A battle over billions of dollars in the bankruptcy case of Purdue Pharma has eclipsed what observers see as a key element of a proposed settlement of thousands of opioid lawsuits: a bid to repair the Sackler family legacy.
The Sackler family’s Purdue Pharma — widely blamed for fueling the opioid epidemic with its marketing of the addictive pain killer OxyContin — would be reinvented in the proposed bankruptcy settlement as a public interest trust dedicated to fighting addiction and overdose deaths.
If successful, it would be a startling turnaround.
The Sackler family business would be transformed from a maker of a well-known prescription narcotic into an entity focused on manufacturing and distributing overdose antidote drugs for free or at a low cost to communities hit hard by addiction.
Court filings indicate the company and its owners seek to use the plan not just to settle a tidal wave of litigation, but also to promote a counternarrative to years of criticism by public health officials and political leaders.
In court filings, Purdue Pharma said the new trust, which would have no Sackler ownership or participation, would deploy company assets for “positive health care uses.” While disputing that OxyContin caused the crisis, Purdue Pharma said the proposed bankruptcy settlement has been engineered “for the benefit of the American public.”
The Sacklers, several of whom served on the Purdue Pharma board, asserted in a separate court filing that the settlement would address “the underlying opioid crisis in positive and demonstrably beneficial ways. ... It will provide substantial funding and vital medical products to victims in urgent need.”
But some government officials and health care experts said the proposed public trust is at the core of an elaborate messaging campaign intended to inflate the perceived value of the settlement and to deflect the efforts of some states to get the family to pay billions more. Up to 25 state attorneys general who have sued Purdue Pharma oppose the settlement plan.
“They are trying to win a PR war,” Connecticut Attorney General William Tong, an opponent of Purdue’s bankruptcy plan, said in an interview. “I think this is scorched-earth wealth preservation.”
Representatives for the Sacklers and Purdue Pharma did not respond directly to questions about how the settlement could affect the family legacy.
“We are disappointed by the counterproductive rhetoric of those more interested in casting aspersions than achieving real solutions,’’ Daniel Connolly, attorney for the branch of the family that includes former Purdue Pharma president and chairman Richard Sackler, said in an emailed statement.
The alternative to the proposed plan, he said, “is a chaotic and costly array of court cases being litigated across the country only to the clear benefit of attorneys while valuable resources are squandered needlessly.’’
Purdue Pharma values the settlement at $10 billion to $12 billion, calling it in court documents an “unprecedented transfer of value to the American people.” Purdue said it can quickly put its drug development and manufacturing expertise to help ease the opioid crisis.
The 23 states supporting the settlement are doing so based on detailed presentations from company representatives about the settlement’s worth, Purdue Pharma said in a statement. “Those who oppose the settlement structure are simply unable to take ‘yes’ for an answer,” the company said.
The settlement contains a minimum $3 billion to be paid over seven years by Sackler family members, derived in large part from the sale of the family’s overseas drug companies.
The company assets that the Sacklers would turn over to the public trust are worth another $2.8 billion to $3.5 billion, according to the company, an amount that includes continued sales of OxyContin, generic opioids and other drugs.
More than a third of the company’s total settlement estimate is based on its $4.45 billion valuation of the overdose rescue drugs the public trust would manufacture. Opponents of the settlement noted that those drugs have yet to be approved by the Food and Drug Administration, and other forms of overdose rescue drugs are already widely available.
Even some supporters of Purdue Pharma’s reorganization said the company’s estimates of the settlement are too high. An official from a state that supports the settlement, speaking on the condition of anonymity to discuss settlement matters, valued the settlement at $4 billion to $8 billion. Asked by The Washington Post about that lower number, Purdue Pharma said, “Purdue stands by its assessment of the value of the settlement structure.”
Attorneys general opposing the settlement and other critics of the Sacklers offered a harsh assessment of the notion of transforming Purdue Pharma into a public trust.
“It’s a little odd that there’s this shot at rehabilitation,” said David Herzberg, a professor at the University at Buffalo who is writing a history of prescription drug abuse. “They knowingly engaged in sales practices that were going to cause harm to the public health. Even after it became clear what the consequences were, they found ways to continue doing that. To me, it’s just not credible.”
The proposed settlement would not require any admission of wrongdoing by Purdue or the family.
Some of the Sacklers, who rarely give interviews to the media, have indicated in court filings that they are sensitive to their public image.
The branch of the family that includes Richard Sackler asserted in a bankruptcy court filing that it has been a victim of inaccurate portrayals in lawsuits and the media. It vigorously denied the allegations that Sacklers or Purdue bear responsibility for the crisis.
“The family has generally declined to respond to the highly inaccurate portrait painted in lawsuits and media coverage,” the family said in a court filing. “The family has been criticized for that choice, and perhaps it should have adopted a more proactive stance.”
“Like families across America, the family has deep compassion for the victims of the opioid crisis and believe the settlement framework ... is a historic step toward providing critical resources to address a tragic public health situation.”
Combatants on all sides of the case are waging appeals to public sentiment far more than a typical corporate bankruptcy. U.S. Bankruptcy Judge Robert Drain has remarked on the public nature of the proceedings in his White Plains, N.Y., courtroom.
“Public perception here is more important than in most cases,” Drain said last month during a hearing.
The Sacklers hold an unusual place in the modern pharmaceutical industry, as family owners of a multibillion-dollar prescription drug company that grossed an estimated $35 billion by marketing narcotic pills. The family also raised its public profile with generous philanthropy, much of it focused on supporting the fine arts.
Three Sackler brothers — Arthur, Raymond and Mortimer — bought the company called Purdue Frederick in 1952. Arthur Sackler’s branch of the family got out of the company after his death in 1987. The Raymond and Mortimer branches of Sacklers, who continue to own it, founded affiliate Purdue Pharma in the early 1990s. Purdue Pharma introduced OxyContin in 1996.
The drug was the first extended release version of an existing painkiller called oxycodone. Purdue marketed the drug to doctors for use in patients with chronic pain. But Purdue’s pioneering role made the company and the family focal points of public anger over the crisis. The drug represents about 90% of Purdue Pharma’s gross sales revenue.
Purdue Pharma’s affiliate Purdue Frederick and three of its executives, none of them Sackler family members, pleaded guilty to deceptively marketing OxyContin in 2007. Purdue was subject to a five-year “corporate integrity agreement” that required reporting its marketing practices to the government, which it says it completed in 2013. It introduced an abuse-deterrent OxyContin pill in 2010.
But federal and state officials continued to scrutinize Purdue’s practices.
The company and family face thousands of lawsuits, including actions by 48 of the 50 states (two states, Oklahoma and Kentucky, have settled). Internal Purdue Pharma emails that Massachusetts disclosed early this year as part of its investigation generated widespread criticism, especially ones that appeared to levy blame for the crisis on addicts.
“We have to hammer on the abusers in every way possible. They are the culprits and the problem. They are reckless criminals,” Richard Sackler wrote in one 2001 email that was cited in a January lawsuit by Massachusetts Attorney General Maura Healey.
Purdue filed for protection against more than 2,600 lawsuits in U.S. Bankruptcy Court in September. It asked that lawsuits against its owning shareholders, the Sacklers, be stayed.
A U.S. Justice Department investigation is also underway, according to bankruptcy court filings. Successful resolution of that probe, details of which were not disclosed, is a condition of the settlement.
The waves of negative publicity and protests over Purdue’s role in the opioid crisis resulted in a number of museums scaling back or ending ties to the Sacklers.
The Tate galleries in London, the National Portrait Gallery in London and the Guggenheim in New York declined further Sackler family donations earlier this year. In May, the Metropolitan Museum of Art, which bears the Sackler name on a wing of the institution, said it also would decline further gifts. The Louvre removed the Sackler name from a wing housing near-eastern antiquities.
In court filings, Purdue Pharma recited steps it said it has taken to blunt the opioid epidemic. These include developing prescription tracking systems and investing $1 billion to develop an abuse-deterrent pill, which it began marketing in 2010. It lists dozens of small grants to nonprofit organizations and community groups totaling $43 million over 18 years.
It also cited prescribing statistics indicating that OxyContin represented no more than 4% of overall U.S. opioid prescriptions at its peak.
Critics contend that comparison is misleading. Percocet and Vicodin, the more commonly prescribed drugs, contained relatively small amounts of opioid ingredient, mixed with acetaminophen.
Scott Hadland, a pediatrician and researcher with Boston Medical Center’s Grayken Center for Addiction, said Purdue’s “argument isn’t sound.”
“There is reason to believe that OxyContin may have had an outsize role in contributing to overdose deaths,” he said.
Whether the plan to reinvent Purdue Pharma will be accepted by the court in a final settlement is one of the biggest questions looming over the bankruptcy case.
After selling OxyContin for more than two decades, the Sacklers would turn over 100% interest and control of Purdue to a public trust whose corporate charter would require it “deploy its assets to address the opioid crisis,’’ according to the settlement term sheet released last month. It would make cash payments toward that goal and contribute overdose rescue drugs — injectable nalmefene and nonprescription Narcan nasal spray — as well as generic addiction-recovery drugs.
The 23 states that have signed on to the proposed Purdue settlement say it’s a promising idea. Tennessee said it supports the settlement because “it gets money to treat the crisis now, gets a bad actor out of the pharmaceutical industry, and ensures that the Sackler family will no longer be involved in the opioid business anywhere in the world.”
But some attorneys general opposed to the settlement want Purdue Pharma shut down completely and its assets sold off.
They are seeking information about what the Sacklers did with money they paid themselves out of company, which is up to $13 billion, a financial consultant to Purdue Pharma said in a deposition in September.
“One of the reasons they like this public interest trust is they think it’s a way they can rehabilitate themselves, when of course they walk away with the billions that they took,” said New Hampshire Associate Attorney General James Boffetti, who is leading the state’s opioid lawsuits against Purdue and the Sacklers.
Connolly, the Sackler family attorney, said last month that, of the money the Sacklers took out of Purdue Pharma, “many billions of dollars from that amount were paid in taxes and reinvested in businesses that will be sold as part of the proposed settlement.”
Bankruptcy specialists said Drain is likely to remain focused on the dollar value of the settlement and how much creditors receive, as opposed to whether Purdue Pharma is shuttered or survives as a public trust.
“The fact that the Sackler family would like to have a memorial to themselves by creating a public trust, and doing the right thing, is completely irrelevant,” said Lynn M. LoPucki, a professor of bankruptcy law at the University of California at Los Angeles. “Whatever value is there belongs to the creditors, and the court’s job is to realize as much value as possible.”
The Sacklers’ offer of $3 billion into the settlement can be seen as an “opening gambit” that is likely to rise in further negotiations, LoPucki added, especially as creditors receive more information about the family’s removal of billions from the company.
“If the deal isn’t made, there probably will be attorneys general chasing the Sackler family all over the world to get the money back,” he said.
Bruce Markell, a former U.S. bankruptcy judge in Nevada and now a professor at the Northwestern Pritzker School of Law, said the involvement in the case of nearly every state attorney general is unusual and introduces an element of politics. Attorneys general are different from typical creditors in a corporate bankruptcy, such as banks and vendors, because they are elected law enforcement officials who see using police powers as part of their jobs, he noted.
“There are attorneys general who are no doubt trying to achieve the best for their citizens,” he said, “and there are some who are trying to achieve the best for their reelection campaigns.”
The structure of the proposed settlement will shield the Sacklers from public scrutiny of their finances, he added.
An agreement announced last month between a committee of creditors and Purdue and the Sacklers will put a confidentiality blanket on details about transfers of Purdue cash to the Sackler family. The details include 700 pages of investigative documents relating to the transfers, according to court filings. The Sacklers also have agreed to tell the creditors committee where the family’s assets are located.
The size of the Sacklers’ settlement payout will continue to remain the focal point of the debate, Markell said.
“What they are doing is they are buying peace. That’s the formula,” he said. “Whether it works or not is another matter.”