After earning billions thanks to its prescription painkiller OxyContin, the company Purdue Pharma has sent in an official bankruptcy filing. This occurred in White Plains, NY, just a few days after they agreed to a tentative settlement with many of the governments (both state and local) which sued them over the opioid toll.
The bankruptcy filing doesn’t come completely out of the blue. Experts had expected it both before and after the company struck the tentative settlement. The deal is believed to be worth up to $12 billion, paid over time.
Steve Miller, Chairman of Purdue’s board of directors, released a statement. In it, he said that the framework of the settlement helped out in avoiding wasting years of litigation, as well as millions of dollars. Instead, Miller continued, it would transfer billions of dollars to communities throughout the United States which suffered from the opioid crisis. Additionally, Miller said that they would press on with implementing the agreement as soon as possible, with many plaintiff representatives and state attorneys general working on it with the company.
The problems for Purdue don’t end with the bankruptcy, however. The company, based in Stamford, CT, is currently having several-million-dollar legal expenses, as they have to face 2,600 lawsuits from governments and other entities. Around half of those have declined to sign the settlement proposal, with many of them announcing they will dispute it in bankruptcy court. Moreover, they will pursue further litigation in other courts against the owners of the company, the Sackler family. The Sacklers will lose $3 billion to the settlement, and they will also contribute to the company, whose future profits will be going to the creditors of the company. Furthermore, Purdue will have to reform its practices.
Alternatives to Settlement
The Sackler family, who inherited the company from its late owners Mortimer and Raymond Sackler, released a statement, saying that they felt “deep compassion” for the people who suffered in the opioid crisis. They said that the settlement and its framework represented a historic step regarding providing funds to a public health tragedy.
Those who oppose the deal claim that the amount of money is not substantial, with several officials saying that it will not reach the quoted $12 billion mark. They also object to the deal because it would signify than no jury found the company liable. Miller said that the company has not and will not admit to any wrongdoing, adding that the only alternative to settling is to resume the litigation.
Talking to reporters during a conference call, Miller said that if there was no settlement and they continued with the litigation, the company’s funds would dry out. This way, Miller claimed, it would result in a “lose-lose-lose” situation, which nobody would be happy with. Regardless of what people wished for, Miller said, that was no longer on the table.
The process of receiving bankruptcy approval is not a straightforward one. Namely, things have become intricate thanks to the large number of states who have opted against signing the agreement. The members of the Sackler family are working with some of those states to try and get them to sign. They said that their hopes rested on the fact that the settlement provided critical resources to people affected by the crisis. Hopefully for the Sacklers, opposing states will turn their focus on those funds that the settlement delivers.
Sacklers’ Hidden Fortunes
Some of the key issues that can be solved include whether state court suits against the Sacklers will be able to proceed, and what the future of the company will be. With the tentative settlement, Purdue will be allowed to continue with its operations, but the profits will go towards paying the settlement. There’s also the option of a judge ordering a sale.
Court filings have shown that the Sackler family members received from the company over $4 billion in the span of eleven years (2007–2018). According to reports, the majority of the Sacklers’ fortune is held outside the States, which would make lawsuits over opioids rather complicated.
On Friday, a court filing from the office of New York Attorney General stated that the Sacklers used Swiss (among other hidden) accounts to take $1 billion for themselves. This filing goes in line with many states’ claims that the Sacklers have put effort into covering up their wealth due to increasing legal threats against the company and the family. They have donated money to several cultural institutions across the world, such as London’s Tate Modern, NYC’s Metropolitan Museum of Art, and the Smithsonian.
The lawsuits against the company affirm that Pharma Purdue sold OxyContin as a drug with low addiction risk, knowing full well that the opposite was true. They released OxyContin, a time-released opioid, in 1996. Since then, addiction and overdose rates have shot up. According to official reports, opioids caused more than 47,000 deaths in both 2017 and 2018.
Creating the Crisis
In the last few years, illicit opioids, such as fentanyl and heroin, have been involved in more deaths than the prescription forms of the drugs. The change is the result of the raised awareness of the dangers that come with prescription opioids. Although Pharma Purdue has sold only a fraction of the opioids, many critics put the blame on the company due to its drug production, as well as the aggressive marketing strategy they had for their product.
The Massachusetts attorney general filed a lawsuit which asserted that Purdue pushed big sales of the drug right from the beginning. Many doctors were reluctant to prescribe a painkiller with such strong effects to their patients. The company persuaded the doctors that OxyContin was a safe one. The court filing alleges that the then-senior VP in charge of sales, Richard Sackler, said at the drug’s launch party that the company would follow up the OxyContin with “a blizzard of prescriptions” which would bury their competition.
Together with other companies in the industry, Purdue became a major funder of advocates who worked on pain patients receiving prescription opioids. They also paid doctors to attest to the safety of the drug.
Additionally, the groups the company funded were active in politics, spending over $880 million on campaigns from 2006–2015. This expenditure allowed the industry to fend off any restrictions on prescribing painkillers.
All these instances are now forming a part of the lawsuits against the drug industry. The suing governments demand reimbursement for the opioid crisis-related costs. They also want the industry to fund abuse-prevention and drug treatment programs.
In its own court filings, Pharma Purdue has pointed to the fact that federal regulators approved its products, as well as the fact that doctors prescribed them. A federal judge from Cleveland, OH, Dan Polster, who is involved in about 2,000 of these cases has been encouraging a grand settlement which would have a major impact on the opioid crisis. Polster has arranged a trial for October, regarding the claims by Ohio’s counties of Summit and Cuyahoga.
Jonathan Novak, a lawyer who is suing the company on behalf of several clients, such as the state of Utah and the city of Albuquerque, NM, said that they have considered for a long time that the company wouldn’t be able to afford the exorbitant amounts sought in the lawsuits. Utah is one of the states that has signed on the settlement. Novak said that he believed Purdue simply didn’t have enough money to pay for all the claimed damages.
According to Novak, this is the reason why there are several other defendants involved in most lawsuits. Alongside the Sacklers, state and local governments are suing huge distribution companies, such as Cardinal Health and McKesson Corp. The governments have also been fighting over how any potential settlements would be dealt out.
Saved by the Bankruptcy Bell
Historically, organizations with huge lawsuits to their name have a record of bankruptcy claims. For instance, many asbestos companies have filed for bankruptcy since the 1980s. In 2018, when team doctor Larry Nassar threatened with a lawsuit over sexual abuse, USA Gymnastics filed for protection. Similarly, earlier in 2019, when faced with billions of dollars in damages from lawsuits regarding California wildfires, Pacific Gas & Electric Corp. also filed for bankruptcy.
Another opioid company, Insys Therapeutics, filed for bankruptcy in June. It also came days after reaching a settlement, this time worth $225 million. It’s now up to a bankruptcy judge to determine how much of the $225 million will have to be paid.
Vincent Buccola, lawyer and professor of business ethics, said that Pharma Purdue might have been staying clear of going to court in states where the opioid crisis had the most significant effect. Buccola said that those states were the jury you’d want to keep away from as a defendant. He added that your hopes would be that a bankruptcy judge would be more favorable than the outcome of litigation in those states.