What does Purdue Pharma's bankruptcy filing actually mean?

Purdue Pharma, the maker of the controversial prescription painkiller OxyContin, has filed for bankruptcy in federal court. The move is part of a tentative agreement it says will provide $10bn to resolve an avalanche of lawsuits against it by American cities, counties and states that blame Purdue for igniting the deadly US opioids crisis.

But a group of states led by Massachusetts, New York and Connecticut oppose the deal and want to take Purdue to trial in an effort to win bigger damages and what they say is a greater measure of justice from the company and the billionaire members of the Sackler family who own it.

But what does a bankruptcy filing signify? What cases is Purdue caught up in and who else is involved? Crucially, what does it all mean for the wider public health opioids crisis that the US government says kills at least 130 people a day from overdoses across America and has claimed the lives of nearly 400,000 people between 1999 and 2017?

Here’s what you need to know:

What’s Purdue Pharma, and what’s an opioid?

Purdue Pharma is a privately owned pharmaceutical company based in Stamford, Connecticut, that relies on selling narcotic painkillers with the brand name OxyContin that it launched in 1996. This game-changing analgesic features a special controlled-release formula designed to deliver the active ingredient oxycodone, obtained from the opium poppy, over many hours. It’s more potent than its opiate cousins heroin and morphine. Opioids are natural or synthetic substances derived from opium that act as pain blockers.

Has Purdue collapsed?

No. This is a request in court to allow a controlled bankruptcy, where a weakened company is shielded from debts and liabilities while it does an emergency restructuring. Known in the US as filing for Chapter 11 bankruptcy protection (a section of the federal bankruptcy law, or code), struggling companies typically do this in order to continue operating while roped off from creditors, forcing negotiations with financial institutions and unions in hopes of emerging in better shape.

What’s different about Purdue’s request is that it wants the court to protect it from the mass of litigation it’s facing, while it reorganizes as part of a deal, essentially, to become a shrunken not-for-profit whose future sales fund a settlement with plaintiffs.

Who’s suing?

Purdue is being sued by about 2,000 US cities, counties and Native American tribes, and their lawsuits are bundled together in a giant civil case in federal court in Cleveland, Ohio. Lawyers representing those plaintiffs have tentatively agreed to the bankruptcy and settlement deal as a way of getting damages sooner – a kind of “bird in the hand” decision.

About 26 states that are separately suing the company are also in favor of this deal.

Other states angrily oppose the deal and argue it’s actually worth less than $5bn, barely denting the cost of the opioids crisis, which the federal government estimates at a trillion-plus dollars since 2001. Critics also say it’s an unfair escape for the company and the Sacklers owning it, who have pledged $3bn towards the deal by selling their controversial UK-based subsidiary, Mundipharma.

Why are they suing?

All the plaintiffs, broadly, accuse Purdue Pharma of aggressively pushing sales of OxyContin across America to millions who didn’t need it, while playing down the dangers of addiction when taken as prescribed or via abuse. Along the way they allege the company manipulated medical experts, lawmakers and regulators while blaming abusers and street drugs for an epidemic of dependency and death.

What happens next?

The bankruptcy judge in White Plains, in the federal jurisdiction known as the southern district of New York, will hear Purdue argue this is a fair and efficient way to settle all the cases against it, while it still has some assets and potential. Purdue will portray it as a generous payout to reimburse state and local governments for some of the public health cost, without admitting any wrongdoing or dissolving the company.

Those opposed say that Purdue should not be shielded or allowed to continue selling opioids to fund a settlement they see as puny, and that the noises the firm has made about helping victims are disingenuous. States like Massachusetts say there’s plenty of wealth squirreled away and argue that even if granted bankruptcy it won’t protect the company – and certainly not the Sacklers that own it and who have not filed for bankruptcy – from state cases.

A day – or many – in court

Purdue Pharma has been sued before, by individuals, and, for example, by Kentucky, a case with damning testimony from the former company president Richard Sackler, while avoiding trial. But it’s never been sued on this scale, and by state and local governments coast to coast.

Slow-going settlement talks and bankruptcy plans have accelerated with the first bellwether, or test, trial in the gargantuan case in Cleveland due to begin this October. That would see Purdue executives publicly quizzed on company secrets and risk an excoriating and financially lethal judgment.

Purdue avoided a closely-watched trial in a state lawsuit in Oklahoma in 2019, settling for $270m, but now the larger case in federal court in Ohio looms, and further trials in that case and in other states are around the corner, next year and beyond.

Others being sued

Purdue is not the only defendant in many cases. Other leading prescription painkiller makers are accused of hard-sell, misleading tactics to profit from their versions of oxycodone or fentanyl products, although allegedly jumping on a bandwagon created by Purdue. The bandwagon also features distributors accused of delivering billions of pills across communities that couldn’t legitimately need even a tiny fraction of them, and leading pharmacy chains for filling the prescriptions.

The list includes manufacturers Mallinckrodt, Endo, Allergan, Teva and Johnson & Johnson; distributors AmerisouceBergen, McKesson and Cardinal Health; and pharmacies Walmart, Walgreens, CVS and Rite Aid.

Johnson & Johnson lost the landmark trial in the Oklahoma case in which Purdue Pharma was also a defendant but had settled before trial.

Who are the Sacklers?

Eight leading members of the Sackler family are being sued and their names have been added to many of the lawsuits against Purdue Pharma, which the family owns. Because they – Richard, Beverly, Theresa, Kathy, Ilene, Mortimer, Jonathan and David Sackler – were sued later than Purdue they won’t face trial until next year. But they’re involved in settlement talks and as longtime company directors are accused of orchestrating deceptive tactics. They are conservatively estimated to be collectively worth $13bn and have donated to famous arts and academic institutions – philanthropy increasingly being shunned amid protests. Court papers indicate recent profit siphoning.

Criminal charges

Purdue Pharma was prosecuted in federal court in 2007, pleaded guilty before trial and was fined $600m-plus for crimes involving misleading regulators, doctors and patients about the dangers of OxyContin. The Sacklers were not charged.

The plaintiffs now bringing lawsuits allege that Purdue continued misbehaving, under the direction of the billionaire Sacklers, but that civil cases are the best way to get damages for victims. There has been some talk of criminal investigations behind the scenes but nothing has yet come to light at the state or federal level.