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Purdue Pharma, drugmaker accused of fueling the opioid epidemic, files for bankruptcy

Purdue Pharma, the drug manufacturer accused of fueling the opioid epidemic, filed for bankruptcy Sept. 15 following litigation agreements with multiple states. (Video: Reuters)

Purdue Pharma, the drug manufacturer accused of triggering the nation’s epidemic of opioid addiction through its sale of the profitable but highly addictive painkiller OxyContin, filed for bankruptcy Sunday.

The Chapter 11 filing is expected to lead to the ultimate demise of a company that sold a fraction of the opioid prescriptions in the United States but nonetheless is most closely identified with the epidemic because of its pioneering role in the sale of narcotic pain pills. The company used aggressive, allegedly misleading, sales tactics to push physicians to prescribe millions of doses of its dangerously addictive pills.

The company’s move to seek financial shelter, part of a tentative settlement with thousands of litigants, will shift the focus to new wrangling over how potential proceeds will be divvied up by communities reeling under the burden of addiction and overdose deaths.

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The bankruptcy also will raise the stakes on legal sparring over how much of the personal fortunes of the billionaire Sackler family, which owns Purdue, will be available to compensate plaintiffs. Multiple states that have rejected the proposed settlement have accused the family of improperly stripping billions of dollars out of the company’s coffers in the past decade to protect the cash from expected court judgments.

Norton, Va. was flooded with 306 pain pills per person per year from 2006-2012, according to previously undisclosed data obtained by The Washington Post. (Video: Joyce Koh/The Washington Post, Photo: Charles Mostoller for The Washington Post/The Washington Post)

“The controversial piece is going to be about how much the Sacklers need to kick in for the deal to work,’’ said Adam J. Levitin, a professor specializing in bankruptcy at Georgetown Law.

Under the settlement announced last week, more than 2,000 small government plaintiffs and 24 states have agreed to the dissolution of the company and a contribution from the Sacklers, valued at $10 billion to $12 billion. But the settlement valuation is in dispute, and a number of states have balked at those terms.

The settlement, which does not include any admission of wrongdoing, would reorganize Purdue during the bankruptcy into a trust that would continue to produce OxyContin, as well as overdose “rescue’’ drugs that would be distributed at no cost to communities across the country.

“We are hopeful of and expectant that a growing number of states will see this is a much better outcome for them than for us to go into the swamp of litigation that would basically eat up all the resources of the company,’’ Purdue Chairman Steve Miller said in a conference call with reporters Sunday night.

A person familiar with the matter, who spoke on the condition of anonymity to discuss non-public company matters, said Purdue has spent $250 million on litigation costs this year.

The proposed minimum contribution from the Sackler family of $3 billion, which could be derived from the sale of a related, family-owned international drug company called Mundipharma, has been called insufficient by state attorneys general who have rejected the plan.

New York, Massachusetts, Connecticut and other states argue that the Sackler family has far more money stashed in a number of trusts and investment firms, including in offshore tax havens such as the Channel Islands, that should be made available to plaintiffs. Forbes has estimated the Sackler family’s total worth at $13 billion.

The family is expected to argue that billions of dollars moved out of Purdue Pharma were legitimate dividends. Levitin said there will be restrictions on what can be “clawed back’’ from the family’s far-flung financial empire, partly because state statutes of limitations prevent plaintiffs from examining transactions going back more than a few years.

“The Sacklers are going to be left with plenty of money after this,’’ Levitin said. “There is a desire that the Sacklers pay some blood money, but it’s never going to be enough to make everyone happy.’’

The Sackler family Sunday night issued a statement calling the settlement and bankruptcy a “historic step’’ to address a “tragic public health situation.’’

“It is our hope the bankruptcy reorganization process that is now underway will end our ownership of Purdue and ensure its assets are dedicated for the public benefit,’’ the family said.

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Under terms of the tentative settlement, bankruptcy will spell the end, at least in its current form, of a company that three immigrant Sackler brothers bought in 1952. By the late 1990s, the Sacklers had turned Purdue into a highly profitable enterprise by selling oxycodone tablets under the brand name OxyContin. The company marketed OxyContin as a safer form of narcotic painkiller when it was introduced in 1996, because of its time-release properties, but the drug was blamed for a sharp rise in addiction, prescription drug abuse and fatal overdoses.

Widespread sale of the drug, as well as generic versions and other oxycodone and hydrocodone tablets that were widely sold by a handful of big companies, also set the stage for subsequent waves of heroin and fentanyl abuse in communities throughout the country, especially Appalachia, according to authorities.

More than 200,000 people have died of prescription opioid overdoses since 1999. Another 200,000 have died from overdoses attributed to heroin and illegally obtained fentanyl.

By 2007, the company and three top executives — none of them Sackler family members — pleaded guilty to federal charges of misleading regulators, doctors and patients about the highly addictive nature of the drug. The company paid more than $600 million in fines and other payments.

Yet, Purdue Pharma, under the family’s tight control, continued to aggressively market OxyContin and kept fueling the growing epidemic of narcotic addiction, according to a raft of litigation filed against the company. Lawsuits also are pending against generic oxycodone manufacturers, distributors and retail pharmacy chains.

As sales continued into the billions of dollars, the family board members who controlled the company began transferring big chunks of money out of the firm beginning in 2008, according to multiple state lawsuits.

“Between 2008 and 2018, they directed Purdue to make nearly $11 billion in total distributions (including tax distributions) to partnered companies, foreign entities, and ultimately to trusts established for the benefit of the Sackler families,’’ said recently unsealed portions of a lawsuit filed this year by Oregon’s attorney general.

Such transfers were cited last week by some of the 26 states that rejected the tentative settlement agreement. Those states also said the $10 billion to $12 billion price tag put on the settlement appears inflated.

But Paul Hanly, co-lead counsel for plaintiffs suing Purdue, said the local governments accepted the tentative settlement because it’s a better bet than the alternative, which he called “probably a decade or more in the bankruptcy court, at the end of which will probably be a ham sandwich left over for our clients, the communities that are suffering.”

Joel Achenbach and Lenny Bernstein contributed to this report.

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