The filing, made in federal bankruptcy court in White Plains, N.Y., marks a remarkable downfall for the closely held company started more than five decades ago in New York by three physician brothers. After it launched the prescription opioid OxyContin in the 1990s, Purdue became one of the most recognizable names in treating pain, a characteristic that later helped make it a target for blame for the opioid crisis.
Purdue faces lawsuits from virtually every state, as well as some 2,600 cities, counties, Native American tribes, hospitals and others seeking to recoup costs incurred from opioid addiction. The Justice Department also has civil and criminal probes into the company.
The OxyContin maker and its owners, the Sacklers, have been under intense financial pressure to settle the cases and have tried to reach a comprehensive settlement that would be implemented through a bankruptcy filing. They got part of the way there, persuading about half of the states and lawyers representing thousands of local governments to sign on to a deal the company values at about $10 billion, which includes between $3 billion and $4.5 billion from the Sacklers, and the donation of addiction-treatment drugs in development. Purdue will continue operations as a trust set up to benefit the plaintiffs.
The bankruptcy, which will at least temporarily halt the litigation against the company, is likely to set up further fighting with states that haven’t yet signed on and have vowed to continue pursuing Purdue and the Sacklers personally.
Purdue has been accused of helping fuel the U.S. addiction crisis through its aggressive marketing of OxyContin, an extended-release opioid designed to last 12 hours, introduced in 1996. Public-health advocates say a wave of prescription-drug addiction gave way to abuse of street drugs like heroin and fentanyl as the availability of legal painkillers decreased.
The company and the Sacklers have broadly denied the accusations and said they are committed to helping curb opioid addiction. “My objective here is to put this company on a course to be a major positive contributor to our society,” said Steve Miller, a longtime restructuring specialist who joined Purdue’s board as chairman last year.
Other drugmakers and distributors are also battling opioid lawsuits, including Johnson & Johnson , McKesson Corp. and Cardinal Health Inc. The companies say they marketed and distributed their drugs responsibly and aren’t to blame for an opioid crisis that has killed at least 400,000 people in the U.S. since 1999.
Purdue faced a reckoning over its marketing more than a decade ago and agreed to a series of settlements with government entities, including the company and three of its executives pleading guilty to federal criminal charges of misleading the public about the addiction risk related to OxyContin and paying $634.5 million.
Attention ramped up again with a new onslaught of lawsuits starting in 2017.
State attorneys general began suing Purdue, and private attorneys separately signed up thousands of cities, counties and other entities to file their own lawsuits. The majority of the local government suits have been centralized in federal court in Cleveland, where a landmark trial is slated to take place next month. Drug distributors on Saturday filed a motion to disqualify the judge overseeing the trial, arguing he has shown bias by being closely involved in settlement talks and publicly saying he wants to help solve the opioid crisis.
Purdue is likely to avoid that trial with the bankruptcy filing. The state attorneys general, meanwhile, have kept their lawsuits in state courts.
The latest backlash has also embroiled the company’s owners personally, with several Sackler family members who served on Purdue’s board or held senior management positions being named as defendants in some of the lawsuits. The public attention has prompted many recipients of the Sacklers’ vast philanthropic donations to cut ties with the family. The Sacklers aren’t personally filing for bankruptcy.
While a bankruptcy provides some finality for the company, Purdue’s owners remain a target of states opposed to the settlement. A Friday filing by the New York attorney general’s office alleged that it had uncovered about $1 billion in wire transfers by the Sacklers and corporate entities, including though Swiss bank accounts.
With the company’s coffers depleting, negotiations with plaintiffs’ lawyers in recent months have focused on how much money the Sacklers would contribute to settlements from their personal fortune. Estimates of their wealth have varied, but court filings show that more than $4 billion was paid out from Purdue to members of the Sackler family between 2008 and 2016.
The Sackler family said Sunday, “We are hopeful that in time, those parties who are not yet supportive will ultimately shift their focus to the critical resources that the settlement provides.”
In a settlement reached in March with the state of Oklahoma to avoid a trial there, Purdue agreed to pay $270 million, including $75 million over five years from the descendants of late company founders Mortimer and Raymond Sackler. The bulk of that money is slated for a national addiction center housed at Oklahoma State University.
OxyContin, Purdue’s signature product, has had more than $35 billion in sales since it launched in 1996. Questions about the drug’s addictive nature have dogged Purdue over most of that time.
Purdue’s share of the opioid painkiller market never exceeded 4% from 2006 to 2012, according to a Journal analysis of more than 378.6 million transaction records in a Drug Enforcement Administration database made public during the litigation. During that period the company had as much as 13% of the market for oxycodone, the active ingredient in OxyContin, the data show.
The company in 2010 began selling a version of OxyContin that is designed to be harder to abuse, but the states and local municipalities suing Purdue say that came too late.
The drugmaker stopped promoting its opioid painkillers to doctors last year and recently sold one of its manufacturing plants. The company is down to around 500 employees after shedding some of its workforce in recent years and facing slumping sales.
Purdue’s roots trace to 1952, when three Sackler brothers, all psychiatrists, acquired a small predecessor company in New York selling laxatives, earwax remover and arthritis treatment. Raymond and Mortimer Sackler bought out the share of the eldest brother, Arthur, after his death in 1987, and Arthur’s heirs weren’t involved in Purdue after that. Raymond and Mortimer are both deceased.
From the beginning of OxyContin sales, Purdue deployed hundreds of sales representatives to call on physicians and try to persuade them to write more prescriptions. It had a bonus system considered the most lucrative in the industry, according to former sales reps and a 2003 U.S. General Accounting Office report. Purdue recruited doctors as paid speakers at resort gatherings, helped fund nonprofits focused on pain patients and blanketed physicians with promotional items such as plush toys shaped like a pill.