Purdue Pharma and the Opioid Crisis

Photo Credit: https://www.aacom.org/reports-programs-initiatives/aacom-initiatives/tackling-the-opioid-epidemic (last visited: Jan. 23, 2022).

Authored By: Cecile Nicolson

Editor in Chief, American Journal of Trial Advocacy

          From April 2020 to April 2021, it is estimated that 75,673 people died from opioid overdose, an increase of almost 20,000 from the year before.[1]  The current opioid crisis began in the mid-1990s when the pharmaceutical industry began marketing opioids to primary-care physicians as a form of pain management.[2]  Opioids were first used in the United States during the Civil War to relieve wounded soldiers’ pain.[3]  Consequently, many became dependent on the drugs.[4]  Then, in the early 1900s, Congress enacted the Harrison Narcotics Tax Act, which imposed strict regulations on the distribution of opiates.[5]  This decreased the number of prescriptions written for the drugs until 1996 when Purdue Pharma began aggressively promoting OxyContin.[6]  Over the past 20 years, efforts have been made to hold Purdue Pharma and its owners liable for their contribution to the opioid epidemic.

          In a 2007 plea agreement with the United States, Purdue admitted that its marketing of the drug was misleading and that OxyContin was addictive.[7]  Additionally, the vast majority of Purdue’s profits after 2007 resulted from its marketing of OxyContin.[8]  The wide use of opioids continued to grow, and in 2017, the U.S. Department of Health and Human Services declared the crisis a public health emergency.[9]  The marketing of opioids led physicians to prescribe the drugs at unprecedented rates.[10]   Consequently, the over-prescription of the drugs led to the current crisis.  While there are very legitimate uses for the drugs, “[r]oughly 21 to 29 percent of patients prescribed opioids for chronic pain misuse them.”[11]  States, cities, and counties are starting to fight back against the over-prescription of opiates.[12]  The catalyst for a great deal of the litigation was the 24-million-dollar settlement between Purdue Pharma and Kentucky in 2015.[13]  Then, in 2017, over 2,000 suits were streamlined into one multidistrict litigation.[14]  Plaintiffs alleged that numerous pharmaceutical defendants ignored their obligation under the Controlled Substances Act “to prevent diversion of opioids and other controlled substances into illicit markets.”[15]

          One of the key defendants, Purdue Pharma, subsequently filed for bankruptcy in September 2019.[16]  Its filing intended to take advantage of the automatic stay provided by bankruptcy law and as a way to resolve pending and future opioid-related litigation.[17]  Soon after filing, the court enjoined “over 2,900 actions against Purdue and at least 400 civil suits against the Sacklers.”[18]  In September 2021, it appeared that Purdue was going to succeed as its Chapter 11 bankruptcy plan was confirmed.[19]  The confirmation came after Purdue paid billions in settlements, and it required the company to contribute an additional $4.5 billion to resolve pending claims and help fund opioid relief and education programs.[20]  The reasoning behind the confirmation was that the settlement would be more beneficial to creditors than if the corporation were liquidated, which would happen if the company could not proceed under Chapter 11.[21]  The confirmation, though, was appealed by eight states, numerous municipalities, the United States Trustee in Bankruptcy, and the U.S. Attorney’s Office for the Southern District of New York.[22]  

          The appellants argued that the plan provided broad releases for claims “predicated on fraud, misrepresentation, and willful misconduct under various state consumer protection statutes – to the members of the Sackler family (none of whom is a debtor in the bankruptcy case) and to their affiliates and related entities.”[23]  The Sackler family—worth almost $11 billion—owns Purdue and, over nine years, drained almost upwards of $10.4 billion from the company into accounts untouchable by bankruptcy proceedings.[24]  The family members involved in the Board and management withdrew in 2018, and the company’s Bankruptcy discussions began the following year.[25]  As part of those discussions, the Sackler family offered to contribute to a settlement but only if all family members would be absolved from all liability resulting from any civil litigation.[26]  The appellants argued that the bankruptcy court did not have the statutory authority to confirm a plan where the Sacklers would be released from all civil liability.[27]

          The Southern District of New York ultimately agreed with the appellants that the bankruptcy court did not have statutory authority to “release, on a non-consensual basis direct/particularized claims asserted by third parties against non-debtors.”[28]  The court noted that the question of whether a bankruptcy court could authorize non-consensual non-debtor releases is one that plagues bankruptcy courts across the country.[29]  The claims from which the Sacklers sought to be released were direct and “aris[ing] out of a separate and independent duty that is imposed by statute on individuals who, by virtue of their positions, personally participated in acts of corporate fraud, misrepresentation and/or willful misconduct.”[30]  In essence, claims for the family’s own misconduct and which the appellants could bring against the family members individually.[31]  This, the court explained, is where the bankruptcy court exceeded its authority.  In vacating the plan confirmation, the court acknowledged “that the invalidating of these releases will almost certainly lead to the undoing of a carefully crafted plan that would bring about many wonderful things, including especially the funding of desperately needed programs to counter opioid addiction.”[32]

            While the Southern District of New York’s ruling does undo a plan that would help mitigate the opioid crisis, it also does not allow the Sackler family to evade liability for its wrongdoings.   The ruling clarifies to corporations that there cannot be a non-consensual release of third-party claims against non-debtors.  Regardless, opioid related deaths are still trending upward, and education and prevention efforts are desperately needed. 

[1] Drug Overdose Deaths in the U.S. Top 100,000 Annually, CDC,https://www.cdc.gov/nchs/pressroom/nchs_press_releases/2021/20211117.htm (last updated Nov. 17, 2021).

[2] Art Van Zee, The Promotion and Marketing of OxyContin: Commercial Triumph, Public Health Tragedy Opioid Overdose Crisis, 99 Am. J. Pub. Health 221, 221-22 (2009); National Institute on Drug Abuse (Mar. 11, 2021),https://www.drugabuse.gov/drug-topics/opioids/opioid-overdose-crisis.

[3] The Origin and Causes of the Opioid Epidemic, Geo. Behav. Health Inst.(Aug. 14, 2018), https://www.georgetownbehavioral.com/blog/origin-and-causes-of-opioid-epidemic.

[4] Id.

[5] Harrison Narcotic Act, ch.1, 38 Stat. 785 (1914).

[6] Zee, supra note 2, at 221 (“One of the cornerstones of Purdue’s marketing plan was the use of sophisticated marketing data to influence physicians’ prescribing.”); see Ben Lesser, An Overview of the Opioid Epidemic, DualDiagnosis.org (Mar. 10, 2021), https://dualdiagnosis.org/infographics/history-of-the-opioid-epidemic/.

[7] In re Purdue Pharma, L.P., No. 21 CV 7532, 2021 WL 5979108, at *1 (S.D.N.Y. Dec. 16, 2021).

[8] Id.

[9] Press Release, U.S. Dep’t of Hum. Health Servs., HHS Acting Secretary Declares Public Health Emergency to Address National Opioid Crisis (Oct. 26, 2017), https://public3.pagefreezer.com/browse/HHS.gov/31-12-2020T08:51/https://www.hhs.gov/about/news/2017/10/26/hhs-acting-secretary-declares-public-health-emergency-address-national-opioid-crisis.html.

[10]Zee, supra note 2, at 222-23.

[11]National Institute on Drug Abuse (Mar. 11, 2021),https://www.drugabuse.gov/drug-topics/opioids/opioid-overdose-crisis.

[12] Nicolas P. Terry, The Opioid Litigation Unicorn, 70 S.C. L. Rev. 637 (2019).

[13] Kentucky Settles Lawsuit with OxyContin Maker for $24 Million, CBS News (Dec. 23, 2015),https://www.cbsnews.com/news/kentucky-settles-lawsuit-with-oxycontin-maker-for-24-million/.

[14] Colin Dwyer, Your Guide to the Massive (And Massively Complex) Opioid Litigation, NPR (Oct. 15, 2019),https://www.npr.org/sections/health-shots/2019/10/15/761537367/your-guide-to-the-massive-and-massively-complex-opioid-litigation.

[15] Melissa D. Berry, Opioid Litigation—Hundreds of Cases Consolidated: Here’s What You Should Know, Thomson Reuters (Sept. 28, 2018),https://www.thomsonreuters.com/en-us/posts/investigation-fraud-and-risk/opioid-litigation-consolidated/.

[16] In re Purdue Pharma, L.P., No. 21 CV 7532, 2021 WL 5979108, at *1 (S.D.N.Y. Dec. 16, 2021).

[17] Id.

[18] Id. at *22.

[19] In re Purdue Pharma L.P., 633 B.R. 53, 84 (Bankr. S.D.N.Y. 2021), vacated sub nom. In re Purdue Pharma, L.P., No. 21 CV 7532, 2021 WL 5979108 (S.D.N.Y. Dec. 16, 2021).

[20] In re Purdue Pharma, L.P., No. 21 CV 7532, 2021 WL 5979108, at *2 (S.D.N.Y. Dec. 16, 2021).

[21] In re Purdue Pharma L.P., 633 B.R. 53, 110-11 (Bankr. S.D.N.Y. 2021), vacated sub nom. In re Purdue Pharma, L.P., No. 21 CV 7532, 2021 WL 5979108 (S.D.N.Y. Dec. 16, 2021).

[22] In re Purdue Pharma, L.P., No. 21 CV 7532, 2021 WL 5979108, at *2 (S.D.N.Y. Dec. 16, 2021).

[23] Id.

[24] Id.

[25] Id.

[26] Id. at *3.

[27] Id.

[28] Id. at *48.

[29] Id. at *3-4.

[30] Id. at *48.

[31] Id.

[32] Id. at *70.

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