Report: With No Settlement, Purdue Could File for Free-Fall Bankruptcy
If Purdue Pharmaceuticals does not reach a $10 to $12 billion settlement for its role in the opioid crisis, the company could file for bankruptcy by the end of the month, Reuters reported this morning.
Citing unnamed sources “familiar with the matter,” Reuters said that the company will have no choice but to file for bankruptcy should a settlement not be agreed upon. The filing would be ahead of a watershed opioid trial in an Ohio courthouse that is set to open in October. The trial has consolidated approximately 2,000 opioid lawsuits and involves multiple companies, including Purdue, Johnson & Johnson, Teva and more. Last week BioSpace reported that Purdue was eying the $10 to $12 billion settlement for its role in the opioid crisis but that hinges on whether or not the attorney generals from 35 states will agree to the settlement. In its report, Reuters said a federal judge has set the threshold for the number of attorney generals and is expecting an update on the progress later this week. If a settlement is not reached, attorneys for Connecticut-based Purdue have stressed that the company will have no choice but to see protection from filing Chapter 11 should a settlement not be reached.
The negotiations that include the potential $12 billion settlement include a restructuring of the company that includes the Sackler family ceding control of Purdue. However, if the settlement is not reached, the Chapter 11 filing would be considered “free-fall,” which means it lacks a reorganization consensus, Reuters noted. Under the possible restructuring plan, Purdue turn itself into a for-profit “public benefit trust” for a period of at least 10 years. The company would contribute $7 to $8 billion to the trust from the sale of its drugs, while the remaining billions would come from Purdue’s cash and insurance policies. Part of that would include the Sackler family paying about $3 billion into the settlement, as well as an additional $1.5 billion from the potential sale of another company the family owns, Mundipharma.
Some of the opposition from the states stems from the anger with the pharmaceutical industry over the aggressive marketing of opioids that have contributed to the deaths of thousands of people. Attorney generals from Connecticut, the home state of Purdue, as well as Massachusetts, a state that has been in a heated lawsuit with the company, have balked at the settlement proposal. According to Reuters, officials from those states have expressed concern over how much money the Sackler family will have to pay. Some officials believe the Sackler family should pay more than what was offered, Reuters said. Also, those officials do not want the additional $1.5 billion to hinge on the potential sale of Mundipharma. According to the report, they believe that the family should be obligated to that $4.5 billion regardless of the potential sale of the company.
The Sackler family has been criticized for its role in the aggressive marketing of OxyContin, the pain killer that has become the poster drug for the opioid crisis. Documents from the court case in Boston highlighted some of the Sackler executives’ desire to profit from the sale of the opioid. Court documents released earlier this year revealed that Richard Sackler, a former Purdue president, encouraged staff to seek a plethora of prescriptions during a launch party for OxyContin shortly after the drug had been approved by the U.S. Food and Drug Administration. The Sackler family, which took home more than $4 billion from sales of OxyContin, has denied that it was involved in any illegal marketing practices.
For now though, it’s a waiting game for how Purdue moves forward. Last week, Purdue hinted to BioSpace that it was interested in the settlement. In a statement, the company said it sees “little good coming from years of wasteful litigation and appeals.” Purdue said it is looking for a “constructive global resolution” and is working with plaintiffs to achieve the goal.