Could Purdue Pharma File for Bankruptcy as a Legal Maneuver to Address Lawsuits?
As Purdue Pharma grapples with multiple lawsuits over the marketing of its OxyContin pain killer that could financially devastate the company, there are reports that the Connecticut-based drugmaker is exploring the possibility of filing bankruptcy as a type of legal defense mechanism.
Late Monday, Reuters reported that “unnamed sources familiar with the matter,” have suggested the company could file for Chapter 11 protection in order to halt the lawsuits and allow the company to negotiate legal claims with plaintiffs. Purdue is the subject of some 1,600+ lawsuits, including a fierce one in Massachusetts that the company is seeking to dismiss.
But, for now, the Reuters sources say there is no guarantee the company will actually pull the trigger on the bankruptcy plans. A brief statement from the company was sent to the wire service that said it does not comment on financial matters or legal strategy. Purdue did tell Reuters that the company is committed to ensuring its business “remains strong and sustainable.”
“We have ample liquidity and remain committed to meeting our obligations to the patients who benefit from our medicines, our suppliers and other business partners,” the company told Reuters.
Part of what is fueling the concerns over a potential bankruptcy filing was the company’s decision to hire the legal team of Davis Polk & Wardwell LLP for restructuring advice, Reuters said. In its analysis of the situation, Reuters noted that sometimes companies that face widespread lawsuits such as Purdue “seek bankruptcy protection to address liabilities in one court even when their financial condition is not dire.” As an example, Reuters pointed to California utility PG&E Corp, which filed for bankruptcy protection this year due to potential litigation claims following wildfires that swept across the state.
All of this speculation about a financial strategy is playing out while Purdue is battling multiple lawsuits over the marketing of its opioid products, as well as attempting to restructure its focus to non-opioid painkillers and other products. Over the past few months, the company has made several moves to beef up its non-opioid offerings. In January, the company forged a partnership with Boston-based Alivio Therapeutics to use that company’s inflammation-targeting technology to develop a non-opioid pain treatment for patients with interstitial cystitis/bladder pain syndrome. Purdue and Ocular Therapeutix entered into a research collaboration to determine the compatibility of Purdue’s non-opioid new chemical entities with Ocular’s bioresorbable hydrogel-based technology in the development of non-opioid pain relief therapies. In the fall of 2018, Purdue struck a deal to acquire SpineThera, Inc, and its non-opioid asset SX600, a non-opioid epidural for lower back pain.
On Friday, the company filed a motion to dismiss a lawsuit in Massachusetts that was filed against not only the company, but also named the founding Sackler family of Purdue. In its motion, the company raises into question some of the accusations made by in the lawsuit filed by the state attorney general. Additionally, the company called the allegations made by the state “a misleading narrative by grossly mischaracterizing Purdue internal business documents and emails.” The company said there are many false claims made within the state’s complaint, such as that Purdue Pharma created the opioid epidemic and that the company made choices that caused much of the opioid epidemic in the state. Purdue said the state’s complaint is “replete with sensational and inflammatory allegations” and failed to meet its burden to “allege legally viable claims.”