Purdue Pharma Offers Plan to End Sackler Control and Mounting Lawsuits

In a message marking the beginning of the end of the most notorious prescription opioid maker in the country, Purdue Pharma unveiled its bankruptcy restructuring plan just before midnight on Monday. The blueprint requires members of the billionaire Sackler family to give up control of the company and transform it into a new business whose revenues are solely aimed at alleviating the addiction epidemic that caused its signature pain reliever, OxyContin.

The 300-page plan is the company’s formal offer to end thousands of lawsuits and includes the Sacklers pledge to pay $ 4.275 billion out of their personal assets – an additional $ 1.3 billion than their original offer – to reimburse states, communities, tribes and other plaintiffs for the costs associated with the epidemic.

If the plan is approved by a majority of the company’s creditors and Judge Robert D. Drain of Federal Bankruptcy Court in White Plains, NY, payments will flow into three buckets: one to compensate individual plaintiffs, such as families whose relatives have overdosed , or legal guardians of infants with newborn abstinence syndrome as well as hospitals and insurers; another for tribes; and the third – and largest – for state and local governments devastated by the cost of a drug epidemic that only worsened during the Covid-19 pandemic.

“With drug overdose still at record levels, it is time to use Purdue’s fortune to help tackle the crisis,” said Steve Miller, chairman of the Purdue board of directors, in a statement. “We are confident that this plan will achieve this important goal. ”

It remains to be seen whether the plan will be adopted. Since the company filed for bankruptcy in 2019, 24 states and the District of Columbia have denounced it, arguing that the lawsuit would preclude their ability to take legal action directly against individual Sackler family members who they consider to be inadequate contributions.

Although some details of the settlement terms are still being worked out, Purdue officials said the Sacklers would not be exempt from criminal investigations that could be launched by a handful of states for violating consumer protection laws. However, the plan exempts them from further civil litigation.

The new application, filed minutes before a court-set deadline, marks a milestone in Purdue’s long, troubled history as the maker and marketer of OxyContin, the prescription pain reliever that has become addicting hundreds of thousands of people. Federal and state agencies spent years trying to curb Purdue’s marketing tactics. In 2007, the Justice Department reached an agreement with Purdue and top executives on $ 634.5 million to resolve criminal charges related to its marketing practices.

As of 2015, when the opioid epidemic hit the country, the lawsuit engulfed cities, counties, states, tribes, families, hospitals and insurers, drug distributors, pharmacies and manufacturers, including Purdue boss. The cases almost consistently claim that OxyContin helped lay the foundation for the prescription and illicit drug addiction epidemic that killed more than 400,000 people over 20 years.

To halt the growing civil lawsuit that cost Purdue $ 2 million a week in legal costs, the company filed for bankruptcy protection in 2019.

The legal dispute before a federal court against other companies continues.

The biggest difference between Purdue’s earlier proposals and this latest plan is that the Sacklers increased their payments by $ 1.3 billion and extended their payment schedule by an additional two years (from seven to nine).

Another notable change concerns control of the new company. The original 2019 proposal called for it to be monitored by state-appointed officials. The restructuring plan now describes it as a private company run by independent managers selected by the states and local governments that sued Purdue. The largest groups of applicants – tribes and the government – own the company and would ensure that the proceeds are used solely for crisis management programs.

The company’s managers could sell to private owners by 2024, but those owners would also be bound by the same rules of conduct and income directions.

As it worked its way through the bankruptcy process, Purdue pleaded guilty in November of fraud against health officials and violating anti-kickback laws.

Individual members of the Sackler family agreed to pay the federal government civil fines of $ 225 million, but said in a statement that they “acted ethically and lawfully.” Although the Sacklers were not charged, the Justice Department reserves the right to file criminal charges later.

A key goal of the new Purdue plan is to install guard rails to ensure that settlement money is used to alleviate the epidemic, rather than being paid out more generally to cover budget constraints. Such payouts were a major criticism of the 1998 settlement that ended widespread legal disputes against the large tobacco companies that opioid disputes are sometimes compared to.

During the bankruptcy negotiations, pushed forward by the creditors, the company suggested in its plan that the payouts comply with the latest public health principles signed by at least two dozen major medical, drug policy, and academic institutions, and attention to drug prevention, youth education, and race set up justice and transparency.

Tens of thousands of parties vote on the plan. Confirmation hearings will follow and completion is expected in a few months. Since bankruptcy proceedings began 18 months ago, leaders of a large community bloc have signaled their support, as have 24 states.

Lloyd B. Miller, who represents numerous tribes including the Navajo Nation, said his customers were on board.

“It is critical that more funds go to the treatment of opioids in tribal communities, all the more given the extraordinary devastation tribes have suffered during the Covid pandemic,” he said.

But since 2019, when Purdue filed for bankruptcy, 24 other states – some controlled by Democrats, others by Republicans – and the District of Columbia have declined to take the move, finding that Purdue has continued to benefit from its OxyContin sales.

Maura Healey, the Massachusetts attorney general who was the first to sued individual members of the Sackler family, alleged that Sackler payments under this scheme would come from their investment returns rather than capital.

“The Sacklers became billionaires by causing national tragedy,” Ms. Healey said in a statement. “They shouldn’t be allowed to get away with paying a fraction of their investment returns over the next nine years and walking away richer than they are today.”

Opposing state attorneys general said the plan, while an improvement on previous proposals, still found it disappointing for several reasons. Among them, the plan should be amended to “achieve a speedy and orderly liquidation of the company that does not involve unduly states and other creditors”.

Two branches of the Sackler family – heirs to two brothers who founded the company – said: “Today is an important step in helping addicts and we hope that this proposed resolution signals the beginning of a far-reaching development. Make an effort to provide help where it is needed. “

The oldest brother, Dr. Arthur Sackler, sold his shares before OxyContin was launched, and his relatives are not part of the litigation.

A forensic review of the Sacklers’ finances commissioned by Purdue as part of bankruptcy investigations found that the family made more than $ 10 billion from the company from 2008 to 2017. Family lawyers said the full amount was illiquid: more than half went into taxes and investments in companies sold under the bankruptcy agreement.

Although states and other creditor blocs have protested vigorously against elements of the plan for the last 18 months, many factors seem to favor the likelihood of approval: the length of the litigation, the exorbitant costs for all parties, the urgency of the worsening opioid crisis, and the general depletion of public health resources due to the coronavirus pandemic.

The new company would continue to sell OxyContin, a pain reliever that is still approved by the Food and Drug Administration in limited circumstances. But it would diversify its products to include generics and a drug used to treat attention-deficit hyperactivity disorder, as well as new drugs to reverse overdose and treat addiction to be marketed as a public health initiative on a nonprofit basis.

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