A bankruptcy declaration and large settlement are supposed to bring some degree of closure. Purdue Pharma LP’s bankruptcy filing and $10 billion plan to settle litigation over its alleged role in fueling the opioid crisis, announced Sept. 15, may not provide much.
The proposal from Purdue, which made billions selling the highly popular opioid OxyContin, would see control of the company handed over to a trust controlled by suing states and counties. Its owners, the billionaire Sackler family, will pay at least $3 billion in cash as part of the settlement. For a supposedly global resolution, the deal isn’t all that popular: More than 20 states [including Rhode Island] oppose the offer, which was initially anticipated to be worth as much as $12 billion, and will fight for more money in front of bankruptcy Judge Robert Drain.
“Before we could responsibly reach any agreement, we would need much more information about the financial holdings of Purdue Pharma and the Sacklers to be confident that this resolution adequately compensates Rhode Island and, equally as important, holds the company and its owners accountable for the enormous destruction they have caused,” Kristy dosReis, spokeswoman for the R.I. Office of the Attorney General, said in a Sept. 11 statement.
Some states have vowed to continue pursuing the company and the allegedly hidden personal assets of the Sacklers, regardless.
Purdue’s situation is unique in many ways relative to other exposed drugmakers and suppliers. The company and its owners, the Sackler family, became the unsympathetic faces of the epidemic, drawing extra scrutiny and legal ire. Still, to the extent there are broader implications, there’s little that’s reassuring about this settlement for companies in the early stages of their legal battle.
More than 20 states [including Rhode Island] oppose the offer.
The fact that Purdue is closely held likely gave the company’s lawyers more flexibility in negotiating a settlement. It’s unlikely that public companies will be able to make deals that are this asset-heavy, cash-poor and unique. Purdue also reportedly used the threat of an unnegotiated “free-fall” bankruptcy as leverage in negotiations, which would have made any financial recovery significantly more complicated. That’s likely not going to be an option for larger public companies.
Purdue’s aggressive OxyContin sales tactics are seen as a big instigator of the opioid crisis. It’s worth noting, however, that the company had a relatively small market share by some measures. A settlement with a $10 billion floor sets an expensive precedent for higher-volume drugmakers and distributors. Bloomberg Intelligence analyst Holly Froum points out in a recent note that the Purdue settlement may leave other firms to shoulder a larger burden.
The fact that so many states are unsatisfied highlights how difficult it will be, particularly for more-complex businesses, to negotiate deals with hundreds of parties that truly end their risks. One of the scariest things about opioid litigation is the lack of certainty about the size and distribution of corporate liabilities. Companies and investors know a bit more than they did before, but it should be scant comfort.
Max Nisen is a Bloomberg Opinion columnist.
