At issue is whether a bankruptcy court judge has the authority to grant members of the Sackler family, owners of the maker of OxyContin, protection from civil lawsuits over the cost of opioids.
A deal that would see Purdue Pharma emerge from bankruptcy and require its owners to contribute billions of dollars to help fight America’s opioid crisis is pending a legal question before a federal appeals panel on Friday.
Attorneys for the company, state and local governments, individual opioid victims and others who would receive payments under the settlement will present their case in the US Court of Appeals for the Second Circuit in New York City.
At issue is whether a bankruptcy court judge has the authority to grant members of the Sackler family, owners of the maker of OxyContin, protection from civil lawsuits over the cost of opioids. Relatives have insisted on the legal shield in exchange for providing the money behind the deal.
Under the agreement, they would contribute between $5.5 billion and $6 billion over time, in addition to relinquishing ownership of the company. Purdue would then become a new entity known as Knoa Pharma that would dedicate its profits to fighting the nation’s opioid epidemic.
Most of the Sacklers’ money would also go to fight the epidemic, but at least $750 million would be distributed to some individual victims and their families.
Other products liability cases have been resolved through bankruptcy court using the kind of protections this settlement would give the Sacklers. But opponents of the deal question the strategy based on the fact that a handful of parties still oppose the deal.
Nearly all of the governments and other entities that originally sued Purdue accepted the settlement. That has left only a small group of objectors: Canadian local governments and First Nations; two mothers of children who died of opioid overdoses; and the US Bankruptcy Trustee’s Office, an arm of the federal Department of Justice.
A judge called for mediation between Purdue and the two individual plaintiffs to see if they could reach an agreement.
This week, more than 1,000 families who have lost loved ones to overdoses sent a letter asking the US Department of Justice to withdraw its opposition. They said individual victims would not receive payments if the settlement falls through.
“Furthermore, if this plan is not implemented, states would have to wait years to recover money to be used to mitigate the opioid crisis,” his letter said. “With drug overdoses happening at record rates, that’s time we can’t afford.”
The federal judge overseeing Purdue’s bankruptcy case approved a settlement last year that was later rejected on an appeal filed primarily by attorneys general from eight states and the District of Columbia. The parties then resorted to mediation that eventually persuaded the Sacklers to increase their contribution by more than $1 billion.
Purdue is perhaps the highest-profile player in the opioid industry. But several other drugmakers, distribution companies and pharmacies have also been sued by state and local governments. While a handful of cases have gone to trial, many are also being resolved.
Earlier this year, drugmaker Johnson & Johnson and retail giants AmerisourceBergen, Cardinal Health and McKesson struck deals to provide a total of $26 billion. Most of the money is required to be used to combat the opioid crisis, which has been linked to more than 500,000 deaths in the US in the past two decades.
No matter how the 2nd Circuit rules on the case, an appeal to the US Supreme Court is possible. If Purdue and its allies win, they must still go back to the bankruptcy judge to get approval of the latest version of the settlement.