Justice Department Blasts Purdue Pharma's Bankruptcy Plan

Jul 19, 2021
Originally published on July 21, 2021 4:21 pm

Updated July 19, 2021 at 10:56 PM ET

The U.S. Justice Department is condemning a proposed bankruptcy settlement for Purdue Pharma, the maker of Oxycontin. In court filings Monday, two divisions of the DOJ described the plan as fatally flawed.

The DOJ's U.S. Trustee program, which serves as a national watchdog over the federal bankruptcy system, said the deal is unconstitutional and illegal.

In a separate brief, the office of the U.S. Attorney for the Southern District of New York said the plan violated the "constitutional right to due process" for those with potential opioid claims.

Under a proposed settlement negotiated over the last year, members of the Sackler family who own the company would contribute roughly $4.3 billion from their private fortunes to help compensate people and communities harmed by Oxycontin.

In exchange, the Sacklers and a long list of their associates who haven't filed for bankruptcy would be granted so-called "third party releases," sheltering them from future opioid lawsuits.

That provision has been highly controversial, but in recent weeks a growing number of states have signed on to the plan.

In his objection, however, U.S. Trustee William Harrington described the liability releases as "impermissible."

He accused the Sacklers and their associates of using the bankruptcy system to avoid liability for "alleged wrongdoing in concocting and perpetuating for profit one of the most severe public health crises ever experienced in the United States."

The Sacklers, who by their own reckoning earned more than $10 billion from opioid sales, have said repeatedly they did nothing wrong and acted ethically.

Harrington noted that under the settlement plan, many of the parties gaining immunity from opioid lawsuits aren't expected to contribute cash to compensate Purdue Pharma's debtors.

"Victims must involuntarily 'settle' for what the [bankruptcy plan] disclosure statement estimates may be as little as $3,500 in compensation for a life upended due to opioids because the Sackler Family says so," Harrington concluded.

In her separate filing, acting U.S. Attorney Audrey Strauss argued the bankruptcy plan improperly strips those with potential opioid claims of "a sufficient opportunity to be heard," effectively denying them due process.

Both objections were filed in the court of federal bankruptcy Judge Robert Drain, who is widely expected to approve the Purdue Pharma settlement at a confirmation hearing scheduled for August 9.

During court hearings, Drain has repeatedly described the settlement as an opportunity to avoid years of costly and uncertain litigation.

In a statement emailed to NPR, a spokesperson for Purdue Pharma said the reorganization plan would "transfer billions of dollars of value into trusts for the benefit of the American people."

The company also noted that third party releases "have long been allowed under the law in most jurisdictions."

A spokesperson for a branch of the Sackler family declined comment.

The aggressive marketing of Oxycontin by Purdue Pharma that began in the late 1990s is widely seen as a trigger of the nation's deadly opioid epidemic, which has killed more than a half-million Americans.

The company has twice pleaded guilty to federal criminal charges related to its marketing practices.

However, members of the Sackler family who own the company and served on its board have never faced criminal charges and are not expected to acknowledge any wrongdoing under the current bankruptcy plan.

Settlement talks with other companies are nearing agreement

Negotiators are close to a final opioid settlement with Johnson & Johnson, McKesson, Cardinal Health and AmerisourceBergen, sources in two state attorney general offices tell NPR.

The deal is expected to include payouts of roughly $26 billion — a game-changer for communities scrambling to fund addiction care after overdoses killed more than 93,000 people last year.

The plan would pay for drug treatment programs and other social services.

Johnson & Johnson sent a statement they've issued before saying "there continues to be progress toward finalizing this agreement."

Copyright 2021 NPR. To see more, visit https://www.npr.org.


Opioid overdoses drove a record number of drug deaths in the U.S. last year. Now, a landmark settlement appears close. It would provide up to $26 billion to communities struggling to respond to the opioid crisis. The money would be paid out by four of the nation's largest drug companies. And the deal would also mean much closer scrutiny for drug firms distributing and selling highly addictive pain pills. NPR addiction correspondent Brian Mann is here.

Hey, Brian.

BRIAN MANN, BYLINE: Hey, Mary Louise.

KELLY: How close is this settlement to a done deal?

MANN: Close but not quite done. A group of lead attorneys involved in suing these companies around the U.S. briefed reporters today. They said they're on the verge of this deal with Johnson & Johnson, AmerisourceBergen, Cardinal Health and McKesson. These are all massive companies that made and distributed opioid painkillers at a time when addiction and overdose deaths were skyrocketing. Joe Rice, an attorney with Motley Rice, who's helped governments sue these firms, he sounded confident today. But he said with $26 billion on the table, they're double-checking every detail.

JOE RICE: This is a complex document. You have to be very cautious that you don't have unintended consequences. I don't think there's anything I would call as a critical issue, but there are some issues that have to get resolved.

MANN: And state attorneys general also released a statement today saying they're working hard to finalize this. And if they do reach an agreement, it would start a national process where state and local governments would decide whether to opt into this massive settlement.

KELLY: And how would this massive settlement - if it comes to pass, how would this money help ease the overdose crisis?

MANN: Yeah. So communities are desperate right now for funds to pay for drug treatment and other social programs that might help people stay alive. You know, as you mentioned, we had a record number of fatal overdoses last year - more than 93,000 Americans lost. So these resources could make a difference.

And there's another interesting thing here. This deal would require companies to begin sharing a lot more data about where they're shipping these highly addictive pills and in what quantities. Paul Geller is another of the firms (ph) suing Big Pharma over opioids. And he said this part of the deal could prevent new waves of opioid addiction.

PAUL GELLER: As a result of this settlement, if it goes forward, the light switch is flipped on. Transparency means they see what pills are shipped.

MANN: And that information would go to federal regulators and to other companies. And we have learned over the last couple decades, these companies really flooded some pharmacies and communities with these pain pills. In theory, this provision of the settlement could prevent that from happening again in the future.

KELLY: Now, we have been talking, Brian, about a national deal, a tentative national deal. But this morning, New York's attorney general announced a separate settlement, same companies involved. And this settlement would be worth more than a billion dollars. Why is New York on a separate track here?

MANN: Yeah. New York's Attorney General Letitia James has just been very aggressive. She sued these firms. They were actually in court with a trial under way here in New York when this was hammered out. Speaking with NPR today, Attorney General James said she, along with these other state attorneys general - she's just trying to hold these companies accountable.


LETITIA JAMES: McKesson and Cardinal Health and AmerisourceBergen distributed this poison, these opioids, without regard to human life and without any consideration of the national crisis. And they basically fueled this epidemic.

MANN: And this $1.1 billion will be paid out to New York State over a long period, over the next 17 years.

KELLY: What are the drug companies saying either about the possibility of a national settlement or about this deal in New York?

MANN: You know, it's interesting, Mary Louise. These companies have never acknowledged any wrongdoing in the opioid crisis. And they declined to comment about the national opioid settlement talks except to say they are working toward a deal. In a statement released this morning about the New York settlement, the three companies said they strongly dispute the allegations. And really, it's important to say, in the big picture, these payouts won't hit these companies' bottom lines very hard. These are huge corporations with tens of billions of dollars in annual revenue.

KELLY: NPR's Brian Mann.

Thank you, Brian.

MANN: Thank you. Transcript provided by NPR, Copyright NPR.