Clos­ing Pur­due Pharma won’t help opi­oid vic­tims

The Morning Call - - TOWN SQUARE - By Joe No­cera Joe No­cera is a Bloomberg Opin­ion colum­nist cov­er­ing busi­ness.

There are few quo­ta­tions that have stuck with me over the years like the one de­liv­ered by the anti-to­bacco sci­en­tist Stan­ton Glanz in 2006, when I was writ­ing an ar­ti­cle about Al­tria Group Inc. Asked what his ul­ti­mate goal was, he didn’t say it was to get peo­ple to stop smok­ing. He said it was “to de­stroy the to­bacco com­pa­nies.”

I thought of that line on Sept. 16, the day af­ter Pur­due Pharma LP filed for bank­ruptcy. The fil­ing was in­evitable: No com­pany can with­stand over 2,600 law­suits from states, coun­ties, ci­ties and Na­tive Amer­i­can tribes all across the coun­try.

As part of its bank­ruptcy fil­ing, Pur­due un­veiled a set­tle­ment pro­posal that would set up a trust to give cash to those af­fected by the opi­oid cri­sis it helped trig­ger with its pri­mary prod­uct, the painkiller Oxy­Con­tin. The money, which Pur­due es­ti­mated at around $10 bil­lion, would come from the com­pany’s present and fu­ture prof­its, as well as $3 bil­lion from Pur­due’s own­ers, heirs of founders Arthur, Mor­timer and Ray­mond Sack­ler. Some 24 states were back­ing the set­tle­ment, along with five ter­ri­to­ries and over 1,000 coun­ties. But other states are op­pos­ing the set­tle­ment, in­clud­ing Mas­sachusetts.

Mas­sachusetts At­tor­ney Gen­eral Maura Healey wrote that the pro­posed set­tle­ment “doesn’t hold the com­pany or its own­ers ac­count­able.” she Ac­count­abil­ity means “shut­ting down Pur­due for good,” Healey wrote.

That’s just crazy. The goal should be to pro­vide money that gov­ern­ment en­ti­ties can use to com­bat the cri­sis. It should be to develop pain-re­lief drugs that are abuse re­sis­tant. It should be to find ways to man­age se­vere pain with­out re­ly­ing on drugs that ad­dict and kill.

At the hear­ing Tues­day in White Plains, New York the com­pany’s lead at­tor­ney, Mar­shall Hueb­ner of Davis, Polk & Ward­well, out­lined the Pur­due plan. A trust would be set up, con­trolled by the plain­tiffs, to dole out money to com­mu­ni­ties and in­di­vid­u­als who had le­git­i­mate claims of be­ing harmed by opi­oids. The trust would take con­trol of Pur­due, mean­ing that those who are now su­ing Pur­due would ef­fec­tively own the com­pany. It would con­tinue to man­u­fac­ture Oxy­Con­tin, but the own­ers would also be able to di­rect the com­pany to­wards de­vel­op­ing drugs to coun­ter­act opi­oid ad­dic­tion. Mean­while, Pur­due prof­its would be sent to the trust.

The real bone of con­tention be­tween those who back the set­tle­ment and those who op­pose it isn’t so much what will hap­pen to Pur­due as it is what will hap­pen to the Sack­lers. Hueb­ner made much of the fact that the fam­ily would be sell­ing an­other phar­ma­ceu­ti­cal com­pany it owns to help raise the $3 bil­lion. But that is ex­actly what galls crit­ics like Healey: sell­ing a com­pany to raise money is dif­fer­ent from tak­ing money out of your pocket and hand­ing it over to the peo­ple who are su­ing you.

At the hear­ing, Pur­due’s lawyers went out of their way to as­sure the court and the crit­ics that the com­pany was dis­as­so­ci­at­ing it­self as much as pos­si­ble from the Sack­lers. No Sack­ler fam­ily mem­ber re­mained on the board. No Sack­lers would get their le­gal fees paid by the com­pany. No Sack­lers would get any of the re­ten­tion bonuses and other money the com­pany was spend­ing to hold onto key em­ploy­ees. Be that as it may, it seems pretty clear that crit­ics like Healey won’t be sat­is­fied un­less the set­tle­ment in­flicts more pain on the fam­ily.

Right now, the bank­ruptcy has stopped all lit­i­ga­tion against Pur­due, in­clud­ing from the gov­ern­ment en­ti­ties that are op­pos­ing the set­tle­ment. Over the next few months, bank­ruptcy court Judge Robert Drain will have to de­cide whether the law­suits brought by those who have not agreed to set­tle can con­tinue. As Bloomberg News pointed out on Tues­day, while Drain could put all lit­i­ga­tion on hold, the law tends to fa­vor at­tor­neys gen­eral who want to keep su­ing. If he al­lows the suits to con­tinue, the set­tle­ment will fall apart.

A bet­ter ap­proach would be to en­cour­age the var­i­ous gov­ern­ment en­ti­ties to forge a set­tle­ment with Pur­due that ex­cluded the Sack­lers. Then they could con­tinue su­ing fam­ily mem­bers, or craft a dif­fer­ent set­tle­ment with them that took away a sig­nif­i­cant por­tion of the $13 bil­lion they are said to be worth.

In 1981, Johns Manville, an in­su­la­tion and roofing man­u­fac­turer fac­ing thou­sands of law­suits for cov­er­ing up the dan­gers of as­bestos, filed for bank­ruptcy. It was the first com­pany to em­ploy the tech­nique Pur­due hopes to use: It set up the Manville Trust and seeded it with 75 per­cent of the com­pany stock. The trust pays out claims to this day. (Johns Manville, no longer associated with the trust, is now owned by Berk­shire Hath­away.)

Here’s the kicker, though. It took seven years for Johns Manville to emerge from bank­ruptcy and for the Manville Trust to be es­tab­lished. Even then, tens of thou­sands of peo­ple who had as­bestos-re­lated cancer had to wait an­other three, four or five years to get any com­pen­sa­tion. And they re­ceived only pen­nies on the dol­lar.

The en­ti­ties af­fected by the opi­oid cri­sis can’t wait that long to get re­lief. They need it now. The set­tle­ment that was ne­go­ti­ated be­tween Pur­due and the plain­tiffs will get them that money. That’s enough rea­son the set­tle­ment on the ta­ble is the best way for­ward, even if it doesn’t sat­isfy the soul.


Head­quar­ters of Pur­due Pharma LP, the maker of the painkiller Oxy­Con­tin, in Stam­ford, Con­necti­cut.

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