Purdue Pharma Is Dissolved and Sacklers Pay $4.5 Billion to Settle Opioid Claims
Purdue Pharma, the maker of the highly addictive painkiller OxyContin, was dissolved on Wednesday in a wide-ranging bankruptcy settlement that …
Purdue Pharma, the maker of the highly addictive painkiller OxyContin, was dissolved on Wednesday in a wide-ranging bankruptcy settlement that will also require the company’s owners, members of the Sackler family, to turn over billions of their fortune to address the deadly opioid epidemic.
But the agreement includes a much-disputed condition: It largely absolves the Sacklers of Purdue opioid-related liability. And as such, they will remain among the richest families in the country.
Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., provisionally approved the plan, saying he wanted modest adjustments. The painstakingly negotiated plan will end thousands of lawsuits brought by state and local governments, tribes, hospitals and individuals to address a public health crisis that led to the deaths of more than 500,000 people nationwide.
The settlement terms have been harshly criticized for shielding the Sacklers. They are receiving protections that are typically given to companies that emerge from bankruptcy, but not necessarily to owners who, like the Sacklers, do not themselves file for bankruptcy.
Several states were preparing to file an appeal as soon as the judge approved the settlement.
In exchange for the protections, the Sacklers agreed to turn over $4.5 billion, including federal settlement fees, paid in installments over roughly nine years. Those payments, and the profits of a new public benefit drug company rising from Purdue’s ashes with no ties to the Sackler family, will mainly go to addiction treatment and prevention programs across the country.
Judge Drain delivered his ruling orally from the bench in a marathon session that ran to six hours, meticulously working through his reasoning in a case he called the most complex he had ever faced. “This is a bitter result,” he said. “B-I-T-T-E-R,” he spelled out, explaining that he was incredibly frustrated that so much of the Sackler money was parked in offshore accounts. He said he had expected and wished for a higher settlement.
But the costs of further delay, he said, and the benefits of an agreement he described as “remarkable” in its consensus and focus on abating the epidemic, tilted toward approval.
While the settlement is clearly a benchmark in the nationwide opioid litigation aimed at covering governments’ costs and compensating families, it also means that a full accounting of Purdue’s role in the epidemic will never unfold in open court. Purdue pleaded guilty to federal criminal charges for drastically downplaying OxyContin’s addictive properties and, years later, for soliciting high-volume prescribers.
But in a concession that made the bankruptcy plan more palatable to many plaintiffs, the company and the Sacklers agreed to make public more than 30 million documents, including confidential emails.
Just last month, Dr. Richard Sackler, a former president and co-chairman of the board, testified that neither the family, the company nor its products bore any responsibility for the opioid epidemic. Other Sacklers struck a more conciliatory note, saying they were horrified that a medication intended to alleviate pain had, in fact, caused pain to so many. But neither apologized nor took personal responsibility.
“I don’t think anybody would say that justice has been done because there’s just so much harm that was caused, and so much money that has been retained by the company and by the family,” said Dr. Joshua Sharfstein, a professor at the Johns Hopkins Bloomberg School of Public Health who developed a set of priorities for opioid settlement funds. “But this is what the legal system is going to produce. So at this point, the question becomes, how can those resources be used as effectively as possible?”
A majority of states and other plaintiffs support the plan, reasoning that it is the best to help pay for a problem that has only grown worse during the pandemic, with a record number of opioid overdose deaths last year.
The Purdue settlement aligns with what some experts predicted from the outset: The money extracted through litigation will not be sufficient to cover the costs of the epidemic — including for law enforcement, treatment and social services — which some economists put in the trillions.
The Sacklers’ payments will come from their investments and the sale of their international pharmaceutical companies, over seven years. Purdue will pay roughly $500 million. Anticipated profits from the new company’s drugs, including OxyContin, will provide additional funds.
States will get money from a national opioid abatement trust, which they will distribute to their local governments. Native American tribes have their own fund.
Another fund will compensate 130,485 individuals and families of those who suffered from addiction or died from an overdose, in amounts ranging from $3,500 to $48,000. Guardians of about 6,550 children with a history of neonatal abstinence syndrome may each receive about $7,000.
“It was take it or leave it,” said Ryan Hampton, who resigned on Tuesday as co-chairman of a watchdog committee of plaintiffs, appointed by the federal government.
OxyContin came on the market in 1996, at a time when doctors were being exhorted to recognize and treat pain, a symptom that the medical profession had tended to disregard as psychological or fleeting.
Purdue’s sales troops fanned across the country, preaching the new pain relief gospel to thousands of doctors, who began prescribing OxyContin for both acute and chronic pain. By 2000, sales of the new drug had grown to almost $1.1 billion.
But soon afterward, reports began surfacing of OxyContin pills being stolen from pharmacies and crushed and snorted. In 2007, the company and three executives pleaded guilty to federal criminal charges, paying a combined $634.5 million for minimizing the drug’s risk of addiction to doctors, regulators and patients.
The nation was pounded by a spiraling epidemic of opioid abuse and overdose deaths. By 2014, local governments began filing lawsuits against Purdue. More plaintiffs followed, eventually suing other companies across the pharmaceutical supply chain. Members of the Sackler family became the personification of the epidemic’s villains. The Sacklers withdrew $10.4 billion from Purdue between 2008 through 2017, of which they say about half was paid to taxes.
In September 2019, Purdue, facing 2,900 lawsuits, 628 of which named the Sacklers, filed for bankruptcy restructuring, which paused all claims.
The most ferocious battle was fought over the extent to which the Sacklers would be released from Purdue-related lawsuits.
Companies that emerge from bankruptcy restructuring are granted considerable legal protections. But federal appeals courts disagree over whether that shield can be accorded owners, like the Sacklers. The prospect of Sacklers left relatively unscathed has led some members of Congress to introduce a bill that would prevent protections for owners in similar situations.
The settlement does not preclude criminal prosecution. But realistically, say prosecutors, those cases are difficult to prove; no government entity has pressed a Purdue-related criminal charge against a Sackler.
The Sacklers can still be held liable for some non-opioid related claims against Purdue, such as an environmental hazard or other Purdue drugs, if their conduct occurred before the bankruptcy plan takes effect.
During hearings last month, four Sacklers tried to put an arm’s length between their role as board members and that of Purdue’s executives, whom they said oversaw marketing and sales.
But Dr. Kathe Sackler also testified, “I wouldn’t describe the board as passive listeners.” Rather, she said, they were “attentive listeners. Asked good questions, thoughtful questions, engaged in some debate over some questions from time to time.”
Nine states objecting to the plan, including Maryland, Washington and Connecticut, argued that the shields would prevent governments from prosecuting the Sacklers for violating laws like consumer protection statutes.
Washington’s attorney general, Bob Ferguson, who announced he was likely to file an appeal, called the plan “morally and legally bankrupt,” because, he said, “it allows the Sacklers to walk away as billionaires with a lifetime legal shield.”
Another objector was the U.S. Trustee, a program under the Department of Justice that monitors bankruptcy cases, which said the Sackler releases were still too broad.
But Marshall Huebner, a bankruptcy lawyer who has shepherded Purdue through proceedings, contended that such objections would topple the Jenga tower-like deal and delay desperately needed funds.
He characterized the governments’ terms as indeed punitive toward the Sacklers and their company. “We will rip it out of your hands,” he said. “We will stomp it out existence. We will transfer its assets to a trust for the benefit of the American people. It will have a monitor. We will pick the board. You will be barred. And you will have to sell all your overseas companies and give us over $4 billion.”
A Congressional committee investigating the Sacklers last spring estimated the family fortune at about $11 billion.
Judge Drain had largely excluded the voices of victims during the two years. But at the conclusion of testimony in August, he pointedly acknowledged the families whose tragedies were entwined with Purdue’s drug.
He spoke haltingly, his voice choking up. “I am very aware of the impact that this company’s products have had on hundreds of thousands of people,” he said.
The letters families placed on the docket were eloquent and brave, he said. “If anyone doubts that impact, you should read them, not as advocates’ pieces but as evidence of the effect of this company’s products.”
Judge Drain broke off in mid-sentence, overcome, and abruptly left the bench, ending the hearing.
One letter he noted was from a Minneapolis widow with Stage 4 cancer. Years earlier, her firefighter husband was prescribed OxyContin for a back injury. He became addicted. Eventually he lost his job. Then the family lost its home. In September, he committed suicide.
“I believe the Sackler family should know what their greed has caused,” the widow, Stephanie Lubinski, wrote. “They should know the name Troy Lubinski and the many, many others that have lost their lives to OxyContin.”