Purdue opioid deal may be worth less than drugmaker promised

QUESTIONS ARE GROWING about the value of the proposed settlement between Purdue Pharma and a number of states and cities suing for damages caused by the opioid crisis. / BLOOMBERG NEWS FILE PHOTO/JOHN MOORE/GETTY IMAGES
QUESTIONS ARE GROWING about the value of the proposed settlement between Purdue Pharma and a number of states and cities suing for damages caused by the opioid crisis. / BLOOMBERG NEWS FILE PHOTO/JOHN MOORE/GETTY IMAGES

WILMINGTON, Del. – Purdue Pharma LP’s deal to escape thousands of lawsuits over its role in the U.S. opioid crisis may be provide less than half the $10 billion that the drugmaker has promised, said three people familiar with details of the proposal.

The settlement Purdue filed in bankruptcy court Sunday includes just $4.4 billion in guaranteed cash, said the people, who declined to be identified discussing confidential negotiations. The rest is based on money that’s far from guaranteed, based on optimistic assumptions of insurance payments and future sales of the company’s highly addictive OxyContin painkiller over seven years, they said.

While Purdue won agreements with 24 states, five U.S. territories and more than 1,000 counties, cities and Native American tribes, many states oppose the deal because there aren’t enough cash guarantees. Opponents also want more from the Sackler family, the owners of Purdue who created a $13 billion fortune on expanded sales of OxyContin over the past decade.

“We just don’t think it’s good enough,” Mass. Attorney General Maura Healey said in an NPR interview Tuesday, adding that the deal could be worth as little as $4 billion. “The Sacklers, who really were the ones who orchestrated the whole illegal scheme to sell Oxy, are not being forced to pay a dime back of any of the billions of dollars they made from Oxy sales.”

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The Sacklers have pledged $3 billion to the settlement, which would cover the company’s share of liability for a U.S. opioid epidemic that kills about 130 people a day. More than two dozen other drugmakers, distributors and pharmacies face thousands of suits by cities, counties and states.

The deal also includes $500 million of Purdue cash and roughly $900 million in expected proceeds from an eventual liquidation of the drugmaker, according to the people familiar with the details. Another $500 million in cash-on-hand will be used to operate Purdue for an unspecified period before its sale, possibly generating $500 million a year, though the exact amount is far from certain, one of the people said.

The settlement was hammered out in Cleveland talks between lawyers for the company, plaintiffs and various attorneys general, according to the people.

A bankruptcy judge in White Plains, N.Y., must approve any settlement, and the states that oppose it are expected to file objections soon and attempt to carry on with their lawsuits against Purdue and the Sacklers in state courts.

Insurance proceeds

Lawyers for the company said in court Tuesday that the United States will benefit from the case because control of Purdue is being handed over to the people and governments harmed by the opioid crisis. The company and the Sacklers, who have denied wrongdoing, have repeatedly said that opposition to the deal is unwarranted and unproductive.

The people familiar with provisions of the deal say it includes insurance proceeds that aren’t known and may be challenged by insurers. The settlement also relies on continued sales of OxyContin in the U.S., where the patent expires in 2023, and income from drugs in Purdue’s pipeline that haven’t won regulatory approval and may not have the demand the company expects, according to the people.

Attorneys general from New York and Massachusetts also have publicly condemned provisions of the deal that require states and other plaintiffs to essentially get into the OxyContin-sales business. Revenue from U.S. sales would go into a public trust run by the settling entities.

The states and plaintiffs would also be relying on overseas sales of OxyContin for years.

According to court documents, the Sackler family agreed to sell Purdue’s U.K.-based international unit, Mundipharma, to raise their $3 billion share of the settlement. Mundipharma includes about 100 companies spread across the globe, from China to western Europe.

But the Sacklers have seven years to unload Mundipharma, allowing them to sell each unit country by country and avoid using any of the money they’ve already made from OxyContin sales and allegedly stashed away in overseas accounts, the people said.

Lawyers for the New York attorney general’s office said last week they’d uncovered evidence the Sacklers made about $1 billion in transfers among themselves and their shell companies, some of which ended up in Swiss bank accounts.

Jef Feeley and Erik Larson are Bloomberg News staff writers.

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