Bankruptcy judge OKs federal settlement with Purdue Pharma

Proposed settlements between the federal government and OxyContin maker Purdue Pharma and its owners cleared a major legal hurdle Tuesday when a bankruptcy judge said they could move ahead.

Last month, the company agreed to an $8.3 billion civil settlement with the U.S. Department of Justice related to claims about its role in the national opioid addiction and overdose crisis. It also pleaded guilty to three criminal charges.

Purdue will pay the federal government $225 million, with the rest being part of a planned settlement between the company and thousands of state and local governments and other entities that are suing it. Members of the wealthy Sackler family who own the company also agreed to pay $225 million to settle civil claims.

U.S. Bankruptcy Judge Robert Drain does not need to approve the Sacklers' federal settlement, but he did rule Tuesday that the payment portion of it was allowable. That came as he approved the Purdue deal after a daylong hearing held by telephone because of the coronavirus pandemic.

Drain, based in White Plains, New York, had a say on Purdue's federal settlement because the company is going through bankruptcy as part of its efforts to resolve the thousands of civil claims against it. The judge let it move forward despite opposition from about half the states, advocates for victims of the opioid crisis, a group of law professors and some members of Congress.

Opponents argued that accepting the settlement now locks the judge into accepting the company’s proposal to resolve the lawsuits, including some terms that remain contentious.

The company wants to convert into a public benefit corporation that would no longer be owned by members of the Sackler family. The plan calls for the new company to continue making OxyContin, but with the profits going toward fighting the opioid crisis, which has been linked to 470,000 deaths in the U.S. since 2000.

Some critics instead would prefer that Purdue be sold with the proceeds going to opioid treatment and intervention.

The settlement calls for the company to pay more if it does not become a public benefit corporation or change to a similar structure. Drain noted that provision could be altered if all the parties agree to a different outcome, and said the states and federal government should be able to agree on Purdue's future.

“Both entities, after all, have the public interest as their guiding imperative and share an interest in resolving the opioid crisis,” Drain said.

A company reorganization plan is expected to be presented to the bankruptcy court in the coming months.

The company says its approach could generate $10 billion over time. But some attorneys general say that does not do enough to hold accountable members of the Sackler family, who would contribute at least $3 billion in that settlement.

The federal settlements are still subject to other steps in court, including a guilty plea for the company that could be entered next week.