Dec 4, 2023 - Health

Supreme Court weighs OxyContin maker Purdue's bankruptcy plan

Illustration: Natalie Peeples/Axios

A controversial bankruptcy reorganization plan for OxyContin maker Purdue Pharma reaches the Supreme Court Monday in a case with major implications for victims of the opioid crisis, as well as states, localities and Indigenous tribes still dealing with the fallout.

Driving the news: Justices will weigh whether members of the Sackler family, who owned the company, should be shielded from current and future lawsuits connected with Purdue in exchange for paying about $5.5 billion to address the addiction crisis.

  • That legal "release" poses a fundamental question that's split those with settlement money at stake: Should the desire to punish the ex-owners get in the way of paying long-awaited compensation for opioid victims?
  • Payments from Purdue's bankruptcy plan would be among the roughly $50 billion states and local governments are slated to receive in opioid settlements over two decades, filling a critical funding gap for a range of addiction and support services in devastated communities.

What they're saying: The case, Harrington v. Purdue Pharma, has drawn in disparate groups including Canadian Indigenous tribes, who oppose the settlement citing the damage opioids inflict on their communities, and Arkansas localities and recovery groups, who back the release and the way it would bring about $50 million to the state for ongoing treatment and recovery efforts.

  • "The actual victims here want this plan, want the releases, and want closure, not the opportunity for endless, damaging, and assumedly futile litigation against the Sacklers," a group of more than 60,000 individuals affected by Purdue's painkillers wrote in a brief to the high court.
  • Ellen Isaacs, a former OxyContin user whose son died of an overdose, wrote to the justices that the bankruptcy plan fails to hold the Sacklers responsible.
  • "In a case where so many lost everything priceless, including their lives, justice is served when the villains keep nothing at all," she wrote. "But justice is not served by forcing victims, against their will, into a deal that leaves the Sacklers billionaires."
  • Remember, the Sackler family withdrew billions from the company in years prior to the bankruptcy, placing the money in trusts and overseas holding companies.

Catch up quick: Purdue filed for Chapter 11 bankruptcy in 2019 after being overwhelmed by thousands of lawsuits over its aggressive marketing of highly addictive OxyContin. The Sackler family members didn't file for bankruptcy themselves.

  • Plans called for the Sacklers to give up ownership and for the company to be turned into a public trust that would distribute payouts to those bringing opioid-related claims.
  • A federal judge in 2021 rejected a proposed settlement on the grounds that the bankruptcy code didn't confer the authority to release the Sackler family from liability in civil cases.
  • Backers of the plan appealed and, in May, a divided 2nd U.S. Circuit Court of Appeals reversed the ruling against immunity and advanced the plan.
  • The Justice Department then asked the Supreme Court for a review, and justices in August froze the reorganization and agreed to hear arguments.

Zoom out: The case underscores the tradeoffs between accountability and money in the opioid crisis — and the way private settlements in mass tort cases could buy peace while leaving justice undone, The Economist writes.

  • As Axios' Kate Marino writes, evidence of Purdue's deceptive marketing about the addictiveness of its painkillers makes a deal that allows the Sackler family to hold onto any of its billions particularly distasteful.
  • But some legal experts argue that such third-party releases can lead to a more equitable distribution of settlement money and keep claimants from racing each other to file more lawsuits, delaying potential payouts.
  • That practical argument could be apt when considering opioid victims, many of whom are living in or near poverty and would stand to collect up to $750 million in direct reimbursements under the plan.

The bottom line: With many opioid manufacturers, distributors and pharmacies already paying billions to settle cases, today's arguments mark a pivotal moment in the crisis — and a coda for a company that for many became a symbol of the ravages prescription painkillers inflicted across the country.

  • It also will likely determine whether investors or lenders could skirt legal exposure in other cases using a technicality in bankruptcy law.
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