‘Fighting for justice’: Connecticut vows to hold Purdue Pharma accountable in opioid crisis

Connecticut is not backing down in its opposition to a judge’s approval last month of OxyContin maker Purdue Pharma’s settlement plan, while the Stamford-based company is still at least about two months from emerging from bankruptcy.

The state now has an appeal before Judge Colleen McMahon in the U.S. District Court for the Southern District of New York. The appeal reflects its objection to Judge Robert Drain’s Sept. 1 confirmation in bankruptcy court of Purdue’s settlement framework, which would resolve several thousand lawsuits alleging the firm fueled the opioid crisis with deceptive OxyContin marketing and ultimately dissolve the company.

“We cannot allow our bankruptcy laws to be abused and misused as a loophole for the rich and powerful to avoid justice and accountability,” Connecticut Attorney General William Tong said in a statement in response to an inquiry from Hearst Connecticut Media about the status of the appeal. “When I speak to the parents who have lost their children, the people who will spend the rest of their lifetimes in recovery fighting addiction, they do not tell me to settle. They tell me to continue fighting for justice, and that’s what I have promised to do.”

While its appeal is being heard, Connecticut is seeking to halt the implementation of Purdue’s settlement plan. A hearing for its motion to stay Drain’s confirmation order is scheduled for Nov. 9 in bankruptcy court.

Last week, McMahon rejected a similar request from the U.S. Trustee, which has represented the U.S. Department of Justice in Purdue’s bankruptcy proceedings. She conditioned her decision on Purdue agreeing that it would not attempt to argue that appeals of Drain’s confirmation order were “equitably moot,” or essentially too late to stop the implementation of the settlement plan.

“Every day of delay caused by the appeals is a day that billions of dollars sit idly in bank accounts not being disbursed to the communities and victims who desperately need these funds to address and abate the opioid crisis,” Purdue said in a statement.

Purdue values its settlement plan at more than $10 billion. The plan’s implementation would see the company dissolved and its assets transferred into a new public-benefit company, Knoa Pharma, focused on using its resources to abate the national opioid crisis. No assets have been transferred yet.

Meanwhile, “less than $7 million out of several billion dollars is being distributed to the Creditor Trusts, the Master Disbursement Trust and TopCo (a holding company for Knoa Pharma) for purely administrative advance set-up work so that distributions can be made as soon as possible after the effective date,” Purdue added in the statement.

The earliest that Purdue could emerge from bankruptcy would be mid-December, “depending on court proceedings and decisions,” according to the company. Purdue filed for Chapter 11 protection in September 2019.

Concerted opposition

Tong’s opposition to the settlement plan focuses largely on a requirement for the Sackler family members who own Purdue to be released from the pending lawsuits, as well as potential opioid-related claims. The plan also provides releases for many other parties, including Sackler family members not directly involved in the company.

The liability shields are a condition of the Sacklers’ agreement to contribute about $4.3 billion in cash to the settlement. The Sacklers, whose family net worth was estimated last year by Forbes to total nearly $11 billion, did not personally file for bankruptcy.

McMahon, the U.S. District Court judge, has indicated that she plans to focus on the legal protections for the Sacklers in assessing appeals of Drain’s approval of the settlement framework.

“That’s the big dog here,” McMahon said in an Oct. 12 hearing. “That presents a pure question of law.”

While Tong has lambasted the releases, their scope would not be unlimited. They would not prohibit potential criminal prosecution. Last November, Purdue as a company pleaded guilty to three criminal charges of conspiring to defraud the government and violate anti-kickback law. No individuals, however, were charged in connection with that plea.

Coinciding with Purdue’s settlement last year with the Department of Justice, the Sacklers involved with Purdue agreed to a separate $225 million settlement with DOJ to resolve allegations of marketing and financial misconduct. The Sacklers did not admit any wrongdoing as part of that agreement, and they have also denied the allegations of malfeasance leveled against them in Connecticut’s lawsuit and many other complaints filed against Purdue.

In addition to Connecticut, several other parties have also appealed Drain’s approval of the settlement plan. Other opponents include the U.S. Trustee, Maryland, Washington state and the District of Columbia.

“While the appeals might create a more just settlement, it would be a settlement that would be farther off,” said Robert Bird, a professor of business law at the University of Connecticut. “It would take more time. That’s a concern that the beneficiaries (of the settlement plan) and courts might have, formally or informally, as the appeals wind their way through the courts.”

Dissatisfaction with the outcome of Purdue’s bankruptcy has also prompted efforts to reform bankruptcy law. Sen. Richard Blumenthal, D-Connecticut, is advancing legislation in Congress that seeks to prohibit the types of legal protections that the settlement plan provides to the Sacklers.

Blumenthal, who sued Purdue when he served as state attorney general, said that “I strongly support Attorney General Tong’s appeal of the Purdue settlement plan which fails to provide adequate compensation for victims of Purdue Pharma and fails to hold the Sackler family accountable for their egregious, unconscionable actions and their disregard for hundreds of thousands of families who lost loved ones to opioid addiction.”

Separate from the Purdue case, Connecticut is set to receive in the coming years an approximately $300 million share of a $26 billion national settlement with the country’s three largest pharmaceutical distributors and drugmaker Johnson & Johnson. Those funds will help support programs to combat an unrelenting epidemic that last year resulted in 1,273 people in Connecticut dying from opioid-related overdoses, up 13 percent from 2019.

“The distributors’ settlement will bring around $300 million to Connecticut over the next 18 years to fight the opioid epidemic and billions of dollars to communities nationwide,” Tong said. “No amount of money will ever bring back those lost to this tragedy, but these funds can be deployed right away to begin to turn the tide on this epidemic.”

pschott@stamfordadvocate.com; Twitter: @paulschott