OxyContin maker Purdue Pharma files for bankruptcy to wipe out 2 000 lawsuits | Fin24
 
Loading...

OxyContin maker Purdue Pharma files for bankruptcy to wipe out 2 000 lawsuits

Sep 16 2019 12:38
Jef Feeley and Steven Church

Purdue Pharma filed for bankruptcy with a more than $10bn (R146bn) plan to settle claims that it fuelled the US 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 $12bn with the plan, which is backed by more than two dozen US 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 $10bn.

The company listed as much as $10bn in assets and $1bn in debts in its Chapter 11 filing. Purdue officials said Sunday the costs of dealing with waves of opioid suits made a bankruptcy inevitable. The company spent $250m this year alone on legal fees and costs to defend the cases, the officials said.

The Sacklers have guaranteed to pay a minimum of $3bn as part of the settlement, with most of the sum generated by selling Purdue’s UK-based drugmaker Mundipharma.

The family has rejected calls by some state attorneys general to boost their guarantee to $4.5bn, and almost 25 states are opposing the family’s settlement offer. States that aren’t satisfied with Purdue’s proposal will get a chance to voice their opposition before a bankruptcy judge approves its Chapter 11 plan.

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.

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.

US 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 in the past, including that of Sears Holding, which was sold to hedge fund manager Eddie Lampert’s ESL Investments. He also oversaw the sale of some of Delphi’s assets in 2009 after the auto-parts maker and ex-General Motors spinoff sought protection from creditors.

Bigger bite

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 finalised, 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 US families, opponents say.

“Irrespective of Purdue’s actions or evasions, we will continue to pursue justice on behalf of those harmed by the Sacklers’ greed, callousness, and fraud,” Delaware Attorney General Kathy Jennings said in an emailed statement.

The Sacklers and Purdue officials had hoped to persuade 35 attorneys general to back the current settlement proposal. That super-majority would have held more sway with a bankruptcy judge when it came time to win final approval of the deal. As of Sunday, the company said it had the support of as many as 29 US states and territories, according to the release.

Purdue planned to file for protection from creditors by the end of September to avoid facing a Cleveland jury that’s scheduled to hear evidence starting next month in the first federal trial over the opioid epidemic.

Public nuisance

A host of other opioid makers, such as Johnson & Johnson, and drug distributors like McKesson, will face claims they created a public nuisance across the US with their mishandling of the medicines.

States and municipalities contend drugmakers, distributors and pharmacy chains conducted illegal marketing campaigns pushing the painkillers, failed to adequately oversee orders and ignored red flags about unusually frequent retail sales.

In March, Purdue settled claims brought by the state of Oklahoma for $270m, and another defendant, Teva Pharmaceutical Industries, also reached a, $85m deal to avoid trial. J&J, which refused to settle, was ordered to pay $572m for creating a public nuisance in the state with its over-promotion of its opioid pain medicines.

purdue-pharma  |  health  |  companies
NEXT ON FIN24X

 
 
 
 

Company Snapshot

#MINIBUDGET2019

Struggling power utility Eskom will take centre stage at this year's mini budget
 

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

What do you think about private healthcare in SA?

Previous results · Suggest a vote

Loading...