It looked like pharma company, and OxyContin originator, Purdue Pharma, was going to pay out as part of an approved bankruptcy plan. In a turn of events, the US Supreme Court blocked the Purdue settlement, which is worth $6 billion in payouts. Why did the Court do this, and what comes next?
This article is the opinion of the writer on recent events concerning the blocked bankruptcy settlement of Purdue Pharma, by the US government.
Purdue and legal issues
Purdue is a big pharma company whose main claim to fame is the drug OxyContin, released in 1996. OxyContin is really oxycodone, a synthetic opioid, but in a novel, time-release form. One of its big selling points when it came out, was that it could offer pain relief for a full 12 hours, without having to take more.
What we found out over time, is that the original marketing for the medication, was based on lies. That testing showed it nearly never lasted as long as it was marketed to, leaving patients in pain for many hours before another scheduled dose. This led to patients taking more, which resulted in a large number of addictions and subsequent overdoses. Though opioid medicines already existed, it was OxyContin that set off the crisis of overdose deaths, and mass addiction, that we’re currently dealing with today.
Purdue Pharma L.P. originated in 1892 as Purdue Frederick Company, founded by John Purdue Gray. Unlike most other large pharmaceutical companies, Purdue was always privately owned; mainly by members of the Sackler family, starting with brothers Mortimer and Raymond Sackler. It has the designation of getting what at-the-time was one of the biggest fines ever waged on a pharma company in 2007, for $634.5 million. The reason was for lying about the medication OxyContin, and its addictive potential.
In 2020, Purdue settled with the Department of Justice, for $8 billion. What did the Sacklers directly pay into this? A whole $225 million. While the settlement entailed the company admit wrongdoing, the Sacklers paid the 225, and got off the hook entirely. This is as of yet, the biggest payout Purdue has made.
The other major settlement of late for Purdue has to do with a bankruptcy settlement, for a Chapter 11 reorganization. As a part of this reorganization bankruptcy, the company was set to pay out $6 billion to local governments, hospitals, and addicts, to thousands of cases. The settlement was approved by a US bankruptcy judge in 2021.
This deal was opposed by eight states, DC, and the federal government. But it was backed up by a Federal Circuit court on May 2nd, which ruled the claims against the company are tied to claims against the owners; and that protections given to the owners are valid. The basis for the opposition, is the protections that the settlement offers to the Sackler family; who own Purdue, but who are not filing personal bankruptcy paperwork. The Supreme Court was brought in by the federal government.
Supreme Court blocked Purdue settlement
The federal government got the Supreme Court to block the settlement Purdue had in place for $6 billion. Biden’s administration questioned the legality of the settlement, and went to the Supreme Court to block its forward movement, until the Court hears arguments. Originally, it was the feds and eight states in opposition; but the states dropped their opposition when the payout was increased to $6 billion in a revised settlement. As a note, the family is said to have withdrawn $11 billion from Purdue, before offering the $6 billion; just to put it in perspective
How far would the release go to get the Sackler’s out of further trouble in the future? According to Solicitor General Elizabeth Prelogar, “The plan’s release ‘absolutely, unconditionally, irrevocably, fully, finally, forever and permanently releases’ the Sacklers from every conceivable type of opioid-related civil claim – even claims based on fraud and other forms of willful misconduct that could not be discharged if the Sacklers filed for bankruptcy in their individual capacities.” She went on to call this an “abuse of the bankruptcy system.”
This is the basis for the Supreme Court interference. The idea the block hinges on, is that Purdue can’t legally restructure a bankruptcy agreement under US law, to offer protections to its private owners the Sacklers. After all, its not a personal bankruptcy filing for any family member, but a company filing. Purdue is going bankrupt, not the Sackler family.
Yet, despite the filing only applying to the company, the settlement nonetheless affords the Sackler family, a great level of protection from any further civil litigation. The Supreme Court will now investigate if the family should legally be able to enjoy benefits related to its company’s bankruptcy, like personal safety from legal threat in the future.
The Federal Circuit court said it was okay, and that since the cases are inextricably tied, that allowing the Sackers to be sued could impact the Purdue case. Although why this matters, is unclear. The federal government argues that US bankruptcy laws are not meant to allow such degrees of protection for the future, especially for people not involved in the suit. Now its up to the US Supreme Court to decide.
Response to settlement block
Purdue made a huge amount of money from OxyContin, but in the last couple decades, has paid out between different lawsuits, plunging itself into bankruptcy, which resulted in a Chapter 11 filing in 2019. The $6 million offered by the Sacklers would be to help settle multiple lawsuits from various places, including private citizens, states, and hospitals.
Purdue made this statement via CNN about the blocked settlement: “We are confident in the legality of our nearly universally supported Plan of Reorganization, and optimistic that the Supreme Court will agree. Even so, we are disappointed that the US Trustee, despite having no concrete interest in the outcome of this process, has been able to single-handedly delay billions of dollars in value that should be put to use for victim compensation, opioid crisis abatement for communities across the country, and overdose rescue medicines.”
Wait, is the company trying to make it sound like the Supreme Court is hurting people by not allowing Purdue to pay out the money? Like, the Supreme Court is some evil being getting in the way of Purdue’s good deed? Kind of sounds like it… How passive-aggressive does it get? I mean, Purdue caused the damage, and has repeatedly copped to knowing it was doing wrong. And now it wants to blame the federal court system for blocking a settlement that would have ensured no punishment on a civil level, for any of the criminals behind it? Makes sense these are the people screwing everyone over.
The reaction to this move from others, was consistent, even considering it stopped the company owners from using their company’s bankruptcy to evade any further legal ramifications. It should be remembered, that the payout might be for ill-gotten gains in the first place; but the money is slotted to pay back creditors, and go toward the very patients that were most hurt by the company. And these entities want the money; a sentiment the Sackler family likely leaned on to get the settlement approved in the first place.
For example, Ohio is one of the states involved in the settlement, and yet the state’s Attorney General Dave Yost said this: “We wanted the settlement to move forward. It’s so important to get this money flowing. It’s been – since 2019 – that this bankruptcy proceeding has been going on. I guess the best thing I can say about today’s decision to hear the case is at least they set it for December.”
What to expect
This case is heating up. Purdue is a hated company, and the Sacklers are a hated family. But they have money, and have been trying to buy themselves out of any trouble for the trouble they caused. A huge reality of life, is that people want money; and they’ll often trade in justice to get it. Even now, the Sacklers refuse any responsibility in the current opioid crisis, calling it an unintended mistake that they feel bad about.
Which means, while the company has repeatedly been prosecuted for the damage it did, the people behind the company never had to deal with it; beyond their company going bankrupt. Perhaps the problem for many Americans, is that most pharma companies are corporations, and run by a board, not a private family. Sure, we can point at a CEO, but its easy to shift blame. To make it look like a big, bad, company, and not big, bad people. Perhaps most people don’t think of Purdue as a family run entity, with that family being behind every decision made.
So to be clear, Purdue is associated with a bunch of lies over OxyContin, of suppressing research, of lying to the public, of knowing its addictive potential… but the Sacklers not at all. And this settlement would ensure that they never face civil court. That’s quite a wiggle move for the people behind the company that is credited with starting the entire opioid epidemic. Whether the US government is doing this to ensure that the Sacklers can take blame in the future (maybe to evade its own for continuing to regulate the drugs?), or whether this comes from public pressure; the Sacklers aren’t free quite yet.
Considering the money they have, and how far they’ve gotten so far to evade trouble; its possible the family can continue buying themselves off. However, in light of the attention this is getting, and the anger toward the family; its also quite possible that the Supreme Court will dash this hope, and make the Sacklers into a public example. As a private citizen watching this, I hope the court blocks the settlement for good; and that all the press leads to drowning levels of civil and criminal penalties, for the family in the future.
Conclusion
The Sacklers have certainly gotten away with a lot; and this recent blocked Purdue settlement by the Supreme Court, brings much of it to light. While its good for the company to have to pay out; I believe it would be a further crime, to allow this family out of legal actions in the future.
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