The Supreme Court on Thursday struck down a Purdue Pharma settlement that in part shielded members of the Sackler family, who own the company, from personal liability related to the opioid epidemic.
Purdue Pharma, the producer of the opioid OxyContin, filed for bankruptcy when it was met with lawsuits for its involvement in the opioid epidemic. While the Sacklers, who populated the board of directors and served as president and chief executive officer of the company, also faced lawsuits, they themselves did not file for bankruptcy. Instead, they successfully persuaded the court overseeing Purdue Pharma’s bankruptcy to shield them from the claims against them.
In its opinion, the Court emphasized that bankruptcy courts do not generally have the power to shield parties who have not filed for bankruptcy from lawsuits without consent. It notes that only an entity that files for bankruptcy is generally eligible for a discharge under the bankruptcy code, and usually only debtors who come forward with more or less all of their assets. Even still, discharges cannot reach claims based on fraud or willful and malicious injury, nor can they affect a right to a jury trial for personal injury or wrongful death tort claims.
About 247,000 people in the United States died from prescription opioid overdoses between the years of 1999 and 2019, notes the opinion, with an estimated cost of $53 to $72 billion annually.
Purdue Pharma began making OxyContin in the mid-90s. Doctors had previously only prescribed opioid pain relievers to people with certain “chronic diseases” and cancer because of their known addictive qualities. Purdue Pharma, however, claimed that OxyContin was less addictive because of its time-release formula. Its marketing suggested OxyContin as a “first-line therapy for the treatment of arthritis.” The opinion points out that members of the Sackler family “were heavily involved” in the marketing of the product, “pushed sales targets,” and “accompanied sales representatives on ‘ride along’ visits to health care providers.”
In 2007, after the company spent years generating billions in revenue, a Purdue affiliate pleaded guilty to a federal felony for misbranding OxyContin as “less addictive” and “less subject to abuse.” Before 2007, the Sacklers took distributions of less than 15 percent of the company’s revenue. Afterward, they began to take as much as 70 percent each year, “draining Purdue’s total assets by 75% and leaving it in ‘a significantly weakened financial’ state,” according to the opinion. When the company filed for bankruptcy, the Sacklers proposed that they would return a little more than four billion of the $11 billion they had withdrawn from the company in exchange for a judicial order protecting them from claims the company’s bankruptcy estate might have against the family and claims by opioid victims.
Justice Kavanaugh in his dissent noted that blocking the deal means rejecting a settlement that would have provided billions of dollars to communities and people affected by the opioid crisis.
While the majority of creditors who voted on the bankruptcy plan supported it, fewer than 20 percent of them even returned ballots. According to the opinion, “thousands of opioid victims voted against the plan too, and many pleaded with the bankruptcy court not to wipe out their claims against the Sacklers without their consent.” The U.S. Trustee and eight states, the District of Columbia, the city of Seattle, and various Canadian municipalities and Tribes objected as well (though the objecting states and the District of Columbia were persuaded when the Sacklers proposed an additional $1.175 to $1.675 billion contribution).
Additional Reading
Supreme Court rejects controversial Purdue Pharma bankruptcy deal, NPR (June 27, 2024)
The Supreme Court rejects a nationwide opioid settlement with OxyContin maker Purdue Pharma, AP News (June 27, 2024)
Harrington v. Purdue Pharma L.P., 603 U.S. __ (2024)
Image Credit: PureRadiancePhoto / Shutterstock.com
