Judge Will Approve Purdue Pharma Bankruptcy Plan That Shields Sacklers

A U.S. judge said on Wednesday he would approve OxyContin maker Purdue Pharma LP’s bankruptcy reorganization plan, clearing a path to resolve thousands of opioid lawsuits and shielding the company’s wealthy Sackler family owners from future opioid litigation.

Bankruptcy Judge Robert Drain said that with small changes he would approve the plan, which overcame opposition to garner support from nearly all states, local governments, tribes, hospitals and other creditors that voted on the restructuring. They became creditors in the bankruptcy by virtue of suing Purdue and Sackler family members over their alleged contributions to the nationwide opioid epidemic.

Drain said it was clear the wrongful marketing of the company’s opioid products contributed to the addiction crisis, which touched every corner of the country. “That makes the bankruptcy case before me highly unusual and complex,” said Drain, who spent more than six hours reading his ruling from the bench.

The plan, which Purdue values at more than $10 billion, dissolves the drugmaker and shifts assets to a new company not controlled by Sackler family members. The new company will be owned by a trust run to combat the opioid epidemic.

It also includes legal releases shielding Sackler family members from future opioid litigation, a controversial provision that some states opposed. Congressional Democrats in recent weeks introduced legislation to block such legal releases.

The Sacklers have denied allegations, raised in lawsuits and elsewhere, that they bear responsibility for the opioid addiction crisis. They have said they acted ethically and lawfully while serving on Purdue’s board.

The Purdue bankruptcy plan includes a $4.5 billion contribution from Sackler family members. The contribution is in the form of cash that will be paid over roughly a decade and also includes $175 million in value from relinquishing control of charitable institutions.

Drain noted that he had expected a larger contribution from the Sacklers and said the evidence showed more might have been secured through litigation, although that was hard to predict.

“This is a bitter result,” he said. He also said he would not jeopardize what the plan achieved by rejecting it and asked for small changes to secure his final approval.

Still, the evidence showed the plan was negotiated by the creditors who all viewed the Sacklers as “the other side, the opposition, the potential defendants,” Drain said. “This is not the Sacklers’ plan.”

The Stamford, Connecticut, drugmaker pleaded guilty to criminal charges in November stemming from its handling of opioids. At the outset of its bankruptcy case, Purdue said there were a number of legal defenses it could mount in response to lawsuits alleging improper conduct.

Several state attorneys general opposed the plan.

“This order is insulting to victims of the opioid epidemic who had no voice in these proceedings,” said Washington Attorney General Bob Ferguson, who said his office would appeal.

A lawyer for the Office of the U.S. Trustee, a bankruptcy watchdog and part of the Department of Justice, said his office would file a motion for a stay of the order confirming the plan during the appeal.

More than 95% of creditors voting approved Purdue’s restructuring, far above the legal threshold required for a bankruptcy judge’s blessing.

Ryan Hampton resigned on Tuesday as the co-chair of the official creditors committee, which included governments and other creditors. Even though the committee helped negotiate the plan, he called the outcome a “total injustice.”

He said people like himself who were recovering from addiction were the real victims and they had to fight states and local governments during plan negotiations for the $750 million set aside for them.

“At no point were the victims listened to,” he said.

Sackler family members behind Purdue were prolific philanthropists, with their names on museum wings and other cultural institutions. They have also agreed to a prohibition on associating their name with charitable contributions until litigation settlement funds are fully paid, according to court records.

Much of the plan’s value is contingent on future donations of overdose reversal and addiction treatment medications that Purdue has under development.

Drain noted that Sackler family owners who testified showed little remorse. “A forced apology is not really an apology,” he said. “And so we will live without one.”

Purdue filed for bankruptcy in September 2019 in the face of 3,000 lawsuits against the company and Sackler family for contributing to a public health crisis that has claimed the lives of about 500,000 people since 1999.

Drain, the judge overseeing the case in a White Plains, New York, bankruptcy court, agreed early in the case to halt litigation against Purdue and Sackler family members, who had not filed for bankruptcy themselves.

Sackler family members have not been criminally charged. They previously agreed to pay $225 million to resolve separate civil allegations with the Justice Department. The family members have denied those allegations.