A settlement that would allow Purdue Pharma to climb out of bankruptcy and require its owners to contribute billions of dollars to help tackle the opioid crisis in the U.S. hinges on a legal question before a federal appellate panel on Friday. Is.
Attorneys for the company, state and local governments, individual opioid victims and others who will receive payments under the deal will put their case before the Second Circuit U.S. Court of Appeals in New York City.
The issue is whether a bankruptcy court judge has the authority to grant OxyContin manufacturer protection from civil lawsuits over the toll of opioids to members of the Sackler family. Family members have insisted on a legal shield instead of providing the money behind the settlement.
Under the deal, they would contribute $5.5 billion to $6 billion over time, as well as relinquish ownership of the company. Purdue would then become a new entity known as Noah Pharma that would dedicate its profits to fighting the nation’s opioid epidemic.
Most of the Sacklers’ money will also go to fighting the pandemic, but at least $750 million will be distributed to some individual victims and their families.
Other product-liability cases have been settled through bankruptcy court, using the kind of protection the deal would give to Sacklers. But opponents of the deal are challenging the strategy based on the fact that a handful of parties still object to the deal.
Almost all governments and other entities that originally sued Purdue have agreed to the settlement. This has left only a small group of protestors: the local governments of Canada and the First Nations; two mothers of sons who died of opioid overdose; and the Office of the U.S. Bankruptcy Trustee, a branch of the federal Department of Justice.
A judge called for mediation between Purdue and the two individual plaintiffs to see if they could agree a settlement.
This week, more than 1,000 families who lost loved ones to overdose sent a letter asking the US Justice Department to drop their protest. If the settlement derails, the victims will not get the payment, he added.
“Moreover, if this plan is not implemented, states will have to wait for years to recover the funds used to alleviate the opioid crisis,” their letter said. “With drug overdoses at record rates, we cannot afford those times.”
The federal judge overseeing Purdue’s bankruptcy case last year approved a settlement that was later rejected Primarily on appeals brought by the Attorney Generals of eight states and the District of Columbia. The parties then went to arbitration which eventually persuaded the Sacklers to increase their contribution over $1 billion.
Purdue is probably the highest-profile player in the opioid industry. But many other drug manufacturers, distribution companies and pharmacies have also been sued by state and local governments., While some cases have been heard, many are also being disposed of.
Earlier this year, drugmaker Johnson & Johnson and distribution giants AmerisourceBergen, Cardinal Health and McKesson finalized deals to provide a total of $26 billion. Most of the money needed to be used to fight the opioid crisis, which has been linked to more than 500,000 deaths in the US over the past two decades.
No matter how the Second Circuit rules on the case, an appeal to the U.S. Supreme Court is possible. If Purdue and its allies win, they still have to go back to the bankruptcy judge to approve the latest version of the deal.