Purdue Pharma, the maker of OxyContin, and its owners, the Sackler family, agreed to pay $270 million to avoid going to a state court trial over the company’s role in the opioid addiction epidemic that has killed more than 200,000 Americans over the past two decades.
The payment, negotiated to settle a case brought by the state of Oklahoma, was far larger than two previous settlements Purdue Pharma had reached with other states. It could jolt other settlement talks with the company, including those in a consolidated collection of 1600 cases overseen by a federal judge in Cleveland.
“Purdue appears to have concluded that it was less risky to settle the Oklahoma case than have the allegations publicly aired against it during a televised trial and face exposure to what could have been an astronomical jury verdict,” said Abbe R. Gluck, a professor at Yale Law School who directs the Solomon Center for Health Policy and Law.
“That said,” she continued, “the settlement does put a stake in the ground for the other cases. It telegraphs what these cases might be worth and makes the elephant in the room even larger — namely, do Purdue and the Sacklers have sufficient funds to give fair payouts in the 1600-plus cases that remain?”
In a statement released after the settlement announcement, Purdue Pharma’s chief executive, Dr. Craig Landau, said: “Purdue is very pleased to have reached an agreement with Oklahoma that will help those who are battling addiction now and in the future.”
While numerous other drug manufacturers, distributors and pharmacy chains have been targets of lawsuits, Purdue, in particular, has been painted as the arch-villain of the opioid disaster, and the company has been feeling exceptional heat in recent months.
Not only was the company staring down an impending trial date of May 28 in Oklahoma, with cameras in the courtroom, but documents made public recently in a case brought by the state of Massachusetts accused Sackler family members of directing efforts to mislead the public about OxyContin’s potency and addictive properties. A number of museums and cultural institutions around the world have recently stopped taking donations from the Sacklers, who have a long record of philanthropy.
As headlines mounted, the company began exploring the possibility of filing for Chapter 11 bankruptcy restructuring, a step that could temporarily insulate it from big judgments. While it has yet to decide, the possibility of bankruptcy exerted powerful leverage at the bargaining table in Oklahoma, people familiar with the negotiations said.
Once a company files for Chapter 11 protection, only secured creditors, such as banks, can expect to be repaid in full. While an Oklahoma jury could potentially have hit Purdue with a stratospheric civil judgment, the likelihood of the state collecting even a significant portion from bankruptcy court — never mind how much appellate courts would reduce the award — would be remote and at some point far in the future. Legal experts said the settlement amounts to a bird-in-the-hand decision.
Legal experts said similar calculations could come into play in the 35 other state cases still pending against Purdue, as well as in the federal litigation, which combines 1600 suits brought by cities, counties, Native American tribes and others.
“There is blood in the water now, and with the threat of bankruptcy, the concern is that counties and states may settle on the cheap early to avoid getting little to nothing later on, “ said Elizabeth Chamblee Burch, a law professor at the University of Georgia.
At a news conference Tuesday in Tulsa, Mike Hunter, the Oklahoma state attorney general, said that as part of the settlement agreement, Purdue’s payment to the state had been secured against any possible bankruptcy filing.
“The addiction crisis facing our state and nation is a clear and present danger,” Mr. Hunter said. “Last year alone, out of the more than 3,000 Oklahomans admitted to the hospital for a nonfatal overdose, 80 percent involved a prescription opioid medication. Additionally, nearly 50 percent of Oklahomans who died from a drug overdose in 2018 were attributed to a pharmaceutical drug. Deploying the money from this settlement immediately allows us to decisively treat addiction illness and save lives.”
Lawyers for the plaintiffs in the federal litigation, while quick to praise Oklahoma’s settlement, underscored that a resolution with Purdue hardly represented a broad settlement with the numerous companies involved in making, distributing and selling opioid painkillers.
“There are nearly two dozen other defendants with pending allegations against them in federal court, “ the executive committee of the plaintiffs’ lawyers said in a statement. “We believe all of these defendants — opioid manufacturers, distributors, and pharmacies — must be held responsible for their role in the epidemic, and we will continue to pursue accountability for the thousands of communities we represent.”
According to details of the agreement announced Tuesday by Mr. Hunter, more than than $100 million will go to fund a new addiction treatment and research center at Oklahoma State University in Tulsa. The Sacklers, who were not named in the lawsuit, will contribute an additional $75 million over five years to the center.
“While the agreement announced today is not a financial model for future settlement discussions, the establish of the National Center is a unique and important step that we hope will save lives, by creating breakthrough innovations in the prevention and treatment of addiction, and point toward how we can achieve a national resolution,” the Sackler family said in a statement.
The statement added: “We also want to make clear that the recent attacks on our family are not accurate and misdirect attention away from crucial issues such as the terrifying rise in illicit fentanyl overdoses.”
The new center, to be named the National Center for Addiction Studies and Treatment, will be housed at the university’s Center for Wellness and Recovery, which has a current annual budget of only about $2.4 million.
About $60 million of the settlement money will be set aside to reimburse the state for litigation costs, and $12.5 million will be given to municipalities and counties to address their costs for the epidemic. The package also includes $20 million in medicine for addiction treatment. (The Food and Drug Administration recently granted Purdue a fast track designation to develop an emergency opioid overdose treatment injection, which the company pledged not to profit from.)
Public health experts cautiously welcomed the agreement.
“It will certainly be addressing the harms caused by the company, “ said Dr. Joshua M. Sharfstein, a professor of public health policy at the Johns Hopkins Bloomberg School of Public Health.
“It creates an opportunity not just to improve treatment right on the university’s site, but to expand access to lifesaving medications across the region, “ he said.
So far, the trial, which includes other pharmaceutical companies such as Johnson & Johnson, is on track to begin May 28. On Monday, the Oklahoma Supreme Court turned aside a bid by the defendants to delay the start by 100 days.
Whether other defendants will settle before then is unclear. Unlike many opioid lawsuits, which have pulled in an array of defendants, including distributors and pharmacy chains, Oklahoma’s case, filed in June, 2017, focused only on manufacturers. There were essentially three major pharmaceutical groups, including Purdue Pharma and its subsidiaries, Teva Pharmaceuticals, the Israeli-based company that mostly makes generic forms of opioids, and Johnson & Johnson.
Johnson & Johnson, which makes Duragesic, a fentanyl skin patch, has long had a reputation for being willing to risk jury trials, notably in cases involving the antipsychotic drug Risperdal and, this week, Xarelto, the blood thinner medication. With its co-defendant, Bayer, Johnson & Johnson prevailed in six jury trials over Xarelto, before it agreed to settle.
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