A judge in the US has rejected the bankruptcy plan proposed by Purdue Pharma to settle legal action over its role in the opioid crisis, because of the protection from civil litigation it includes for the Sackler family that owns the drugmaker.
Judge Colleen McMahon has thrown out the plan in a New York court, in a move that would remove the shield handed to the Sackers in return for a $4.5 billion payout to projects intended to support victims of the opioid crisis over a nine-year period.
The deal – which will also see the Sacklers cede control of Purdue – attracted immediate criticism when it was announced earlier this year, amid reports that the family’s wealth could be worth as much as $11 billion, much of it held offshore.
The Sacklers said earlier they would exit the settlement deal if they were not granted immunity, and the judge in the bankruptcy court that accepted the deal – Robert Drain – said he did not want to jeopardise what was on offer by seeking further changes.
The settlement would set up a fund that will pay some victims of opioid addiction compensation of between $3,500 and $48,000 each.
Protecting the Sacklers from future opioid litigation is however not allowed under US bankruptcy law, said McMahon in her ruling, and the bankruptcy court “did not have the authority to deprive victims of the opioid crisis of their right to sue the Sackler family.”
Purdue has insisted it will appeal the judgment, but will also try to come up with another settlement plan that will be acceptable to its creditors.
The company filed for bankruptcy in 2019 in an attempt to settle thousands of lawsuits claiming that aggressive marketing of opioid painkiller OxyContin (oxycodone) fuelled an epidemic in addiction that has claimed hundreds of thousands of lives in the US.
The district court ruling will “delay, and perhaps end, the ability of creditors, communities, and individuals to receive billions in value to abate the opioid crisis,” said Purdue chairman Steve Miller.
Under the terms of the proposed deal, Purdue will transform into a new company that – while still selling opioid medicines – would use its profits to fight the opioid crisis and to develop drugs to treat people with opioid use disorder (OUD).
The Sacklers are facing hundreds of already-filed lawsuits focusing on their part in the opioid epidemic so far, with more possible if they are stripped of protection. The settlement agreement did not protect them from possible criminal charges, but so far none have been filed.
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