Court clears way on bankruptcy deal for maker of OxyContin

FILE PHOTO: Bottles of prescription painkiller OxyContin pills, made by Purdue Pharma LP sit on a counter at a local pharmacy in Provo, Utah, US, April 25, 2017. [Photo/Agencies]

A federal appeals court in New York on Tuesday cleared the way for a bankruptcy deal that will protect the billionaire Sackler family — whose Purdue Pharma produced the painkiller OxyContin that fueled the US opioid addiction crisis — from future lawsuits in exchange for $6 billion to fight opioid addiction and to assist the drug’s victims.

The settlement plan includes a total of up to $750 million, and eligible claimants would each receive between $3,500 and $48,000.

The Sacklers earned billions of dollars from the sale of OxyContin and other opioids. Family members have denied wrongdoing and said they wouldn’t fund the $6 billion settlement payment unless they were fully released from civil liability.

Government lawyers had argued that the settlement plan grants the Sacklers, who haven’t personally filed for bankruptcy, protections against opioid liability that aren’t permitted by US bankruptcy law.

The Justice Department could ask the Supreme Court to review Tuesday’s ruling.

The ruling by the US Court of Appeals for the Second Circuit reversed a December 2021 decision by a district judge who found that a bankruptcy judge who approved Stamford, Connecticut-based Purdue’s settlement plan didn’t have the authority to grant protections from opioid-related lawsuits to the Sackler family.

The proposed legal safeguards for the Sacklers have long divided the parties involved in Purdue’s bankruptcy, which began in September 2019.

In total, Purdue values its plan at more than $10 billion. That includes the development and distribution by Purdue’s planned successor company of medicines to reverse opioid overdoses and treat opioid-use disorder that Purdue officials said could be worth several billion dollars.

For 2 1/2 years after Purdue filed for Chapter 11 bankruptcy, several states strongly opposed an agreement with the company. They appealed a bankruptcy judge‘s approval in September 2021 of Purdue’s settlement plan because they were unhappy with the terms proposed by the company and the Sacklers.

But after a wave of negotiations during the first two months of 2022, the nonconsenting states forged a deal with Purdue and the Sacklers that was announced in March 2022. The settlement amount increased to $6 billion.

This latest ruling overturns a lower court’s December 2021 decision and clears the way for a deal hashed out with thousands of state and local governments.

Roughly $750 million from the settlement will go to individuals across the US who became addicted to OxyContin, and to the families of those who died from overdoses.

Lindsey Simon, who studies bankruptcy law at the University of Georgia School of Law, described the latest ruling as a solid victory for proponents of the deal.

“It’s very clear that in the 2nd Circuit, this kind of [bankruptcy] remedy is appropriate under certain circumstances,” Simon told National Public Radio (NPR). “There were some questions about whether it would be permitted going forward. It is.”

Purdue Pharma’s aggressive marketing of OxyContin is widely seen as having spurred the national opioid crisis. Prescription pain-pill overdoses have killed hundreds of thousands of Americans. Public health experts say the spread of OxyContin and other pain medications also opened the door to the wider heroin-fentanyl epidemic.

In a statement Tuesday, Sackler family members praised the ruling.

“The Sackler families believe the long-awaited implementation of this resolution is critical to providing substantial resources for people and communities in need,” they said in a statement to NPR.

Agencies contributed to this story.

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