in the bankruptcy case by federal and state authorities.

If the Bankruptcy Court confirms the deal, the Sackler family would be released from individual accountability from future opioid-related civil litigation after contributing more than $4 billion in installments over nine years. 

David Sackler, a former Purdue Board member and descendant of Raymond Sackler, had been scheduled to testify Monday but for procedural reasons will instead take the stand in the bankruptcy settlement trial later in the week.

In August court filing, David Sackler said he and his family are unwilling to endorse any resolution that leaves our family exposed to new lawsuits relating to historical Purdue conduct.

“I look forward to the time that the billions of dollars that my family and the Mortimer Sackler family have offered in the proposed Shareholder Settlement can be put to work to abate the opioid crisis,” he declared. “We are prepared to relinquish our interest in Purdue, dispose of our overseas pharmaceutical companies and fund the shareholder settlement to bring help to those who need it.

“We would prefer that the money be spent on efforts to abate the opioid crisis rather than being spent on years of litigation,” Sackler wrote. “But my family and I are only willing to support and fund this Shareholder Settlement as part of a resolution in which we receive the broad releases contemplated by the proposed Plan.”

Earlier this month, Democratic Senators Elizabeth Warren and Richard Blumenthal, and U.S. Representatives Carolyn B. Maloney and Mark DeSaulnier, sent a letter urging the Department of Justice to file an immediate appeal of Purdue’s bankruptcy plan of reorganization that would prevent the Sackler family from being held accountable for the opioid crisis.

Since filing for bankruptcy, the company has struck deals in criminal litigations with the Justice Department and agreed to pay $225 million toward a $2 billion criminal forfeiture.

Purdue’s settlement with the Department of Justice last October does not resolve claims by states against Purdue, nor does it preclude debtors’ ability to recover fraudulent transfers. 

In a statement last year, Purdue Board Chairman Steve Miller said that the DOJ settlement will lead to a better company that will deliver more than $10 billion in value to claimants and communities. “Purdue today is a very different company,” he said. “We have made significant changes to our leadership, operations, governance, and oversight.” In court, the company is represented by Marshall Huebner of Davis Polk & Wardwell.

Nearly every state has sued the company and members of the Sackler family, claiming they promoted OxyContin for off-label use and urged prescribers to write higher doses to maximize sales.

Last month, New York Attorney General Letitia James announced a $1.1 billion settlement with Cardinal Health, McKesson and Amerisource Bergen Drug — three leading distributors of addictive painkillers said to have been put into the stream of commerce negligently.

The pending Purdue Pharma settlement with resolve a lawsuit that James’ office brought against the Sacklers in 2019; New York state expected to receive at least $200 million, and possibly more, for abatement of the opioid epidemic.

No member of the Sackler family has ever been criminally charged.

Earlier this month, Bankruptcy Judge Robert Drain said that he would grant, with conditions, Purdue’s request to pay up to approximately $29 million in bonuses for 2021, which would be distributed among the bulk of its approximately 500 employees, if the settlement plan is approved in bankruptcy court.

In February this year, global consulting firm McKinsey & Company agreed to pay $573 million to settle simultaneous complaints brought by 53 attorneys general representing 47 states, the District of Columbia and five U.S. territories, who alleged that from 2004 through 2019 McKinsey advised Purdue Pharma and designed an aggressive marketing campaign to boost sales of the pharmaceutical drugs that intensified the national opioid addiction crisis.

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