Purdue Pharma and the Sackler family have agreed to pay $270 million to settle Oklahoma’s claims that illegal marketing of the painkiller OxyContin devastated local communities. The deal could influence the results of thousands of lawsuits faced by Purdue and other companies.
The settlement comes two months before the scheduled start of a trial against Purdue, Johnson & Johnson and Teva Pharmaceutical Industries Ltd. in Norman, near Oklahoma City. Oklahoma is the first state in the nation to try claims against opioid makers, and the trial against the other two companies will proceed.
The settlement resolves a sliver of the massive legal liability that has led Purdue to threaten to file for bankruptcy protection as a way of managing its legal costs. The drugmaker is owned by the billionaire Sackler family, and states and local governments have recently targeted the family’s wealth to recoup billions spent on the social costs of opioid addiction.
“This agreement is only the first step in our ultimate goal of ending this nightmarish epidemic,” Oklahoma Atty. Gen. Mike Hunter said in a press release. He said the state is pressing ahead to “hold other defendants in this case accountable for their role in creating the worst public health crisis our state and nation has ever seen.”
Representatives of Teva and Johnson & Johnson didn’t immediately respond to requests for comment.
“I see this as a one-off tied to Purdue’s limited financial resources,” said Richard Ausness, a University of Kentucky professor who teaches about mass-tort law. “I think these other companies will wait to see the outcome of some of these test trials before they get serious about settling.”
At a news conference Tuesday, Hunter said the Purdue settlement is structured in a way to ensure the state gets paid even if the drugmaker seeks Chapter 11 bankruptcy protection from creditors. Purdue gave Oklahoma officials “a commitment that they’re not filing for bankruptcy in the near term,” he said.
The companies and others are battling claims by three dozen states and 1,600 U.S. cities and counties, but those suits are pending in other courts and the first test trial isn’t until the fall. Purdue’s settlement could give other states a road map for resolving their cases if they want to avoid trial, said Carl Tobias, a University of Richmond professor who teaches about product liability law.
Shares of Johnson & Johnson rose 1.4% on Tuesday to close at $138.57. Bonds of drugmaker Endo International, which is being sued elsewhere, rose as well.
In its suit, Oklahoma sought $25 billion in damages and penalties over Purdue’s push to induce doctors to prescribe OxyContin for unauthorized uses to generate billions of dollars in profits for the company. Although doctors have wide discretion to prescribe medicines for purposes beyond what those medicines are approved to treat, drugmakers are limited to marketing their products for ailments approved by regulators.
Craig Landau, Purdue’s chief executive, confirmed in a March 8 interview with the Washington Post that “bankruptcy is an option” to deal with the wave of opioid suits that threaten the pharmaceutical company’s financial strength. A Chapter 11 filing would shield Purdue from litigation by imposing a stay on all U.S. suits and allow the privately held drugmaker to consolidate its legal costs and expenses. Experts say taking the cases out of the regular court system and putting them before a single bankruptcy judge would be likely to allow Purdue to pay less in settlements.
The settlement announced Tuesday will allow Stamford, Conn.-based Purdue to avoid filing for bankruptcy protection, at least for now.
Lawyers for Oklahoma and Purdue have been in talks for months, according to people familiar with the negotiations. The talks were overseen by a court-appointed mediator.
Oklahoma sued opioid manufacturers in 2017 over their marketing campaigns for painkillers. Cleveland County District Judge Thad Balkman agreed to break up trials to have only three companies face juries at one time. Purdue, J&J and Teva were slated to be the first three drugmakers to come to trial.
In 2016, there were 444 opioid-related overdose deaths in Oklahoma; the state ranked 28th in the nation for such deaths, according to data analyzed by the Centers for Disease Control and Prevention. The year before, Oklahoma doctors wrote more than 4 million opioid prescriptions — a number exceeding the state’s population. State officials noted more state residents died from opioid overdoses than car accidents since 2009.
The state’s suit sought millions of dollars in damages for the current costs of dealing with the opioid epidemic and billions of dollars in future costs tied to counseling, healthcare and social services for recovering addicts and children orphaned by overdoses.
Among the terms of the settlement, Purdue will pay $103 million to establish the National Center for Addiction Studies and Treatment at Oklahoma State University, donate $20 million worth of medicine to the center and contribute $72 million for counties and cities and the cost of the litigation. The Sacklers have pledged $75 million to the center over five years even though they weren’t named defendants in the case.
“The agreement reached today will provide assistance to individuals nationwide who desperately need these services — rather than squandering resources on protracted litigation,” family members said in an emailed statement.
The Sacklers, whose total fortune has been estimated at $13 billion, have had doors closed on them recently as museums refused charitable donations and activists demand the family’s names be removed from academic buildings in the United States and Israel.