Topline
Purdue Pharma’s bankruptcy settlement, worth more than $10 billion on paper, was approved by a federal judge Wednesday, ending thousands of claims against the OxyContin maker and giving members of the Sackler family, who own the company, protection against future lawsuits over the opioid crisis, which has claimed half a million lives.
Key Facts
Under the ruling—by Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York—members of the Sackler family will pay more than $4.3 billion and sever ties with Purdue, which will be turned into a new company with the mission of ending the opioid epidemic that the company is widely blamed for starting.
Over the objections of critics, the settlement shields members of the Sackler family from future lawsuits, even though they did not declare bankruptcy themselves.
Not approving the deal would have made it harder for people harmed by the opioid crisis to get money for treatment, Drain said in a ruling read from the bench.
As part of a separate federal agreement, Purdue agreed to pay the Justice Department up to $6.3 billion in civil and criminal penalties, putting the combined settlements’ potential value at more than $10 billion—but the company does not have enough money to pay out most of the amounts making up those penalties, according to Lindsey Simon, a law professor at the University of Georgia who specializes in bankruptcy.
Connecticut and Washington state announced they would appeal the decision shortly afterward, while a Justice Department spokesperson told Forbes it would ask for the ruling to be stayed while the case is appealed.
Nearly 500,000 people died of opioid overdoses between 1999 and 2019, according to the Centers for Disease Control and Prevention, and comprised seven in 10 overdose deaths in 2019.
Crucial Quote
Drain preempted critics who said that the plan favored the Sacklers. “This is not a ‘Sackler Plan,’” he said, “but a plan agreed to by 80% of the states” and 95% of creditors who voted on the deal.
Contra
“This IS the Sacklers' plan,” Adam Levitin, a Georgetown University law professor who focuses on bankruptcy and commercial law, wrote on twitter. “The basic framework” of the deal, he said, “is the one the Sacklers designed: a public benefit company or the like plus releases for the Sacklers in exchange for the Sacklers' contribution of some of their assets. The other details are irrelevant to the Sacklers.”
Chief Critic
“The Sacklers are not bankrupt, and they should not be allowed to manipulate bankruptcy laws to evade justice and protect their blood money,” William Tong, Connecticut’s attorney general, said in a statement responding to the ruling.
Big Number
$10 billion. That’s at least how much money members of the Sackler family withdrew from Purdue Pharma in the decade after the company’s admission, in 2007, that it lied about OxyContin’s addictiveness.
Key Background
The settlement was approved by the Trump administration in October in an agreement that also included Purdue admitting guilt to three felony counts of defrauding the government and violating anti-kickback laws. The civil settlement was approved by a majority vote of Purdue’s creditors in July, although the vast majority of them did not vote, the Wall Street Journal reported. Most states signed off on it, many reluctantly: “We have achieved the very best we can under current law,” Massachusetts Attorney General Maura Healey said of the settlement terms in July, when her state and 14 others gave up their opposition to the plan.
What To Watch For
The Justice Department may appeal the ruling, something that Purdue has tried to persuade the department against, NPR reported. Senators Elizabeth Warren (D-Mass.) and Richard Blumenthal (D-Conn.) and Representatives Carolyn Maloney (D-N.Y.) and Mark DeSaulnier (D-Calif.) asked Attorney General Merrick Garland to immediately appeal a decision, while Maloney and DeSaulnier in March proposed the Sackler Act, which would prevent people from being shielded from legal liability as part of bankruptcy settlements where they don’t personally claim bankruptcy. The Justice Department’s lawyers, like many states and critics of the deal, have said that the Sackler family is misusing the bankruptcy deal to shield themselves from legal liability for their role managing the company, and their enrichment from OxyContin, despite not claiming bankruptcy themselves.
Tangent
Drain said that the media, academics and members of Congress had misled the public that the settlement would provide immunity from prosecution because they used the word “immunity” to describe the proposed deal. In fact, immunity also refers to protection from civil suits.
Further Reading
Judge begins ruling on Purdue Pharma bankruptcy plan that shields Sacklers (Reuters)
Justice Department Blasts Purdue Pharma's Bankruptcy Plan (NPR)
Key Critics Of Purdue Pharma's Bankruptcy Deal Withdraw Their Opposition (Forbes)
Sackler Family Members Come Out Fighting With New Website Ahead Of OxyContin Settlement Confirmation (Forbes)
