Purdue Pharma Files for Bankruptcy Protection

States oppose the company’s plans for a Chapter 11 settlement, which would restructure the company as a trust and cap funding to plaintiffs, Reuters and other news outlets report.

On Sept. 15, 2019, Purdue Pharma LP, manufacturer of the opioid painkiller OxyContin, a form of oxycodone, filed for Chapter 11 bankruptcy protection in White Plains, NY, Reuters reported. The company, and in some cases its board members and former owners, the Sackler family, currently face more than 2600 lawsuits. Seeking billions of dollars in compensation, the lawsuits allege that Purdue leadership misinformed physicians and the public about the drug’s potential to become addictive, thus fueling a public health epidemic in the United States that has resulted in nearly 400,000 deaths between 1999 and 2017, Reuters reports. Suits also allege that overdose risks were not clearly explained to patients or healthcare providers. Purdue managers and the Sackler family have denied these allegations, according to Reuters.

Purdue plans to restructure the company as part of the proposed agreement, which would settle suits with 24 states, five territories, more than 2000 cities, as well as other plaintiffs, Reuters reports, noting that the states are opposed to the settlement. Opponents to the settlement want Purdue’s owners to offer more money, Reuters reports.

Under terms of the agreement, the Sacklers would surrender control of the company and offer $4.5 billion in cash including future proceeds from the sale of another asset, Mundipharma, according to Purdue. Purdue Pharma would become a trust that would provide at no or very low cost, tens of millions of doses of drugs that the company developed to counter the effects of opioid addiction and overdoses, Reuters reports. Purdue believes that these drugs would be valued at $4.45 billion during the next 10 years. The Sacklers do not plan to revise their offer, Reuters reports. One estimate of the Sackler family's wealth, published in Business Insider, puts the figure at $13 billion.

Purdue’s corporate management team has argued that opposing the settlement would lead to longer litigation and higher legal fees, and that it could steer money away from the communities that have been most seriously affected by opioid abuse, Reuters reports. 

In a statement, members of the Sackler family, well known for philanthropy (e.g., the Sackler wing of the Metropolitan Museum of Art in New York City), voiced "deep compassion for victims of the opioid crisis and the belief that the settlement framework is "a historic step toward providing critical resources that address a tragic public health situation," according to NBC News. They also expressed hope that opponents to the settlement offer would change their minds, Reuters reported. “It is our hope [that] the bankruptcy reorganization process that is now underway will end our ownership of Purdue and ensure that its assets are dedicated for the public benefit,” the family said.

The restructuring and settlement will determine how much funding communities receive from the company. Both must be approved by a US bankruptcy judge, according to Reuters.

States suing the Sacklers, such as New Jersey, whose legal complaint is included here,  allege that the family profited from opioid sales. Opponents to the settlement have vowed to fight attempts by Purdue and the Sacklers to use bankruptcy proceedings to contain the litigation, Reuters reported.

New York Attorney General Letitia James said that she had uncovered approximately $1 billion in wire transfers between the Sacklers, in particular former board member Mortimer Sackler, and their partners, Reuters reports, as well as financial institutions, including Swiss banks. For more information, see reporting from KTLA.com

The transfers, she claimed, suggest that Purdue used shell companies to move money and then hide it in real-estate investments in New York City, according to Reuters. Mortimer Sackler called amassing evidence of these transfers “a cynical attempt … to generate defamatory headlines to try to torpedo a mutually beneficial settlement,” according to Reuters, which notes that Purdue plans to ask the judge to stop active litigation so that it can negotiate a final settlement.

Sources

Purdue Pharma Files For Bankruptcy Protection, https://www.reuters.com/article/us-purdue-pharma-bankruptcy/oxycontin-maker-purdue-pharma-files-for-bankruptcy-protection-idUSKBN1W1058

New Jersey Redacted Legal Complaint, https://www.nj.gov/oag/newsreleases19/Sackler-Complaint-Redacted.pdf

Purdue Pharma Files Bankruptcy as Part of a Settlement, https://www.nbcnews.com/news/us-news/purdue-pharma-maker-painkiller-oxycontin-files-bankruptcy-part-settlement-n1054711

Who are the Sacklers? https://www.businessinsider.com/who-are-the-sacklers-wealth-philanthropy-oxycontin-photos-2019-1

New York Attorney General Exposes $1 Billion in Wire Transfers by the Sackler Family, https://ktla.com/2019/09/14/new-york-attorney-general-exposes-1-billion-in-wire-transfers-by-sackler-family/