Purdue Pharma settles opioids case

(Jessica Hill | AP file photo) Christine Gagnon of Southington, Conn., protests with other family and friends who have lost loved ones to OxyContin and opioid overdoses at Purdue Pharma LLP headquarters in Stamford, Conn., Friday, Aug. 17, 2018. Gagnon lost her son Michael 13 months earlier. Purdue Pharma and its owners, members of the Sackler family, have tentatively reached the first comprehensive settlement with lawyers representing thousands of municipal governments, tribes and states.

Purdue Pharma and its owners, members of the Sackler family, have tentatively reached the first comprehensive settlement with lawyers representing thousands of municipal governments, tribes and states nationwide that are suing the pharmaceutical industry for the devastation resulting from the opioid epidemic.

The company is expected to file for Chapter 11 bankruptcy imminently. The settlement, which was described by two people involved in the negotiations, involves the dissolution of Purdue Pharma as it now exists, the formation of a new company that will continue to sell its signature opioid, OxyContin, with the proceeds going to a public beneficiary company that will pay the plaintiffs. Purdue Pharma also will donate “rescue” drugs, several of which are in development, for addiction treatment and overdose reversal.

The Sackler family will pay $3 billion in cash over seven years.

The settlement does not include a statement of wrongdoing.

The company declined to comment.

The settlement is a landmark moment in the long-running effort to compel Purdue Pharma, the company whose drug is seen as an early driver of the crisis, and its owners, the Sacklers, to have their day of reckoning for the deaths of hundreds of thousands of people from overdoses and the calamitous systemic costs.

The settlement comes scarcely six weeks before the start of the first federal trial in the sprawling opioid litigation in front of a federal judge in Cleveland who has recently issued tough pretrial rulings against the defendants — drug manufacturers including Purdue, as well as drug distributors and chain retailers. Although other manufacturers have already settled in that case, as well as in an earlier state opioid trial in Oklahoma, the Purdue agreement is the first so-called “global” arrangement. Negotiated by a team of five lawyers representing nearly 2,300 lawsuits in federal court, as well as by lawyers for the states, the resolution would end almost all of the cases against Purdue.

But because the deal falls short of what some state attorneys general had insisted upon, they have said that they will continue to pursue the Sacklers themselves. In recent weeks, perhaps in anticipation of legal fortresses built by the Sacklers to guard their fortune, which Forbes estimated to be about $13 billion, more states, including Virginia, New Mexico and Delaware, have been filing cases against members of the family. The states have used an array of legal tactics, hoping for an even bigger payout from the Sacklers and to force them out of the pharmaceutical business altogether.

A critical sticking point has been the timing of the family’s sale of its global pharmaceutical business, Mundipharma, and the contribution the family would make from the proceeds. Some attorneys general, including those from Massachusetts, New York, and Connecticut, who have not signed on to the settlement, had been pressing the family to sell the company immediately and to discontinue manufacturing drugs for international markets. And regardless of what price Mundipharma fetched, the attorneys general said, they wanted the Sacklers to commit an additional $1.5 billion up front.

The family refused to do so.

“Connecticut has not agreed to any settlement,” William Tong, the state’s attorney general, said in a statement. “Our position remains firm and unchanged and nothing for us has changed today.” He added: “I cannot predict whether Purdue will seek bankruptcy, but all I can say is we are ready to aggressively pursue this case wherever it goes — whether it is in the Connecticut courts or through bankruptcy.”

Often when a company goes into Chapter 11 bankruptcy, all litigation against it is stayed. The deconstruction and evolution of Purdue would now be presumably overseen by a bankruptcy judge and, eventually, trustees appointed to assemble a new, transparent board, which would not include any of the Sacklers.

Still unclear is what the distribution of any Purdue and Sackler money would look like for 23 states and nearly 2,300 local governments and tribes that signed onto the deal, as well as for the federal government, which has been investigating the company, plus hospitals, insurers and a group representing infants born with neonatal abstinence syndrome, which have also brought lawsuits.

Another significant question to be resolved is where, legally and practically, the settlement would leave the Sacklers themselves. They are not the company nor, apparently, are they insolvent and in need of bankruptcy protection. Whether they would be legally insulated by the settlement is in dispute.

One question is whether the Sacklers’ payouts in the settlement would bind them into Purdue’s bankruptcy proceeding and therefore halt the lawsuits against them as well as the company. Purdue is expected to file for bankruptcy in New York, which has occasionally looked favorably upon such conditions.

Many of the two dozen states that have named individual Sacklers as defendants have said that the family has been intentionally taking billions of dollars out of the company ever since 2007, when Purdue and its executives paid a $635 million fine to resolve federal civil and criminal charges related to the “misbranding” of OxyContin.

Legally speaking, this is known as “fraudulent conveyance,” and it could very well be a claim for the states to pursue in bankruptcy court. Some states have been aggressively hunting for where the Sacklers have deposited their money, particularly the New York attorney general’s office, which recently issued 33 subpoenas, including to offshore holding companies.

The Sacklers, however, have long said that whatever funds they withdrew from Purdue were appropriate dividends from a company they owned and directed.