Purdue’s $7.4 Billion Opioid Settlement Is Approved

BY BECKY YERAK

OxyContin manufacturer Purdue Pharma won court approval for an opioid-related settlement plan of at least $7.4 billion, clearing its path to exit from a six-year bankruptcy and resolve mass lawsuits against the company for fueling addiction.

Friday’s ruling in a bankruptcy court in New York all but ends the longest and costliest-ever corporate bankruptcy case stemming from the U.S. opioid crisis by a closely held company that came to symbolize drugmakers’ marketing and promotion of addictive painkillers.

The reorganization plan approved in court will largely be funded by Purdue’s owners from the Sackler family, who were sued alongside the company in thousands of lawsuits seeking to hold them liable for the costs of drug addiction.

The Sackler owners have denied wrongdoing but agreed to fund $6.5 billion in settlement payments over time that will be distributed to state and local governments, healthcare providers and individuals. Purdue itself will contribute an additional $900 million.

Purdue will cease to exist under the reorganization and transfer most of its operating

assets to a newly formed entity called Knoa Pharma, which expects to provide treatments and medicines to combat the opioid crisis. Knoa will be owned by a newly created foundation, with no involvement from the Sacklers, and states will pick members of the initial board of directors.

Judge Sean Lane of the U.S. Bankruptcy Court for the Southern District of New York said Friday that he would approve the reorganization and expects to provide his reasoning at another Purdue hearing next week.

“The plan is the product of intense work with our creditors through a singular, shared focus on delivering as much value as possible to meaningfully address the opioid crisis,” said Purdue’s chairman, Steve Miller. “Today cements the end of a long chapter, and brings us very near to the end of the book for Purdue.”

Purdue filed for chapter 11 in 2019, overwhelmed by mass opioid-related lawsuits against the company and its owners. An earlier reorganization proposal for Purdue was rejected last year by the Supreme Court, which barred the company from granting blanket liability releases to the Sacklers when not all opioid- related plaintiffs had accepted their settlement offer. Purdue, the Sacklers and its creditor representatives returned to the negotiating table to craft another plan in which the family members upped their contributions to as much as $6.5 billion, up from a range of $3 billion to $4.5 billion previously.

Under the revised structure, the Sacklers will only be granted releases by creditors who agree to grant them. Those who don’t grant releases will keep their rights to sue the Sackler owners in civil court. The Sacklers might contribute an a d d i t i o n a l $ 500 million depending on the outcome of the sale of an international drug business that isn’t part of the bankruptcy, according to Purdue.

Of the total settlement proceeds, individual victims alleging they were harmed by OxyContin could receive their share of $866 million in cash.

Christopher Shore, a lawyer for a group of people who support the plan, said in Friday’s hearing that getting a claim recognized through the bankruptcy settlement would be easier, less costly and less time-consuming than fighting the Sacklers in court.

The relatively few who opposed the plan were mostly people whose lives have been affected by opioid addiction. Purdue pleaded guilty in 2020 to three federal felonies in connection with its marketing and distribution of opioids.

After it launched the prescription opioid OxyContin in the 1990s, Purdue became one of the most recognizable names in treating pain. It entered bankruptcy facing lawsuits from virtually every state, as well as some 2,600 cities, counties, Native American tribes, hospitals and others seeking to recoup costs incurred from the opioid crisis. Drugmakers Mallinckrodt and Endo also faced crippling opioid litigation and used chapter 11 in recent years to cap their liabilities.

During the bankruptcy, more than 600,000 claims were filed against Purdue, including by the U.S. government, states, thousands of governments, hundreds of Native American tribes, more than 130,000 personal-injury victims, hospitals, public schools and others.

The Sacklers haven’t had a role at Purdue since 2018, will have no role at Knoa and are prohibited from making or selling opioids in the future. The reorganization also creates a publicly available document library that will cover Purdue’s historical sales and marketing practices. It will rival the size of the tobacco industry’s repository, according to Purdue. Becky Yerak writes about bankruptcy for WSJ Pro.