A deal wouldresolve claims by almost every U.S. state and many cities andcounties that the family and Purdue sparked the ongoing U.S. opioidepidemic through wrongful marketing tactics for OxyContin. (Image:Shutterstock)

(Bloomberg) –The Sackler family and their embattled drugmaker,Purdue Pharma LP, are backing a proposal to resolve all opioidlawsuits against themselves and the drugmaker for more than $11billion in what would be the largest settlement to date in thesprawling litigation over the addictive painkillers, according topeople familiar with the proposal.

Under the proposal, Purdue will file for bankruptcy, hand itselfover to a trust controlled by the states, cities and counties thathave sued, and sell its overseas drugmaker Mundipharma, accordingto the people. In addition, the Sacklers will dig into their ownpockets for at least $3 billion in cash. Funds from those sourceswould generate $11.5 billion to cover the fallout from the opioidepidemic, said the people, who asked not to be identified becausethe talks are private.

Related: New lawsuit unveils scope of Purdue's'extraordinary efforts' to push opioids

In return, the Sacklers and Purdue — maker of OxyContin painmedicine — would see more than 2,000 suits against them wiped out,the people said. A deal would resolve claims by almost every U.S.state and many cities and counties that the family and Purduesparked the ongoing U.S. opioid epidemic through wrongful marketingtactics for OxyContin, the people said.

The settlement would be separate from ongoing negotiationsinvolving state and local governments seeking a global settlementof opioid claims against drugmakers including Johnson & Johnsonand Endo International Ltd and drug distributors McKesson Corp andCardinal Health Inc.

The proposal, some details of which were first reported by NBCNews, came during settlement negotiations sponsored by a federaljudge in Cleveland last week, the people said. More than a halfdozen state attorneys general were involved in the meeting as wellas lawyers for cities and counties, they said. David Sackler,representing one wing of the Sackler family, also attended,according to NBC.

U.S. District Judge Daniel Polster has asked both sides toreport back to him on the status of the talks by Aug. 30, thepeople said.

Judge's ruling

In March, Purdue settled OxyContin marketing claims brought bythe state of Oklahoma for $270 million. On Monday, a judge inOklahoma ordered J&J to pay $572 million for creating a publicnuisance in the state with its over-promotion of its opioid painmedicines.

"While Purdue Pharma is prepared to defend itself vigorously inthe opioid litigation, the company has made clear that it seeslittle good coming from years of wasteful litigation and appeals,''the company said in an emailed statement.

"The people and communities affected by the opioid crisis needhelp now,'' the company said. "Purdue believes a constructiveglobal resolution is the best path forward, and the company isactively working with the state attorneys general and otherplaintiffs to achieve this outcome."

Davidson Goldin, a spokesman for some members of the Sacklerfamily, didn't immediately respond after regular business hoursTuesday to calls or emails seeking comment on the settlementproposal.

States and local governments accuse Purdue of deployinghyper-aggressive marketing tactics to dupe doctors intoover-prescribing OxyContin, leading to a surge in overdoses andaddiction across the country. A 2017 congressional investigationfound more than 50,000 Americans died from drug overdoses in 2015alone, with a third of those deaths linked to prescription opioidsincluding OxyContin and Insys Therapeutics Inc.'s Subsys.

The settlement will be facilitated through a bankruptcy filingand creation of a trust, the people said.

Bankruptcy filing?

Purdue Chief Executive Officer Craig Landau said in March thecompany hadn't made a final decision on whether it will seek aChapter 11 bankruptcy filing, but that it was "an option." Purdueofficials are trying to decide whether to file the case in Delawareor New York sometime within the next month, which would remove themfrom the upcoming trial, the people said.

The Sacklers will hand Purdue over to the states and localgovernments as part of the bankruptcy reorganization, the peoplesaid. The trust would own the drugmaker and independent trusteeswould appoint managers to run it, the people said.

The company's assets — including cash on hand, continued salesof OxyContin and other drugs, insurance — are expected to generateas much as $7 billion to compensate municipalities for tax dollarsspent on the opioid crisis, the people said.

The sale of U.K.-based Mundipharma network of companies maygenerate as much as $1.5 billion. If bidders won't go that high,the Sacklers have agreed to make up any shortfall up to a maximumof $1.5 billion, the people added.

Annual revenue

Mundipharma generates more than $3.4 billion in annual revenuethrough overseas sales of OxyContin and biosimilars, the peoplesaid. Biosimilars are cheaper versions of complex biologicalmedicines that are in increasing demand globally.

All monies will flow into the trust, which will oversee payouts,the people said. Such entities have been used for years bycompanies facing thousands of asbestos suits to resolve hundreds ofbillions of dollars-worth of litigation. Big-name corporations suchas Halliburton Co. and W.R. Grace & Co. have set up trusts,which are separate from the companies, to settle suits accusingtheir asbestos-laden products of causing cancer.

Some attorneys general seem determined to take a tough line.

"From the day we filed our complaint, I and other attorneysgeneral from around the country said the Sackler family needs to beheld accountable for their actions hooking this country onOxyContin," New York Attorney General Letitia James said in anemailed statement. "This family started a national fire, and anarsonist should never give advice on fire prevention."

Almost 400,000 people died from opioid overdoses in the U.S.from 1999 to 2017, according to the Centers for Diseases Controland Prevention. While fatalities from prescription pills haveleveled off, deaths from illegal heroin and synthetic opioids haveskyrocketed.

The consolidated Cleveland case is In Re National PrescriptionOpioid Litigation, 17-md-2804, U.S. District Court, NorthernDistrict of Ohio (Cleveland).

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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