Purdue files for Chapter 11
State AG opposed to OxyContin maker’s plan for bankruptcy
STAMFORD — Purdue Pharma has filed for bankruptcy, an expected move linked to a multibilliondollar settlement plan reached last week with some two-dozen states and approximately 2,000 cities and counties suing the company — but the measure hardly represents an end to the ongoing Purdue saga, with Connecticut Attorney General William Tong and many of his counterparts pledging to keep fighting the OxyContin maker.
The company’s Chapter 11 bankruptcy filing Sunday would pave the way for enacting the proposed settlement terms — in which the business would be be turned into a trust or similar entity, with the Sackler family members who own Purdue relinquishing control and making a payout of at least $3 billion. The Sacklers would also transfer possibly more than $1 billion through the sale of their international drug businesses, and a successor firm would potentially contribute tens of millions of doses of free or low-cost overdose-reversal and addiction-treatment medications.
But Tong and about half of the other state attorneys general are unconvinced by the proposal, which the company estimates to be worth more than $10 billion. They have not agreed to settle.
“Whether through bankruptcy or Connecticut courts, we will hold Purdue and the Sacklers accountable for the pain and suffering and death they have caused here and across the country,” Tong said in a statement Monday. “They have had opportunity after opportunity to do the right thing and begin to make amends for the damage they have done, yet time after time they choose greed.”
Purdue is not acknowledging any wrongdoing by the company, as a whole, or by the Sacklers. Many of the states that have sued Purdue, including Connecticut, have also named the owners as individual defendants in their complaints.
Across the board, the lawsuits accuse Purdue of deceptive OxyContin marketing and thus contributing to the deaths of some
400,000 people from overdoses involving prescription and illicit opioids in the past
20 years. The company has uniformly denied the allegations.
As they grappled with the cost and time of dealing with the burgeoning number of lawsuits, Purdue officials had signaled since March that they were considering bankruptcy.
In a court filing Monday, Purdue cited among its reasons for seeking Chapter 11 protection the “staggering cost” of simultaneously litigating more than 2,600 lawsuits filed by local and state governments from across the country.
During the first six months of this year, Purdue paid approximately $63 million for “legal representation, expert fees and other expenses” directly related to the pending lawsuits; it projects the outlay will rise to $121 million by the end of this year.
For all of 2019, Purdue predicts it will spend approximately $263 million on legal and related professional costs, comprising its “largest operating expense by far,” the filing said.
At the same time, Purdue officials said they would keep working with state attorneys general and other plaintiffs’ representatives to finalize and implement the proposed agreement “as quickly as possible.”
“This unique framework for a comprehensive resolution will dedicate all of the assets and resources of Purdue for the benefit of the American public,” Steve Miller, Purdue’s board chairman, said in a statement. “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.”
The prospective settlement through bankruptcy faces a number of hurdles, among them securing court approval amid major rifts among the negotiating parties.
Twenty-five state attorneys general, including Tong , said last week that they opposed settling with Purdue based on the terms now on the table.
“This is yet another cynical maneuver to try to shirk responsibility, but it is not without risks for them,” Tong said. “Purdue and the Sacklers cannot cry poverty while stashing billions overseas. We will move aggressively in bankruptcy to disclose their hidden fortune and ensure their full wealth is now on the table. And at every turn, we will fight their craven strategy to use bankruptcy to shield their wealth and to evade our claims to secure billions of dollars for addiction science, treatment and recovery.”
While Tong has outlined proposed terms that resemble those in the preliminary agreement backed by Purdue, what the company is offering does not not appear to go far enough for him.
“Purdue must be broken up and shut down, and its assets must be liquidated and transferred to a trustee not named Sackler,” Tong said in a statement last week. “Purdue and the Sacklers must be completely out of the opioid business, domestically and internationally, and they cannot return. Purdue and the Sacklers must pay billions and billions of dollars, including the billions the Sacklers siphoned out of Purdue and those resources must be put into addiction science, treatment and prevention.”
Among others who are not ready to settle, New York Attorney General Letitia James alleged in new court documents last Friday that the Sacklers used Swiss bank accounts and other hidden ones to transfer $1 billion to themselves. A spokesperson for the Sacklers responded that those transfers were “perfectly legal and appropriate in every respect.”
“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 Monday. “My office will not be deterred in its lawsuit against the Sackler family and will continue fighting to make this family pay for the death and destruction they inflicted on the American people.”
At the same time, attorneys representing the approximately 2,000 local governments whose complaints against Purdue and other pharmaceutical firms have been consolidated in “multidistrict litigation” in federal court in Cleveland have said a final agreement would need to garner in bankruptcy court majority support from the company’s creditors, which include the plaintiffs.
“A journey of a thousand miles starts with the first step,” Paul Hanly Jr., co-lead counsel for the MDL plaintiffs, said Monday. The MDL plaintiffs’ lawyers group “hopes this is the first step in bringing long-needed help to all communities in the nation that have suffered so terribly from the actions of the opioids companies.”
Purdue’s Chapter 11 filing in the White Plains, N.Y.based federal bankruptcy court for the Southern District of New York, would ostensibly remove the company from the first of the MDL trials, which is scheduled to begin Oct. 21.
Purdue’s plan envisions its proposed successor company, “NewCo,” being governed by a new board selected by claimants and approved by the bankruptcy court. The new enterprise would be “bound permanently by injuctive relief,” including marketing restrictions on the sale and promotion of opioids, Purdue officials said.
Last year, Purdue announced that it would stop marketing its opioids to medical professionals. The decision led to the disbanding of Purdue’s sales force and the layoff of several hundred employees.
In total, approximately 550 work for the company, according to information posted on the business public-relations website BusinessWire.
“Slightly fewer than 250” are based at Purdue’s downtown Stamford headquarters, at 201 Tresser Blvd., according to company officials.
A Purdue spokeswoman declined to comment Monday, beyond the company’s statement, on bankruptcy’s potential jobs impact.