Purdue Pharma Files for Bankruptcy

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Stamford, CT—Purdue Pharma, maker of OxyContin, filed for Chapter 11 bankruptcy on Sunday night. The New York Times reports that the move is “at the center of the company’s efforts to shield itself and its owners from more than 2,600 federal and state lawsuits.”

The terms of the filing include a proposed resolution of most of those cases, but a group of states that have refused to settle with Purdue are expected to contest the bankruptcy and pursue the Sackler family, the owners of Purdue.

Filing for bankruptcy, and restructuring the company through that process, is part of a tentative settlement agreement that would put all profits from OxyContin towards plaintiffs’ claims and the R&D of medicines to treat addiction and overdoses, which would then be donated to the public. The Sackler family would also have to sell their Britain-based drug company Mundipharma; the proceeds from that sale, too, would go towards the settlement.

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The Times also notes that Friday afternoon, New York attorney general Letitia James announced that her office had uncovered nearly $1 billion in previously undisclosed wire transfers from Purdue to private accounts held by one of the Sacklers. CNN reports that the office is trying to determine how much money the Sacklers have and where it is. A spokesperson for Mortimer D.A. Sackler, former Purdue board member, states that the transfers in question are “decade-old transfers, which were perfectly legal and appropriate in every respect.” CNN notes that this particular member of the Sackler family was involved in 137 wire transfers totaling nearly $20 million, some of which occurred as recently as 2018.

 

The Opposition

The states opposing the deal do so for two reasons. First, Purdue has assessed the value of the settlement at $10 billion, a number which the states have said is based on optimistic calculations that may take years to realize, the Times reports. Second, the Sacklers would be able to continue participating in the drug manufacturing business until Mundipharma is sold—thus, lawsuits will be paid for in part through ongoing sales of OxyContin, rather than entirely by the Sacklers. States in opposition include Massachusetts, New York, New Jersey, Connecticut, Pennsylvania, California, Illinois, Virginia, Delaware, and North Carolina, among others, most of which have sued the Sacklers in addition to Purdue, or are about to. 24 states have signed onto the deal, and the Times reports that they are looking to secure guaranteed money from a seemingly inevitable bankruptcy, and to end expensive litigation.

Whether or not opposing states will be able to override bankruptcy protections is unclear. The Times reports that several states have accused the Sackler family of transferring billions of dollars from Purdue to shell corporations and private accounts, in moves amounting to “fraudulent conveyance,” which may be sufficient. Also, while bankruptcy is federal, many states say that the Sacklers have violated individual states’ consumer protection and fraud laws, which could give them the authority to pursue the Sacklers in their own courts.

Steve Miller, chairman of Purdue’s board of directors, said in a statement: “This unique framework for a comprehensive resolution will dedicate all of the assets and resources of Purdue for the benefit of the American public. This 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.”

CNN quotes Pennsylvania’s attorney general Josh Shapiro as saying that the case is “far from over”: “This apparent settlement is a slap in the face to everyone who has had to bury a loved one due to this family’s destruction and greed. It allows the Sackler family to walk away billionaires and admit no wrongdoing.”

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