Purdue Pharma, a drug manufacturer accused of fueling America’s epidemic of opioid addiction through its sale of the profitable but highly addictive painkiller OxyContin, filed for bankruptcy Sunday.
The Chapter 11 bankruptcy filing is expected to trigger the ultimate demise of a company that sold a fraction of the opioid prescriptions in the United States but nonetheless is most closely identified with the epidemic because of its pioneering role in narcotic pain pill sales. The company used aggressive, allegedly misleading, sales tactics to push physicians to prescribe millions of doses of its dangerously addictive pills.
The company’s move to seek financial shelter, part of a tentative settlement with thousands of litigants, will shift the focus to new wrangling over how potential proceeds will be divvied up by communities reeling under the burden of addiction and overdose deaths.
The bankruptcy also will raise the stakes on legal sparring over how much of the personal fortunes of the billionaire Sackler family, which owns Purdue, will be available to compensate plaintiffs. States that have rejected the proposed settlement have accused the family of improperly stripping billions of dollars out of the company’s coffers in the past decade to protect the cash from expected court judgments.
“The controversial piece is going to be about how much the Sacklers need to kick in for the deal to work,” said Adam Levitin, a professor specializing in bankruptcy at Georgetown University’s law school.
Under the settlement announced recently, more than 2,000 small-government plaintiffs and 24 states have agreed to the dissolution of the company and a contribution from the Sacklers, valued at $10 billion to $12 billion. But the settlement valuation is in dispute, and a number of states have balked at those terms.
The settlement, which does not include admission of wrongdoing, would reorganize Purdue during the bankruptcy into a nonprofit trust that would continue to produce OxyContin as well as overdose “rescue” drugs that would be distributed at no cost to communities across the country.
“We are hopeful of and expectant that a growing number of states will see this is a much better outcome for them than for us to go into the swamp of litigation that would basically eat up all the resources of the company,” Purdue Chairman Steve Miller said in a conference call with reporters Sunday night.
The proposed minimum contribution from the Sackler family of $3 billion, which could be derived from the sale of a related, family-owned international drug company called Mundipharma, has been called insufficient by state attorneys general who have rejected the plan. New York, Massachusetts, Connecticut and other states argue that the Sackler family has far more money stashed in a number of trusts and investment firms, including in offshore tax havens such as the Channel Islands, that should be made available to plaintiffs. Forbes has estimated the Sackler family’s total worth at $13 billion.
The Sackler family Sunday night issued a statement calling the settlement and bankruptcy a “historic step” to address a “tragic public health situation.”
More than 200,000 people have died of prescription opioid overdoses since 1999. Another 200,000 have died from overdoses attributed to heroin and illegally obtained fentanyl.