Appeals court plans to pave way for Purdue Pharma deal

A settlement that would see Purdue Pharma out of bankruptcy and force its owners to contribute billions of dollars to help tackle the opioid crisis in the United States hinges on a legal matter before a federal appeals panel on Friday.

Attorneys for the company, state and local governments, individual opioid victims and others who would receive payments under the settlement will argue cases in the US Court of Appeals for the 2nd Circuit in New York.

At issue is whether a bankruptcy court judge has the power to grant members of the Sackler family who own maker OxyContin protection from civil lawsuits over the opioid toll. The family members insisted on the legal shield in exchange for providing the money behind the settlement.

As part of the deal, they would contribute $5.5 billion to $6 billion over time, in addition to giving up ownership of the business. Purdue would then become a new entity known as Knoa Pharma that would dedicate its profits to fighting the country’s opioid epidemic.

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Most of the Sacklers’ money would also go to fighting the epidemic, but at least $750 million would be distributed to some individual victims and their families.

Other product liability cases have been settled in bankruptcy court using the kind of protections this agreement would give the Sacklers. But opponents of the settlement dispute the strategy based on the fact that a handful of parties still oppose the deal.

Almost all of the governments and other entities that originally sued Purdue have agreed to the settlement. This left only a small group of objectors: Canadian local governments and First Nations; two mothers of sons who died of an opioid overdose; and the Office of the US Bankruptcy Trustee, a branch of the federal Department of Justice.

A judge requested mediation between Purdue and the two individual plaintiffs to see if they could agree on a settlement.

This week, more than 1,000 families who have lost loved ones to drug overdoses sent a letter asking the US Department of Justice to drop its opposition. They said individual victims would not receive payments if the settlement is derailed.

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“Furthermore, if this plan is not implemented, states would have to wait years to recover money to be used to alleviate the opioid crisis,” their letter reads. “With drug overdoses happening at a record rate, that’s time we can’t afford.”

The federal judge overseeing Purdue’s bankruptcy case approved a settlement last year which was later rejected on an appeal filed primarily by attorneys general of eight states and the District of Columbia. The parties then went to mediation which eventually persuaded the Sacklers to increase its contribution over a billion dollars.

Purdue is perhaps the most prominent player in the opioid industry. But several other drugmakers, distribution companies and pharmacies have also been pursued by state and local governments. While a handful of cases have gone to trial, many are also in the process of being settled.

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Earlier this year, drugmaker Johnson & Johnson and retail giants AmerisourceBergen, Cardinal Health and McKesson finalized deals to provide a total of $26 billion. Most of the money is to be used to tackle the opioid crisis, which has been linked to more than 500,000 deaths in the United States over the past two decades.

Regardless of the 2nd Circuit’s decision on the case, an appeal to the United States Supreme Court is possible. If Purdue and its allies win, they still have to go back to the bankruptcy court to get the latest version of the deal approved.

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