September 15, 2019; New York Times
Purdue Pharma, maker of OxyContin, filed for Chapter 11 bankruptcy on Sunday night in the federal Southern District court of New York, report Jan Hoffman and Mary Williams Walsh in the New York Times. As Hoffman and Walsh note, “Restructuring the company through bankruptcy was at the heart of a tentative settlement agreement reached last week between the company and thousands of cities and counties that have sued it in federal court for its role in the opioid epidemic. Twenty-four states and five United States territories have also accepted the agreement.”
Although called a settlement “agreement,” a number of states have in fact not agreed to the settlement and may contest the bankruptcy in federal court in White Plains as early as this week. Among those not signing on are Massachusetts, New York, New Jersey, Connecticut, Pennsylvania, Maryland, California, Illinois, Virginia, Delaware, North Carolina, Washington, Oregon, Nevada, Idaho, Minnesota, Iowa, Wisconsin, Illinois, Maine, Rhode Island, New Hampshire, Hawaii, and the District of Columbia.
Under Purdue’s settlement proposal, Hoffman and Walsh explain, the Sacklers would give up ownership of Purdue and pay $3 billion in cash to states and local governments. They would also sell their Britain-based drug company, Mundipharma, with sales proceeds contributed to the settlement amount. Purdue itself would become a public benefit trust. Profits earned would either be contributed to the settlement pool or used to support research and development of medicines to treat addiction and overdoses. Any new medicines developed would be donated to the public. Restrictions would also be placed on company marketing and sales of opioids.
Purdue claims that the total settlement value is $10 billion, but the actual value will depend on the trust’s earnings and the sale price of Mundipharma. Many have suggested the actual value of the settlement could be well under $10 billion. The states that have not settled have also objected to the fact that the Sacklers could continue to profit from drug sales until Mundipharma is sold.
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An even larger bone of contention is that the Sackler Family gets to keep most of the profits they extracted. Earlier this year, reports Christopher Rowland in the Washington Post, a suit filed against eight named Sackler Family members who had served on the board of Purdue Pharma by the state of Oregon alleged that between 2008 and 2018, the Sacklers “directed Purdue to make nearly $11 billion in total distributions (including tax distributions) to partnered companies, foreign entities, and ultimately to trusts established for the benefit of the Sackler families,” according to recently unsealed portions of a lawsuit filed this year by Oregon’s attorney general.
The 2008 date is important; in 2007, Purdue had settled a federal suit for $634.5 million and promised to cease its deceptive marketing practices. Instead, the federal settlement appears to have become a signal to begin shifting earnings out of the company. Moreover, according to a lawsuit from Massachusetts, from 2007 to 2018, the Sacklers directed “the company to hire hundreds more sales reps to visit doctors thousands more times. They insisted that sales reps repeatedly visit the most prolific prescribers. They directed reps to encourage doctors to prescribe more of the highest doses of opioids. They studied unlawful tactics to keep patients on opioids longer and then ordered staff to use them…They sometimes demanded more detail than anyone else in the entire company, so staff had to create special reports just for them.”
Additionally, last Friday, the office of New York state attorney general Letitia James reported “that it had tracked about $1 billion in wire transfers by the Sackler family, including through Swiss bank accounts, suggesting that the family tried to shield wealth as it faced a raft of litigation over its role in the opioid crisis.”
This finding, note Hoffman and Walsh, “came from just one of 33 subpoenas the state issued recently to financial institutions and advisers that have done business with the Sacklers.” In short, more bombshells could await.
What happens next? That is hard to say. Hoffman and Walsh point out that, “The federal bankruptcy judge must decide whether the objections by the opposing states are sufficient to scuttle the deal or whether those states will have to bound by the deal as well. Other nettlesome issues include the order in which the plaintiffs and their private lawyers will be paid, the respective amounts and, eventually, how those funds will be allocated to address the disaster.”—Steve Dubb