Holdouts vow to challenge Purdue Pharma settlement

Holdouts vow to challenge Purdue Pharma settlement
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Purdue Pharma’s bankruptcy filing, the centerpiece of a settlement intended to shield the company and its owners from more than 2,500 lawsuits by cities and states over its role in the opioid crisis, is already facing tough opposition from critics.

Purdue manufactures OxyContin, the drug that’s widely blamed for starting the country’s opioid crisis. It is facing lawsuits from virtually every state in the country, as well as thousands of cities, counties, Native American tribes and others seeking restitution for the opioid epidemic.  

The company’s move to seek protection in bankruptcy court, announced Sunday night, is part of a settlement that Purdue estimates to be worth $10 billion, a sum which will be split between the thousands of plaintiffs that have sued the drugmaker.

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But states that have not signed on to the deal quickly criticized the settlement, saying that it is not nearly enough to address the opioid crisis and that it will take years before the full terms are realized, if at all.

They are gearing up for a fight in bankruptcy court and are expected to try to pursue Purdue’s owners, the Sackler family, for a full accounting.

The settlement was accepted by nearly 2,300 counties and tribes, but only 24 states and five territories. Among the holdouts are a number of major states, including New York, Massachusetts, North Carolina and California.

“Purdue has had all of its money sucked from it by the Sacklers, so the money is with the Sacklers,” Massachusetts Attorney General Maura Healy (D) said in a press conference Monday.

“This proposal is ... not going to require the Sacklers to pay back any profits they took out from Purdue from the sales of OxyContin over the last 10 years,” Healy added. 

New York Attorney General Letitia James (D) on Monday also indicated her state will continue to pursue the Sacklers. The bankruptcy announcement came just 48 hours after James’s office uncovered nearly $1 billion in wire transfers from Purdue to Swiss bank accounts owned by the Sacklers. 

“In no uncertain terms, any deal that cheats Americans out of billions of dollars, allows the Sacklers to evade responsibility, and lets this family continue peddling their drugs to the world is a bad one, which is why New York remains opposed to it,” James said in a statement.

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Purdue has touted the settlement as the best way to avoid a costly legal battle, but the proposal is certain to face a tough fight ahead.

“This settlement framework avoids wasting hundreds of millions of dollars and years on protracted litigation, and instead will provide billions of dollars and critical resources to communities across the country trying to cope with the opioid crisis,” Steven Miller, the chairman of Purdue Pharma’s board, said in a statement.

The Sackler family in a statement expressed “deep compassion for the victims of the opioid crisis.” 

The Sacklers said they “are hopeful that in time, those parties who are not yet supportive will ultimately shift their focus to the critical resources that the settlement provides to people and problems that need them.”

Legal experts said the bankruptcy filing should freeze the litigation against Purdue, and the company is hoping that the outstanding claims will be shifted to bankruptcy court.

Under the settlement, the company will be restructured and turned into a public trust, which will operate in service of the plaintiffs. The Sacklers would give up ownership of the company and pay $3 billion cash over seven years.

The company will continue to sell OxyContin, and profits from the sales would be used to pay for addiction treatment and other services.

Healy said she was incensed by that provision of the settlement.

“This settlement is only going to be made possible from the future and continued sales of OxyContin. I reject that. That’s offensive to me, that we will allow a settlement that allows Purdue and the Sacklers to sell [OxyContin] when every day, people in this country are dying of opioids,” Healy said.

There are a number of questions as the fight shifts to bankruptcy court.

Jared Ellias, a professor at the University of California, Hastings College of Law in San Francisco, said companies often emerge from bankruptcy being owned, at least partially, by their creditors. 

But since the majority of the creditors are state and federal entities, a public trust is likely the quickest way for everyone to get paid, Ellias said. 

The holdout attorneys general, though, will likely oppose the effort to move their claims to bankruptcy court. One possible argument in their favor is that the states are acting as regulators to protect their citizens, but it’s not clear if a federal judge would accept that argument.

The states that signed on to the deal said they wanted the guarantee of billions of dollars, but it is also not clear if a federal judge will force the remaining states to accept the same settlement.

Ellias said it’s possible that the initial settlement puts pressure on the other states to continue negotiating with Purdue in bankruptcy court.

“It’s not that states who go first are at a disadvantage. They put pressure on other governmental entities to settle themselves,” Ellias said.

Moving the fight to bankruptcy court is not necessarily a win for Purdue, Ellias said. Bankruptcy court will allow plaintiffs to negotiate or litigate over how much they should be paid. 

And he said that more details about the company’s practices could come to light in bankruptcy court.

“CEOs that are in Chapter 11 liken it to working in a glass fishbowl. The Sacklers are now in that fishbowl,” Ellias said. 

For a family that for decades has branded itself as being philanthropic pillars of the community, the discoveries could be damaging. 

“Internal company emails will likely get released. Creditors will look for information that’s embarrassing [to force a bigger settlement], and the judge will let them poke around,” Ellias said. 

Despite the opposition, the committee of attorneys who negotiated the settlement with Purdue on behalf of the thousands of state and local governments said the bankruptcy filing will not stop them from finalizing the settlement.

“In working to resolve the Purdue claims, or any defendant claims, our goal has always been to bring desperately needed resources into local communities that, for years, have been forced to shoulder the devastating consequences and financial burden of what we will demonstrate at trial is an industry-caused epidemic,” the attorneys said in a statement.