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Sacklers Say They're Willing to Part With $6 Billion to Settle Opioid Lawsuits

By Laura Temme, Esq. on February 24, 2022 | Last updated on February 25, 2022

The latest proposal in Purdue Pharma's efforts to settle thousands of lawsuits related to the damage opioids have dealt across the nation would cost the Sackler family up to $6 billion. The Sacklers have owned Purdue since the 1950s.

Several state attorneys general rejected an earlier settlement offer with a $4.3 billion contribution from the Sacklers, arguing that even this seemingly large amount was not enough to hold the family accountable.

If the new deal goes through, members of the Sackler family would be shielded from liability in all current and future lawsuits related to the opioid epidemic—lawsuits that have been a thorn in the company's side for over two decades.

A Long (and Expensive) Twenty Years

Over the last twenty years, Purdue Pharma has faced a flood of more than 2,600 state and federal lawsuits for its role in the opioid epidemic.

The flood began as a trickle, though, back in 2001 when the West Virginia Attorney General sued the company to recover "excessive prescription costs" paid out by the state. West Virginia argued that the drug wore off long before the 12-hour mark touted by the company, leading patients to take far more of the drug than prescribed. Purdue settled that case in 2004, and kept all evidence under seal by agreeing to pay $10 million to the state to fund drug abuse programs.

In 2007, Purdue Pharma pled guilty to felony charges of misbranding OxyContin as "non-addictive." The company paid out $601 million in criminal penalties in what at the time was one of the biggest pharmaceutical settlements in U.S. legal history.

Fast forward to 2022, and that amount looks like a drop in the bucket.

Opioid Lawsuits Lead to Purdue's Bankruptcy

Faltering under the weight compiling litigation, Purdue Pharma filed for Chapter 11 bankruptcy in September 2019. As part of those proceedings, the company motioned to enjoin all legal actions against Purdue and the Sacklers—more than 3,000 claims. Claimants consisting of hospitals, public schools, personal injury plaintiffs, as well as state, tribal, and municipal governments became creditors in the company's bankruptcy proceeding.

U.S. District Judge Colleen McMahon had this to say of Purdue's bankruptcy case in a December 2021 opinion (which we discuss in greater detail below):

"Purdue's bankruptcy was occasioned by a health crisis that was, in significant part, of its own making: an explosion of opioid addiction in the United States over the past two decades, which can be traced largely to the over-prescription of highly addictive mediations, including, specifically and principally, Purdue's proprietary, OxyContin."

The company's bankruptcy proceedings have taken a lot of twists and turns, primarily overseen by federal bankruptcy judge Robert Drain of the Southern District of New York.

Even Bankruptcy Experts Struggle to Resolve Proceedings

In his 20 years on the bench, Judge Drain has presided over many high-profile Chapter 11 bankruptcy cases, including cases involving Frontier Airlines, Reader's Digest, Sears, the Minneapolis Star Tribune, and Windstream. He's been praised for his near-encyclopedic knowledge of bankruptcy law, but faced criticism in September 2021 after he approved a bankruptcy plan for Purdue Pharma that included $7.1 billion in bonuses for five top executives. The plan also included the release of several members of the Sackler family from civil liability.

In December 2021, Judge McMahon reversed Judge Drain's confirmation order on an appeal by eight states and the District of Columbia. Judge McMahon found that the bankruptcy court lacked statutory authority to approve a plan which released parties from liability without the other side's consent. She noted that her decision was aided by "extended ruminations on the subject by several esteemed bankruptcy judges of [her] own District—Judge Drain not the least."

Nonetheless, she held that Section 524 of the Bankruptcy Code does not grant bankruptcy courts the power to order a non-consensual release of third-party claims against non-debtors connected to a bankruptcy plan.

Read Judge McMahon's full opinion and thousands more with a free trial of Westlaw Edge.

Are States Close to Settling?

Purdue, the Sacklers, and their creditors went back to the drawing board in early 2022 in another attempt at settlement. Federal bankruptcy Judge Shelley Chapman, who is overseeing the mediation, filed a report on February 18 which stated the Sacklers' new settlement offer of $6 billion. That contribution, paid out over 18 years, would fund support and services for those impacted by the opioid crisis.

The company's biggest hurdle is appeasing the group of holdout states that turned down the latest offer. But perhaps an extra $1.7 billion will be enough to sweeten the deal. Federal mediators requested more time to broker a new deal in the report filed on February 18. Judge Drain agreed to keep lawsuits against the Sackler family and Purdue Pharma on hold until March 3.

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