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Purdue Pharma Files For Bankruptcy as States Seek More Damages from the Sacklers

October 07 2019 | Blog, Pharmaceuticals
  • The parties seen as the architects of the ongoing opioid crisis may be about to face a reckoning. However, the outcome for the individuals most affected by the epidemic remains uncertain.

    The opioid crisis has been on everyone’s lips for years. The disastrous effects of this deadly epidemic and the toll it took on American communities have been covered extensively in the news, conveyed through the press and analyzed by pundits on all sides of the political spectrum. However, those immediately affected by the crisis – the people who are trying to fend off the lethal addiction opioids or the families who lost their loved ones to an opioid overdose – have long felt that while much has been said about the problem, not enough has been done to truly address its root cause. This may be about to change, however, with the most recent developments in legal action against Purdue Pharma – the manufacturer of OxyContin, one of the most widely abused opioid prescription drug – and the Sackler Family, the company’s owners.

    On Wednesday, September 13, after months of difficult negotiations, the representatives of plaintiffs – which include municipal governments and almost two dozen states – have reached a tentative settlement agreement with Purdue Pharma and the Sacklers. However, certain aspects of the deal are expected to be contested by some of the plaintiffs who would like to see the Sackler family shoulder the brunt of the financial liability for the fallout of the opioid crisis.

    Under the proposed deal, Purdue Pharma would file for Chapter 11 bankruptcy and the Sacklers’ private wealth would largely be shielded from any current or future liability claims. Read our blog to learn more about the details of the settlement and how the results are likely to affect individuals who have filed an OxyContin-related lawsuit.

    Contentious Settlement

    The details of the tentative settlement deal between Purdue Pharma and plaintiffs from more than 2,600 federal and state lawsuits began emerging in early September, just a few weeks before the trial scheduled for October 21. Under the proposed deal, Purdue Pharma would be compelled to file for Chapter 11 bankruptcy to be restructured into a new legal entity known as a public benefit trust. This entity would continue selling OxyContin, however, all the profits would be directed to both pay the current plaintiffs and support research into addiction drugs and overdose reversal agents.

    Additionally, the Sacklers are seen by many as one of the driving forces behind the opioid crisis. Due to the direct-to-doctor marketing procedures that they developed and oversaw, the deal would also seek damages directly from the billionaire family. Specifically, the Sacklers would be compelled to pay $3 billion in cash over seven years to the plaintiffs. They would also be forced to sell Mundipharma, a UK-based pharmaceutical company they also own.

    It is unclear, however, whether the proposed conditions of the tentative deal will indeed help settle all pending and future lawsuits. Even though Purdue Pharma already filed for Chapter 11 bankruptcy as of September 16, it is reported that the terms of the filing are likely to be contested by the legal representatives of 26 states currently in litigation against the company. The states appear to be determined to pursue solutions in which more liability would be ascribed to and more damages ordered to pay by the Sackler family who, under the current deal, would be largely shielded from the financial consequences of the litigation.

    What the Bankruptcy Means for Individual Plaintiffs

    When a company files for bankruptcy, all lawsuits against that company become frozen under a legal provision called the automatic stay. This doesn’t mean that plaintiffs’ claims become void; rather the claims will become a part of the bankruptcy proceedings and processed by the bankruptcy court. This means that the plaintiffs will be treated as the company’s creditors and they will still have a claim to a piece of the company’s assets.

    However, in the bankruptcy proceedings, the plaintiffs will be treated as unsecured creditors which means they will only be entitled to a portion of assets that are left after the company settles its liabilities with creditors such as banks and other loan providers. The portion left for plaintiffs may, therefore, be much lower than what original damages would amount to. This is relevant in the case of Purdue Pharma lawsuit as the company’s assessed value of $10 billion is being disputed as too optimistic. In addition, allegations emerged that in the wake of the bankruptcy filing, that members of the Sackler family had diverted as much as $1 billion from Purdue Pharma to private accounts, limiting the company’s available assets.

    The bankruptcy proceedings are expected to start in the second half of September. It remains to be seen whether the current settlement deal will be adopted in its entirety, significantly modified or dropped altogether. Whatever the outcome, however, the hope of millions of Americans is that the current legal action will not only help curb the crisis that has crippled our communities for so long but also justly compensate the individuals and families most affected by it.

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