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Terry H. Schwadron

Sept. 12, 2019

At first, we thought the cork had popped out of the bottle a couple of weeks ago with a court decision against Johnson & Johnson in Oklahoma that set a half-billion fine as the black mark for making and selling opioids.

Then came a first blow against Purdue Pharma, the biggest maker of OxyContin, and its owners, the Sackler family, agreed to pay $270 million to avoid going to a state court trial in Oklahoma over the company’s role in the opioid addiction.

As we started thinkingabout what was going to be seen as appropriate punishment for crimes from involves making money while killing hundreds of thousands with legit drugs to which people became addicted over two decades, along comes word that a settlement is at hand with Purdue Pharma and the Sacklers to settle 1,600 cases to be overseen by a federal judge in Clevelandreportedly worth billions of dollars.

As part of those toward punishing settlements, however, the emergent deal would leave the owning Sackler family, which became super wealthy through sales of OxyContin, with its personal fortunes largely intact.

Some attorneys general remain dissatisfied and want to keep after Purdue and the Sackler family.

Recent analyses by The Washington Post and analysts who considered the figures say the deal involves the dissolution of Purdue Parma, the sale of another company, the creation of new trusts for alternatives to opioids — and the preservation of family riches.

As we go through the ins and outs of what is known about the deal, remember that Americans main a relatively simplistic Robin Hood mentality in our society, some idea of fairness that says those found having done wicked things should be punished and make it up to those who suffered. Museums and universities who have benefited from these same Sacklers as philanthropists are ripping the Sackler name from their walls, and returning some of the money.

So an idea that leaves the family with lots of money may strike some of us as, well, not punishment enough.

Here’s the deal: Purdue Pharma has proposed declaring its company bankrupt and resurrecting its efforts as a trust to fight the epidemic. The Sacklers promise to raise most if not all, of their personal share of the $10 billion to $12 billion agreement by selling another international drug conglomerate, Mundipharma, according to the documents and those close to the talks.

Yet, reported The Post, the proposed settlement — built on the projected value of drugs not yet on the market — offers gains for both sides if the company and more than 2,000 cities, counties, states and others that have sued Purdue and the family can reach a deal. Purdue would produce millions of doses of badly needed anti-addiction medication and overdose antidotes for the public, free of charge; the company would also contribute hundreds of millions of dollars in cash and insurance policies that could be worth more.

Whatever company is left would change hands, and the Sacklers would be out of the drug business. They would be required to contribute $3 billion and possibly more, depending on the sale price of Mundipharma, their international drug company, over seven years.

But, in this analysis, they would still retain much of their personal wealth, including monies that state attorneys general allege they pulled out of the company. The only out-of-pocket cash from the company will be that first amount of perhaps $3 billion, the rest coming after sales, trusts, and the new plan.

If no deal is reached, Purdue is likely to declare bankruptcy in coming weeks, according to people familiar with the company’s strategy. A huge civil trial against Purdue and as many as two dozen drug companies is scheduled to begin in Cleveland on Oct. 21.

The analysis shows that if the Sacklers send Purdue into Chapter 11 bankruptcy, the plaintiffs might get as little as $1.2 billion from an auction of the business’s components. In that scenario, plaintiffs would probably have to jockey for rights to Purdue’s assets. The process could generate enormous legal bills, possibly further reducing any payout to them. Clearly, Purdue is betting that this reality, coupled with continued pressure for a settlement from U.S. District Judge Dan Aaron Polster, who oversees the case, will produce an agreement, but attorneys general in Massachusetts, New York, Connecticut and New Jersey are balking.

Purdue says the company, “believes a settlement that benefits the American public now is a far better path than years of wasteful litigation and appeals. While the company is prepared to defend itself vigorously in the opioid litigation, Purdue has made clear that it prefers a constructive global resolution. We are actively working with state attorneys general and other plaintiffs on solutions that have the potential to save tens of thousands of lives and deliver billions of dollars to the communities affected by the opioid abuse crisis.”

More than 40 states have sued Purdue or other drug companies in their own courts. But the company has said it wants any deal to cover those lawsuits as well as the consolidated federal case so that it will no longer face litigation.

Massachusetts has produced records of Purdue board meetings where the Sacklers voted to move hundreds of millions of dollars from Purdue. Between 2008 and 2016, the family paid itself more than $4.3 billion, the lawsuit claimed. On Friday, Oregon’s attorney general, Ellen Rosenblum, said the family had taken $11 billion out of the company, which the Sacklers dispute.

The settlement comes scarcely six weeks before the start of the first federal trial in the sprawling opioid litigation in front of a federal judge in Cleveland who has recently issued tough pretrial rulings against the defendants — drug manufacturers including Purdue, as well as drug distributors and chain retailers. Although other manufacturers have already settled in that case, as well as in an earlier state opioid trial in Oklahoma, the Purdue agreement is the first so-called “global” arrangement. Negotiated by a team of five lawyers representing nearly 2,300 lawsuits in federal court, as well as by lawyers for the states, the resolution would end almost all of the cases against Purdue.

The settlement comes just weeks before the start of the first federal trial in the sprawling opioid litigation in front of a federal judge in Cleveland who has recently issued tough pretrial rulings against the defendants — drug manufacturers including Purdue, as well as drug distributors and chain retailers. Although other manufacturers have already settled in that case, as well as in an earlier state opioid trial in Oklahoma, the Purdue agreement is the first so-called “global” arrangement. Negotiated by a team of five lawyers representing nearly 2,300 lawsuits in federal court, as well as by lawyers for the states, the resolution would end almost all of the cases against Purdue.

The most novel idea here, said The Post, is to kill the company to produce a a for-profit trust that would seek new drugs to fight opioids. The trust would produce and provide addiction and overdose medications, which are still in the pipeline, free of charge. But to calculate their value for the agreement, the analysis estimates their worth at $4.4 billion over 10 years. The bulk of that is derived from two drugs. Ironically, the new public trust would largely pay for the millions of doses of the antidote drugs by continuing to sell OxyContin to pain patients, according to the documents.

Like everything else, it turns out that that the business of punishment is complicated.

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