Supreme Court will hear challenge to controversial Purdue Pharma deal

Purdue Pharma and the wealthy family that controlled it are forever linked to the deadly opioid epidemic, which has killed hundreds of thousands of people.

But their role in the public health crisis is not the central question the Supreme Court will grapple with Monday when it hears arguments over a bankruptcy settlement involving Purdue, the maker of the highly addictive painkiller OxyContin.

Instead, the justices will focus on a narrower issue: whether the plan, designed to address thousands of claims from state and local governments, tribes, hospitals and individual victims, can provide comprehensive legal protections to members of the Sackler family. the owners of the company.

Under the deal, the Sacklers would pay up to $6 billion of their fortune to settle these claims in exchange for immunity from any civil lawsuits related to the opioid crisis and Purdue.

A broad ruling by the court could impact other major lawsuits in which a group of plaintiffs accuses an organization of similar injuries. A decision could not come until June, near the end of the court’s term.

In recent years, bankruptcy court has become a popular venue for handling mass claims settlements. The Purdue case and others like it are based on a system that courts in some parts of the country have said can shield third parties, such as the Sacklers, from liability even if they do not declare bankruptcy themselves.

A Justice Department watchdog had asked the Supreme Court to intervene after an appeals court upheld the settlement. The agreement violated federal law, the government said, by allowing the Sacklers to benefit from protections intended for those in “financial difficulties” and offered “a roadmap for wealthy corporations and individuals to abuse the bankruptcy system.”

Attorneys for Purdue said in lawsuits that the plan would “provide billions of dollars and lifesaving benefits for victims of the opioid crisis.” The suggestion that the plan set out a strategy for the wealthy who wanted to avoid responsibility was “unfounded” they added.

Purdue, widely credited with helping fuel the opioid crisis, has faced a barrage of challenges since OxyContin’s addictive properties and potential for abuse became apparent.

The company continued to aggressively push the painkiller anyway. In 2007, a holding company for Purdue pleaded guilty to a misdemeanor charge of “misbranding” the drug, including the risk of addiction, and agreed to pay about $600 million in fines and other fees.

As overdose deaths soared, municipalities, tribes, families and others sought funding to address the ravages of drugs. Many placed much of the blame on OxyContin.

Purdue filed for bankruptcy protection in September 2019 as civil lawsuits began against the company and, increasingly, the Sacklers themselves.

Under a restructuring plan filed in March 2021, the company would dissolve and become a public utility company focused on combating the opioid epidemic. In turn, members of the Sackler family would donate billions from their personal fortunes to help states, municipalities, tribes and others combat the opioid crisis. More than 90 percent of claimants who voted on the plan approved it.

In September, Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., approved the plan. The U.S. Trustee Program, an office of the Justice Department, was among those who appealed the decision.

After a court appeal was denied, members of the Sackler family increased their cash offer in February 2022 to settle the thousands of opioid claims for up to $6 billion. They continued to insist that they be excluded from all opioid-related lawsuits.

The U.S. Court of Appeals for the Second Circuit ruled in favor of the plan over a year later, handing Purdue a victory.

In agreeing to hear the case, the Supreme Court temporarily halted the deal and most likely suspended payments to the plaintiffs until it issues a ruling.

The plan approved by the appeals court “includes one of the most significant and comprehensive” waivers of claims to a party that had not even declared bankruptcy, Solicitor General Elizabeth B. Prelogar, wrote to the court requesting that it hear the case.

Lawyers for Purdue argued that if the court were to reject the deal, “the individuals and entities with an actual interest in the outcome would lose everything.”

They pointed to the unusually strong support among claimants for the plan, add that “Countless lives will be helped – and literally saved – by the billions of dollars that will flow to communities across the country under the plan.”