Per the New York Times, Purdue Pharma, the maker of the synthetic opiate drug, OxyContin, filed a restructuring plan yesterday, minutes before a deadline, in bankruptcy court. The restructuring plan has been long-awaited. In October 2020, Purdue was hit with $8 billion in federal penalties—the largest penalty ever for a pharmaceutical company.
Approximately $3.5 billion of the $8 billion were for fines, $3 billion for liability costs, and $2 billion for forfeited profits.
As expected, the restructuring plan relinquishes control of the company by the billionaire Sackler family. Henceforth, a new corporation will run Purdue Pharma. Revenue that the new corporation generates will be exclusively directed toward abating the addiction epidemic that its signature painkiller, OxyContin, helped create, reports NYTIMES.com.
The 300-page restructuring plan needs approval from a majority of the company’s creditors and a federal bankruptcy court judge. If approved, the bankruptcy will likely put an end to the thousands of lawsuits the company faces.
OxyContin Victims Could Receive Up to $48,000
The Wall St. Journal reports that Purdue Pharma’s Chapter 11 bankruptcy plan would create a trust worth between $700 million to $750 million to resolve OxyContin personal injury claims. Individuals who filed claims against Purdue Pharma over its flagship synthetic opiate pain-relieving drug could receive up to $48,000 under the plan, depending on the severity of the case. Minimum payouts are projected at $3,500.
Over 100,000 personal injury claims have been filed against Purdue Pharma over damage caused by OxyContin.
State Attorney Generals (AGs), lawyers for the victims, and other critics think the payment plan doesn’t go far enough. It remains to be seen whether AGs and plaintiffs will sign on to the restructuring deal.
Will the Purdue Pharma Bankruptcy Go After The Sackler Family Fortune?
Prior to the restructuring plan, critics of the $8 billion in penalties announced last year complained that despite the fines and forfeited profits, the Sackler family was able to maintain a majority of its personal wealth. The restructuring plan ostensibly will wipe out some of the Sackler family’s personal wealth. The restructuring plan includes “a pledge from the Sacklers to pay $4.275 billion from their personal fortune.” This is roughly $1.3 billion more than the Sackler’s original offer. The money coughed up by the Sackler fortune will be allocated towards reimbursing states, municipalities, tribes and other plaintiffs “for costs associated with the epidemic,” according to the New York Times.
Three Classes of Plaintiff Buckets
The New York Times adds that should the bankruptcy plan be approved, “payments will start pouring into three buckets”:
- Individual plaintiffs
- Native American tribes
- State and local governments
Of the three class of plaintiffs, state and municipal governments are by far the largest. It is local and state governments that have “been devastated by the costs of a drug epidemic that has only worsened during the Covid-19 pandemic,” says the New York Times.
In a statement, Steve Miller, chairman of Purdue’s board of directors said, “With drug overdoses still at record levels, it is past time to put Purdue’s assets to work addressing the crisis.” Miller added, “We are confident this plan achieves that critical goal. ”
Will States Fight To Sue The Sackler Family?
As mentioned earlier, one sticking point in the restructuring plan is the unwillingness of Attorneys General of several states to accept the bankruptcy.
According to the Times, 24 states as well as the District of Columbia have denounced Purdue’s Chapter 11 bankruptcy that was filed in 2019. If the plan is accepted, states that have wanted to go directly after Sackler family members who were on the board, would be unable to do so.
However, even if the restructuring plan is accepted, it would not shield the Sacklers from criminal suits for violating consumer protection laws; the plan would shield Sackler family members from further civil litigation.
Who Will Run Purdue Pharma If The Plan Is Accepted?
The New York Times reports that Purdue Pharma will be run as a de facto private corporation. But not just anybody will be able to take the reins as CEO and other executive positions. Rather, the states and local governments that have sued Purdue would select the independent managers. Moreover, the revamped Purdue would be owned by the federal government and Native tribes. This coalition would make sure that revenue generated from the newly structured Purdue would go towards programs designed to mitigate opioid addiction.
There has been concern that profits generated by a restructured Purdue would merely fill state coffers for any sort of program, be it infrastructure, health care, etc. However, economic guardrails would be put in place to ensure Purdue profits are allocated solely to alleviate the opioid crisis.
Is This The End Of A Company That Caused Hundreds Of Thousands To Become Addicted To Opioids?
In 2019, a lawsuit filed by the state of Massachusetts against Purdue Pharma revealed how the company engaged in deceptive marketing practices. StatNews.com highlighted how Purdue aggressively pursued tight relationships with two of Massachusetts’ elite academic medical centers: Tufts University and Massachusetts General Hospital. The purpose of forging ties with those venerated institutions: “to expand prescribing by physicians, generate goodwill toward opioid painkillers among medical students and doctors in training, and combat negative reports about opioid addiction.”
Purdue adopted this strategy in several states. But Massachusetts’ lawsuit by all means wasn’t the first against the company. Indeed, by January 2019, 36 states had sued Purdue Pharma. Which is why, being faced with $2 million in legal fees per week, Purdue Pharma filed for bankruptcy protection that year.
In addition to US states, many cities, counties, tribes, families, hospitals and insurers were furiously mounting lawsuits against opioid manufacturers, big-chain pharmacies, and drug distributors. The bulk of the lawsuits were filed in 2015, at the height of the opioid epidemic, with most of the claims having been filed against Purdue Pharma.
“The cases almost uniformly allege that OxyContin helped lay the groundwork for the epidemic of addiction to prescription and illegal drugs that resulted in the deaths of more than 400,000 people over 20 years,” says The New York Times.
Do The Sacklers Still Believe They Were Behaving Ethically?
In 2001, five years after OxyContin hit the market, Dr. Richard Stephen Sackler, former chairman and president of Purdue Pharma, and son of Raymond Sackler, who acquired Purdue Pharma, detailed in an email that prescription opiate addiction is the fault of individual users.
StatNews.com says that this coincided when questions were beginning to be raised about OxyContin’s addiction potential, and that of opioid medications in general.
“We have to hammer on the abusers in every way possible,” Sackler wrote in an email in February 2001. “They are the culprits and the problem. They are reckless criminals.”
But even after individual members of the Sackler family agreed to pay the federal government $225 million in civil penalties, the Sacklers, said in a statement just two months ago, before the Congressional Oversight Committee, that they had “acted ethically and lawfully.”