Purdue Proposes Bankruptcy Plan for Settlement in Opioid Litigation with Sacklers to contribute $4.3 Billion

In the latest development in the Opioid litigation, the Purdue Pharma LP filed a bankruptcy plan on March 15, 2021. Purdue Pharma L.P., Case No. 19-23649. As per Purdue Pharma, the plan would resolve thousands of opioid lawsuits. The Bankruptcy plan aims to restructure the OxyContin maker into an entity that would drive profits to plaintiffs and would require the Sackler family owners to pay up nearly $4.3 billion towards the settlement. The plan is the proposed route for Purdue to exit the bankruptcy, which was filed in September, 2019, in response to around three thousand lawsuits filed against the company accusing it of fueling the national opioid crisis through deceptive marketing.

As per the plan which is proposed by Purdue, public trusts would be set up which would indirectly control the new entity. The aim would be to distribute money to states, local governments and tribal organizations for opioid abatement programs. Further, the Sacker’s contribution of around $4.3 billion would be made over the span of nine years. Purdue alleged the plan to be worth more than $10 billion. Trusts would also be established to pay out private entities and individuals, such as hospitals, insurance carriers and legal guardians of children born with addiction-related issues that had brought opioid-related lawsuits against the company. The established trust would be funded with an initial cash infusion of around $500 million, once the company comes out of the bankruptcy. And later, $1 billion would be generated from the new entity’s assets and operations till 2024. The trusts would also receive funds from Sackler’s contribution. Purdue also expects to receive funds from several insurance policies.

With respect to the administration of the new entity, a board would be constituted of independent managers selected by states and local governments in consultation with Purdue and its unsecured creditors’ committee. However, the Sacklers would not be a part of the selection process. Also, the new entity would not promote opioid products to healthcare providers.

Further, the plan aims to create a publicly available repository for documents relating to government’s investigation into alleged misconduct in the marketing of opioids. The repository would be created once the plan is approved by the bankruptcy court. The plan proposed by Purdue sounds pleasant and even had support from about half of the U.S. states and other governmental entities for the proposed settlement. However, many states have been opposing Purdue’s plan and the public trust arrangement and the size of the initial $3 billion contribution from the Sacklers. The opposing states believe that the contribution from Sacklers should have been larger.

The Sacklers entered into a separate settlement with U.S. Department of Justice, of $225 million, to settle a civil investigation. Purdue was alleged to be involved in criminal forfeiture of $2 billion. As a result of the settlement, the Justice Department agreed to let go the rest, if the company developed a reorganization plan which would establish a public benefit company or a similar entity which would dedicate the remaining $1.775 billion to U.S. communities battling the opioid crisis.

The opioid-litigation settlement has made the pharmaceutical industries more accountable towards the products they promote and the health implications on the consumers.

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