OxyContin maker Purdue Pharma LP’s plan to turn over its operations to creditors and see its owners, the Sacklers, exit the opioid business is contingent on first resolving U.S. Justice Department probes, court filings show.
The disclosure emerged late Tuesday in a proposed term sheet Purdue filed in U.S. Bankruptcy Court in New York that publicly lays out for the first time details of the company’s plan to resolve its sprawling opioid liabilities.
Purdue is in bankruptcy court in the face of more than 2,600 lawsuits brought by state and local municipalities accusing the drugmaker of helping fuel the opioid crisis by aggressively marketing opioid painkillers.
The company filed for bankruptcy in September saying it had a deal in hand with 24 states and thousands of local governments that it valued at as much as $10 billion to $12 billion. Another 24 states oppose the proposed settlement and question its valuation. The Tuesday filing shows that before any deal can go through, Purdue and the Sacklers must resolve with the Justice Department “all potential federal liability arising from or related to opioid-related activities.” If the economic terms of a DOJ settlement are materially inconsistent with the bankruptcy deal, the document says, the state and local governments have the right to back out.
Purdue has been in talks to resolve multiple civil and criminal Justice Department probes related to OxyContin, The Wall Street Journal reported in September. Those include investigations by the U.S. attorney’s offices in New Jersey, Connecticut and Vermont, as well as the Justice Department in Washington.
Spokesmen for the four agencies declined to comment Wednesday or didn’t immediately return a request for comment.
The settlement calls for the Sackler family to “no longer be engaged in the opioid business,” an outcome that plaintiffs in support of the deal say is crucial.
Sacklers plan to pay out at least $3 billion to creditors over a period of seven years, much of it contingent on the sale of the family’s international opioid business, Mundipharma.
If the family brings in more than $3 billion from the sale, plaintiffs will receive 90% of any proceeds, up to $4.5 billion, with the Sacklers getting the rest. The plaintiffs and Sacklers split the proceeds 50-50 after that.
The arrangement, structured to give the Sacklers an incentive to sell the international operations for as much as possible, also means the family could stand to profit from the deal, which states in opposition don’t like.
The term sheet also lays out how Purdue’s U.S. operations will be turned over to a trust run for the benefit of the plaintiffs.
Plaintiffs’ lawyers representing thousands of cities, counties and Native American tribes that support the deal said Wednesday the proposed settlement would help Purdue avoid a free-fall bankruptcy and increases “the chance that we will be able to put these assets to work for the American public within 12 to 16 months.”
Purdue is due back in court later this week in front of U.S. Bankruptcy Judge Robert Drain to seek approval to pay employees and keep its day-to-day operations running. It will also be asking Judge Drain to approve a hotly contested request to temporarily halt all litigation against Purdue as well as members of the Sackler family who have been personally sued.
Sackler family members who sat on Purdue’s board and served as executives have been sued by more than half the states. A Massachusetts court on Tuesday denied a motion by Sackler members to dismiss a lawsuit they face there, which was among the first to try to lay blame for the opioid crisis on the family in addition to the company. Purdue and the Sacklers have denied the allegations in the lawsuits.