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    Op-Ed
    Saturday, April 27, 2024

    Purdue Pharma OxyContin ruling lets Sacklers off the hook

    There is only one bankruptcy judge in White Plains, New York: Robert D. Drain, a former bankruptcy lawyer who has been on the bench for nearly two decades. That means, of course, that if a company decides to file for bankruptcy in White Plains, Drain will preside over its restructuring.

    Over the years, dozens of companies have done just that, including Delphi Automotive, Hostess Brands, Sears Holding Corp. — and, most recently, Connecticut-based Purdue Pharma LP, the infamous maker of OxyContin, the addictive painkiller that triggered the opioid crisis in the U.S.

    Bankruptcy lawyers can shop for venues they think will be favorable to their case, and many bring their corporate clients to Drain’s court. And though Drain told the Wall Street Journal last year that any notion of legal friendliness was “an offensive fantasy,” the bitterly fought settlement in the Purdue Pharma case he announced from the bench on Wednesday would seem to provide ammunition for his critics.

    Purdue Pharma filed for bankruptcy two years ago as it sought protection from the thousands of lawsuits that had been filed against it by states, counties, communities, Native American tribes and families of opioid addicts, many of whom died. The central allegation of those suits was that Purdue had misled doctors and patients, playing down or ignoring OxyContin’s addictive properties in its aggressive marketing campaigns. Many of the suits named members of the Sackler family, which had run the company for most of its history and remained its principal owners.

    In the months before the bankruptcy filing, the Sacklers resigned from the Purdue board — thus ending their management roles with the company — and yet the original settlement offer put forth by the company’s lawyers included an extraordinary demand: that the Sackler family receive immunity from all opioid lawsuits. In return, the family would donate a portion of their $11 billion fortune. Without that immunity, the Sacklers’ lawyers said, the family would not pay a cent.

    Practically from the start of the bankruptcy process, Drain made it plain that he was in favor of this settlement, at least in broad strokes. Under its terms, Purdue would go out of business, replaced by a new company that would devote its profits to addiction treatment and opioid prevention programs. The company also agreed to make public 30 million internal documents that would allow the public to see the company’s — and the Sacklers’ — true culpability. A national opioid abatement trust would be created, which would distribute money to states. And the money had to be used to ease the opioid crisis — it couldn’t go to fill a state’s revenue shortfall, the way tobacco settlement money has been used over the years.

    But some states, including Connecticut, vehemently objected to letting the Sacklers off the hook.

    As Drain noted, most of the states, as well as the other claimants, wanted the deal to go through, primarily so that the billions of dollars at stake could start being used to ease the crisis. And Drain said that’s what he wanted, too — even if it meant that the Sacklers would get a deal they really didn’t deserve.

    “This is a bitter result,” he said from the bench. “I believe that at least some of the Sackler parties have liability for those (opioid) claims.” He added, “I would have expected a higher settlement.”

    But, he concluded, “it is clear to me after a lengthy trial that there is no other reasonable conceivable means to achieve this result.”

    Well, maybe.

    The communities dealing with the opioid crisis might well have been better off if Drain had been willing to push through a settlement without the Sacklers’ immunity. In addition to litigation accusing the Sacklers of playing a role in marketing OxyContin, a number of attorneys general sued the family for “fraudulent conveyance,” meaning they stand accused of taking money out of the company specifically to shield their assets from the coming litigation. And there appears to be some email evidence to back up that assertion. It is quite likely that had the hundreds of lawsuits aimed at the family been allowed to continue, the Sacklers themselves would have had to file for bankruptcy. In such a scenario, they would most likely have had to surrender much more than $4.5 billion.

    Yet Drain did nothing of the sort. Instead, he did exactly what Purdue and the Sacklers hoped he would. He let the family get away with it.

    Joe Nocera is a Bloomberg Opinion columnist covering business.

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