September 12, 2019

Purdue Pharma, the maker of OxyContin, and its owners, the Sackler family, have reached a tentative settlement with nearly two dozen states and thousands of U.S. cities, counties, and territories suing the company for allegedly contributing to the U.S. opioid epidemic.

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Background on opioid lawsuits

Across the country, thousands of lawsuits have been filed against pharmaceutical companies over their role in fueling the opioid epidemic. U.S. District Judge Dan Polster in Cleveland, Ohio, is overseeing the consolidation of 2,000 opioid cases brought by 33,000 U.S. counties, cities, and towns—including those that have not filed lawsuits—to settle opioid cases.

Polster on Wednesday approved a proposal to allow the counties, cities, and towns to form a negotiating bloc for settlement discussions with the 13 companies being sued. Polster said the negotiating bloc would be "a voluntary mechanism developed to address the unique circumstances of this litigation," and companies could decide whether to participate in negotiations with the bloc.

Drugmakers also face separate lawsuits brought by state attorneys general (AGs). A district court judge last month ruled that Johnson & Johnson helped to fuel Oklahoma's opioid crisis by downplaying the risks of its opioid drugs and ordered the company to pay the state $572 million. Observers have said the ruling could influence settlement negotiations in similar cases.

Purdue's tentative settlement

For the past year, Purdue and the Sackler family have been working to negotiate a settlement to resolve the local government lawsuits being overseen by Polster, as well as lawsuits filed by state AGs. Sources familiar with the matter said Purdue as of Wednesday had reached a tentative settlement with attorneys representing thousands of cities and counties in federal lawsuits, 23 states, and three U.S. territories, the Wall Street Journal reports.

The proposed settlement would total up to $12 billion, Reuters reports.

Under the proposed settlement, the Sackler family would:

  • Give up ownership of Purdue;
  • Pay $3 billion of their own money over seven years; and
  • Sell Mundipharma, another drug company they own, and contribute $1.5 billion or more from the sale's proceeds toward the settlement agreement.

Purdue would not cover the costs of the settlement in a straightforward cash payment. The majority of the funds Purdue would pay under the settlement would come from the company's restructuring under a Chapter 11 bankruptcy filing, which would convert Purdue from a private company into a "public beneficiary trust" and allow the profits from the company's drug sales—including OxyContin sales—to go to cities, states, towns, and tribes involved in the lawsuits.

According to Journal, an individual familiar with the matter said Purdue could file for bankruptcy as soon as Sunday. Purdue under the settlement would file for bankruptcy under the supervision of a bankruptcy judge who would appoint three independent trustees. The trustees then would select a board of directors for the new public beneficiary trust. The board would be responsible for all the decisions about the trust's revenues.

Purdue under the proposed settlement also would provide public access to substance use disorder treatments the company is developing at no cost. The treatments include tablets designed to curb opioid cravings and an over-the-counter nasal spray that can reverse the effects of an opioid drug-related overdose. Overall, the value of the profits generated from the trust and drug donations is projected to be between $7 billion and $8 billion.

Purdue under the settlement would not admit to any wrongdoing.

The proposed settlement needs to be approved by bankruptcy judge and Purdue's board, which is scheduled to be briefed on the settlement's progress on Thursday, an individual familiar with the matter told Reuters.

Next steps

Purdue said the company "continues to work with all plaintiffs on reaching a comprehensive resolution to its opioid litigation that will deliver billions of dollars and vital opioid overdose rescue medicines to communities across the country impacted by the opioid crisis."

Members of the Sackler family said they support "working toward a global resolution that directs resources to the patients, families, and communities across the country who are suffering and need assistance," as opposed to being involved in "endless litigation."

According to Reuters, a global settlement would allow Purdue to avoid a trial for the cases that is scheduled to begin Oct. 21, individual's familiar with the matter said. It also would make Purdue the first among about two dozen prescription opioid distributors, manufacturers, and retailers to settle all lawsuits alleging the company played a role in opioid epidemic.

However, reaching such an agreement would require all plaintiffs in the cases to agree.

Attorneys representing cities and counties in federal court viewed the proposed settlement favorably. "We believe that this settlement would bring desperately needed recovery resources into local communities that, for years, have been forced to shoulder the devastating consequences and financial burden of the opioid epidemic," the lawyers said.

Some state AGs, including Tennessee AG Herbert Slatery (R), also have agreed to the proposed settlement's framework. Slatery's office called the proposal "the most significant step to date in a multi-year investigation and negotiation to obtain meaningful relief to address the opioid addiction crisis." Slatery said the proposed settlement "would secure billions of dollars nationwide to go toward addressing the devastating effects of the opioid epidemic and will result in the Sackler family divesting themselves of their business interests in the pharmaceutical industry forever."

However, AGs from more than a dozen states oppose the proposed settlement, the New York Times reports.

According to the Times, AGs from Connecticut, Massachusetts, and New York have called on the Sackler family to pay $4.5 billion to resolve the lawsuits. Some AGs have pledged to pursue efforts to compel the Sackler family to pay more of their money to governments seeking to recover funds they have spent on care, enforcement, and treatment for opioid-related substance use disorders over the years. According to the Times, the states' resistance casts doubt on whether a bankruptcy judge will approve the proposed settlement.

North Carolina AG Josh Stein (D) said, "Along with many other states, I wasn't satisfied with Purdue's position. I allege that these people are among the most responsible for the trail of death and destruction the opioid epidemic has left in its wake—and I will not stop fighting until I am assured that they have made a meaningful and certain commitment to pay for drug addiction treatment and other remedies."

New York AG Letitia James (D) said, "While our country continues to recover from the carnage left by the Sacklers' greed, this family is now attempting to evade responsibility and lowball the millions of victims of the opioid crisis. A deal that doesn't account for the depth of pain and destruction caused by Purdue and the Sacklers is an insult, plain and simple."

Connecticut AG William Tong (D) said, "I remain steadfast in my view that the Sacklers have to give back the money they took from selling opioids so that we can put it toward solving the problem they created. The current proposal does not do that" (Randazzo/Hopkins, Wall Street Journal, 9/11; Spector/DiNapoli, Reuters, 9/11; Hellmann, The Hill, 9/11; Hoffman, New York Times, 9/12).

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