Purdue officials said the costsof dealing with waves of opioid suits made a bankruptcy inevitable,and the company projected it will spend about $263 million on legaland related professional costs in 2019. (ALM File Photo)

(Bloomberg) –Purdue Pharma LP filed for bankruptcy with a morethan $10 billion plan to settle claims that it fueled the U.S. opioid epidemic by illegally pushing salesof its addictive OxyContin painkiller.

The Chapter 11 filing on Sunday in White Plains, New York, isdesigned to short-circuit more than 2,000 lawsuits against Purdue and its owners,the billionaire Sackler family. The settlement calls for theSacklers to hand over Purdue to a trust controlled by the states,cities and counties that have sued to recoup billions of dollarsthey spent battling opioid addictions and overdoses.

Related: Purdue proposes $11.5B opioidsettlement

Officials originally envisioned raising as much as $12 billionwith the plan, which is backed by more than two dozen U.S. statesand territories, along with many cities and counties that suedPurdue. In an emailed statement, Purdue officials reduced thepotential settlement amount to more than $10 billion.

The company listed as much as $10 billion in assets, including$1.2 billion in cash, and $1 billion in debts in its Chapter 11filing. Purdue officials said Sunday the costs of dealing withwaves of opioid suits made a bankruptcy inevitable, and the companyprojected it will spend about $263 million on legal and relatedprofessional costs in 2019.

The Sacklers guaranteed they'll pay a minimum of $3 billiontoward the settlement, with most of the sum generated by sellingPurdue's U.K.-based drugmaker Mundipharma.

The family has rejected calls by some state attorneys general toboost their guarantee to $4.5 billion. Of the 48 states that havecourt actions pending against the company in some forum, half haverefused to sign on to the settlement. States that aren't satisfiedwith Purdue's proposal will get a chance to voice their oppositionbefore a bankruptcy judge approves the accord.

The plan calls for Purdue officials to set up a trustresponsible for operating the company, which would generate moneythat governments could use to bolster drug treatment and policingbudgets. That entity, run by trustees appointed by a bankruptcyjudge, also will oversee payouts to state and local governmentsthat sued.

"This unique framework for a comprehensive resolution willdedicate all the assets and resources of Purdue for the benefit ofthe American public," Steven Miller, the drugmaker's boardchairman, said in an emailed statement.

To make its plan work, the company said it will soon ask thejudge overseeing the case to halt lawsuits brought by local andstate governments that are not part of the current deal. Typically,such government regulatory actions are allowed to continue while acompany is in bankruptcy, while private lawsuits are halted.

Who gets what

The court that will oversee Purdue's case has the thorny task oftrying to figure out how to apportion monies generated by the planamong thousands of states, cities and counties seekingreimbursement for tax dollars spent on the crisis.

That allocation "will be one of the main tasks in the case,"Miller said Sunday. Lawyers for cities and counties have createdcomputer programs that calculate how much a municipality could getunder the deal based on the amount of opioids circulated in thearea.

U.S. Bankruptcy Judge Robert Drain has been assigned to overseePurdue's Chapter 11 case. His White Plains court is about a20-minute drive from Purdue's Stamford, Connecticutheadquarters.

A veteran bankruptcy judge, Drain has handled similarhigh-profile filings, including that of Sears Holding Corp., whichwas sold to hedge fund manager Eddie Lampert's ESL Investments Inc.He also oversaw the sale of some of Delphi Corp.'s assets in 2009after the auto-parts maker and ex-General Motors Co. spinoff soughtprotection from creditors.

Bigger bite

The Sackler family said it backed the proposed settlement inhopes of finding a way to provide "critical resources" to addressan epidemic that some attorneys general have accused them ofspawning.

"This process will bring the thousands of claims into a single,efficient forum where the settlement can be finalized, reviewed bythe bankruptcy court to ensure it is fair and just and thenimplemented," the family said in an emailed statement.

Opponents argue Purdue's plan isn't enough of a reckoning forthe Sacklers, who made billions from the over-prescribing ofOxyContin that was spurred by the company's allegedly illegalmarketing. It also won't provide enough reimbursement for hundredsof thousands of overdose deaths and addiction damage inflicted onmillions of U.S. families, opponents say.

"Irrespective of Purdue's actions or evasions, we will continueto pursue justice on behalf of those harmed by the Sacklers' greed,callousness, and fraud," Delaware Attorney General Kathy Jenningssaid in an emailed statement.

The Sacklers and Purdue officials had sought to persuade 35attorneys general to back the current settlement proposal. Thatsuper-majority would have held more sway in bankruptcy court whenit came time to win final approval of the deal. As of Sunday, thecompany had lined up as many as 29 U.S. states and territories,according to Purdue's news release.

Purdue planned to file for protection from creditors by the endof September to avoid facing a Cleveland jury that's scheduled tohear evidence starting next month in the first federal trial overthe opioid epidemic.

Public nuisance

A host of other opioid makers, such as Johnson & Johnson,and drug distributors like McKesson Corp., will face claims theycreated a public nuisance across the U.S. with their mishandling ofthe medicines.

States and municipalities contend drugmakers, distributors andpharmacy chains conducted illegal marketing campaigns pushing thepainkillers, failed to adequately oversee orders and ignored redflags about unusually frequent retail sales.

In March, Purdue settled claims brought by the state of Oklahomafor $270 million, and another defendant, Teva PharmaceuticalIndustries Ltd., also reached an $85 million deal to avoid trial.J&J, which refused to settle, was ordered to pay $572 millionfor creating a public nuisance in the state with its over-promotionof its opioid pain medicines.

The case is Purdue Pharma LP 19-23649, U.S. Bankruptcy Court forthe Southern District of New York (White Plains).

–With assistance from Dawn McCarty, Rick Green and VirginiaVan Natta.

Read more: 

• Lawyers in opioid suit seek nationwide classcertification
• New lawsuit unveils scope of Purdue's'extraordinary efforts' to push opioids
• Opioid manufacturers: A publicnuisance?

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