As Martin Shkreli, Elizabeth Holmes and Sunny Balwani, and the Purdue bankruptcy deal play out, there is even more drama beyond the stories–a failure to pay legal fees.
With Martin Shkreli, Elizabeth Holmes and Sunny Balwani, and the Purdue bankruptcy deal all simultaneously taking place in various courtrooms across America, the ugly side of the pharmaceutical industry has been on full display. Yet, there is even more drama going on beyond the sensational stories - a failure to pay legal fees.
Shkreli owes more than $25 million in penalties and has been banned from future involvement in the pharmaceutical industry. He has been dubbed the “Pharma Bro” due to his brash and unrepentant antics regarding his fraud charges and increasing the price of Daraprim by 5,000% after his former company acquired the decades-old drug, and he now owes more than $2 million in legal fees. According to Reuters, Shkreli’s company, Phoenixus, has stopped paying his legal bills despite having agreed to cover the costs. The report shows that the Swiss-based company exhausted the limits of an insurance policy that covered the fees last fall.
Duane Morris, the legal firm representing Shkreli, filed a motion with the federal court in Manhattan seeking to withdraw from the case because of a lack of assets to pay its fees. The firm said it would not be harmed from the withdrawal because the antitrust trial is over.
Shkreli currently remains in federal prison over his fraud conviction but is eligible for release in November.
While the Shkreli case played out in New York, in California, Elizabeth Holmes, the founder and head of the now-defunct blood-testing startup Theranos is also facing questions over unpaid legal bills. According to CNBC, attorneys representing Holmes in a civil trial have asked the judge to allow them to walk away from the case due to unpaid bills.
Noted law firm Cooley LLP filed a motion in March asking to withdraw from the case. In its filing, the firm said “Holmes has not paid Cooley for any of its work as her counsel of record in this action for more than a year.” Given her current financial situation, the law firm said it anticipated that Holmes would never be able to pay for its services as her legal counsel, CNBC said.
And Holmes is not addressing those debts, at least in public. Following an appearance in court this week, she walked away from reporters asking questions about her legal bills.
It’s not just individuals within the industry who have accrued significant legal bills. Purdue Pharma owes an exorbitant amount of money for the professional services it has used over the past nine months during its bankruptcy proceedings. According to The Wall Street Journal, the company owes $277 million, which is four times as much as Purdue spent on research & development. Out of that more than a quarter-billion dollars, $134 million is owed in legal bills, the Journal said.
The Sackler family, the majority owners of OxyContin maker Purdue, will pay about $6 billion under an approved opioid settlement plan. In 2020, Purdue Pharma reached a combined $8.4 billion criminal and civil settlement with the U.S. Department of Justice.
Other pharma companies have also been embroiled in legal battles, many of them over patent infringements. A recent update reported by Ernst & Young notes that legal fees spent on patent infringement lawsuits can be tax-deductible.
