New Haven Register (New Haven, CT)
Purdue deal remains elusive
STAMFORD — In September 2019, Purdue Pharma filed for bankruptcy to resolve the thousands of lawsuits accusing it of fueling the U.S. opioid crisis. Today, the OxyContin maker and many of its accusers are still far from making a deal.
The lack of an agreement one year after the case started does not surprise experts who expected that the longstanding controversy surrounding the Stamford-based company would not be quickly defused. A comprehensive settlement still appears to be the most likely outcome, but Connecticut and other states that have rejected Purdue’s proposed terms show no signs of backing down.
“There was anticipation that this was going to be long, complex and expensive,” said Robert Bird, a professor of business law at the University of Connecticut. “And it’s shaped it up to be all three. It will not be quick, simple or cheap. It’s going to be a substantial amount, and I think ultimately Purdue Pharma is going to have to pay.”
By the time it filed for bankruptcy on Sept. 15, 2019, Purdue was dealing with a deluge of lawsuits from nearly every state and thousands of local governments, including litigation from the state of Connecticut and dozens of cities and towns in the state.
Across the board, the complaints accused Purdue of deceptive OxyContin marketing and thus partly contributing to the deaths of some 400,000 people from overdoses involving prescription and illicit opioids in the past 20 years. Many of the local and state governments that sued — including Connecticut — also filed claims against the Sackler family members who own the company.
Having signaled earlier in 2019 that it would seek Chapter 11 protection — a move that would essentially consolidate the pending litigation against the firm into one case — Purdue’s bankruptcy filing came as no surprise to plaintiffs. Days before it filed, it had hammered out a multibilliondollar settlement framework with two-dozen states and approximately 2,000 cities and counties that had sued.
The company was also motivated to file for bankruptcy to help contain the litigation’s skyrocketing costs. For all of 2019, Purdue predicted it would spend approximately $263 million on legal and related professional costs, comprising its “largest operating expense by far,” it said in court filings.
While Purdue and the Sacklers rejected the lawsuits’ allegations and denied any wrongdoing, they put on the table a settlement offer that they valued at more than $10 billion.
“We continue to believe that the best way to maximize value for the creditors and the American public is to implement a global settlement,” Purdue said in a statement this week. “Given the urgency of the need, as well as the astronomical costs of prolonging the bankruptcy proceedings, we hope to reach a settlement as soon as possible.”
The Sacklers — who did not personally file for bankruptcy — would contribute at least $3 billion to the total and also transfer funds from the sale of their international pharmaceutical businesses, according to the proposal.
Purdue and the Sacklers also proposed having the Sacklers relinquish control of the company so that it could be turned into a trust or similar entity, with 100 percent of the firm’s assets transferred to the new structure.
They said that their plan would also provide millions of doses of opioid-addiction treatment and overdose-reversal medicines.
“The proposed settlement would deliver critical resources to the individuals, families and communities most in need, rather than squandering them on lawyers’ fees,” the Sacklers said in a statement this week.
To help advance settlement discussions, the bankruptcy court subsequently halted the lawsuits against Purdue and the Sacklers.
But Connecticut Attorney General William Tong and another 23 “non-consenting” states’ attorneys general have rejected Purdue and the Sacklers’ proposal.
They have argued that more funds are needed to tackle the opioid crisis, questioned the restructuring plan and cast doubts on the appropriateness of Purdue manufacturing products to treat opioid addiction and overdoses.
“Our goal from the beginning has been to do everything possible to hold Purdue and the Sacklers accountable for the terrible harm and suffering they have caused, and to ensure they pay as much as possible to support treatment and recovery,” Tong said in a statement this week. “Beyond that, we cannot comment on confidential communications and litigation strategy.”
Purdue officials remain confident that a settlement will be reached, they said. But given the contention with the non-consenting states, an agreement does not appear imminent.
In total, states’ claims against Purdue add up to roughly $2.2 trillion, although any settlement is likely to amount to a fraction of that amount.
“A deal that doesn’t account for the depth of pain and destruction caused by Purdue Pharma and the Sacklers is an insult, and as attorney general, I will continue to seek justice for victims and fight to hold bad actors accountable, no matter how powerful they may be,” New York Attorney General Letitia James, another of the nonconsenting attorneys general, said in a statement this week.
To be enacted, any comprehensive plan would require the approval of most creditors — including widespread backing from the cities and states that have sued.
“I think it is highly likely that most parties will support an agreement with the Sackler interests that will result in a higher contribution than their original offer,” said Bob White, a practitioner-in-residence who teaches bankruptcy law at Quinnipiac University. “I can’t predict when the case will end and when payments will start being made to creditors. I can say that mass tort cases generally take several years to resolve.”
A to-be-determined amount of any settlement funds would also be distributed to private citizens who have filed claims of personal injury or harm to loved ones allegedly caused by Purdue’s opioids. In total, more than 122,000 personal-injury forms have been submitted, including about 500 from Connecticut.
Federal officials could play an influential role as well. In addition to the local and state claims, U.S. Department of Justice officials are reportedly seeking up to $18 billion from the company, in connection with criminal and civil probes.
“As previously stated, we are fully cooperating with the ongoing governmental investigations,” Purdue said in its statement. “It is our goal to maximize the company’s value for creditors and the American public, rather than consume resources with litigation.”
Bankruptcies are civil cases, so there will be no repeat of 2007 when Purdue, as a company, and three former and then-executives pleaded guilty to charges of OxyContin misbranding. In total, they incurred about $635 million in penalties. The executives did not serve any prison time.
Art gallery owner and activist Fernando Luis Alvarez, who was arrested in 2018 for his role in a protest that featured the dropping of a massive spoon outside Purdue’s downtown Stamford headquarters, said he was concerned that a settlement would be too lenient, encourage more whitecollar crime and lead to the loss of information that could help prevent further epidemics.
“Society will be at a huge loss and facing the same risks to its safety if, one, we don’t take all of the Sacklers’ money and two, if none of them go to jail,” Alvarez said.
In their statement, the Sacklers said that “all of the Sackler family members, including those who served on Purdue’s board, have always conducted themselves properly.”