Last year, 49 states and thousands of cities, counties and territories joined in massive litigation designed to punish the drug industry for its role in the opioid crisis.
But now that one of the companies, Oxycontin-maker Purdue, has put as much as $12 billion on the table as part of a bankruptcy settlement, Democrats and Republicans are fighting over the proper strategy.
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Democratic attorneys general don’t trust Purdue’s numbers and want it to cough up a much larger sum. They’re gambling that refusing a settlement will lead to a much bigger payoff. Republican attorneys general are angling to persuade a bankruptcy judge to order a quick but guaranteed payout for opioids victims.
The partisan split — most of the 24 states rejecting the Purdue deal are led by Democrats — marks two different strategies, with the GOP going for a more pragmatic approach that may also reflect the party’s traditionally closer relationship with industry. Democrats meanwhile are aiming to send a broader message about corporate accountability, not just to Purdue, but to the large collection of even more powerful companies still tied up in opioid litigation. They are leery of a repeat of the financial crisis, where companies were dissolved but their leaders weren’t punished.
Even as the split lays bare two different philosophies, it could complicate a global settlement of the opioid crisis, which plaintiffs have estimated will cost the country nearly half a trillion dollars in substance abuse treatment, criminal justice, health care and other costs. Resolution of the Purdue case could tip off drug companies and distributors on how to emerge from the litigation at the lowest cost.
“The clear message is, we aren’t rolling over here,” Colorado Attorney General Phil Weiser said. “We are representing our states and our citizens who have suffered extensive harm and we want to make sure we obtain a sufficient amount to address what is a public health crisis.”
The holdout states will argue in bankruptcy court that the Sackler family, which has made billions from its ownership of Purdue and the sale of opioids, is every bit as liable for the epidemic as the company itself, and that the settlement doesn’t truly hold them accountable.
The Sacklers are using Purdue to shield their billions in wealth, the holdouts argue. Last week, the New York attorney general told a state court judge her office had uncovered evidence the Sacklers had siphoned money out of Purdue to devalue the company and hide their wealth from lawsuits.
“The Sacklers have withdrawn the vast majority of the value of this company so Purdue Pharma, the drug company, is just a shell of itself,” said North Carolina’s Democratic attorney general, Josh Stein. “I believe they need to be held accountable.”
The vitriol reflects the Sacklers’ position as the poster children of drug industry malfeasance in an opioid epidemic that has killed an estimated 400,000 people over the past two decades. Purdue’s Oxycontin was seen as a much-abused drug in the early phase of the epidemic, but the company only holds about 3 percent of the opioid market in the United States now.
Purdue, which made its first appearance in a New York bankruptcy court on Tuesday, has reached a tentative deal with 24 states and nearly 2,000 cities and counties that would put the company’s assets into a public health benefit trust. The Sacklers would also sell their international drug company Mundipharma and contribute the money from that sale to the settlement. The Sacklers would also pony up at least $3 billion from the sale of another company.
The company and the family behind it would admit no wrongdoing as part of the deal, a key sticking point for those who oppose it.
The company sparked outrage anew in a White Plains, N.Y., court this week by asking to pay “certain employees” $34 million in bonuses to keep them from leaving Purdue during its trials, The Washington Post reported. Plaintiffs in the case said Purdue should put all its funds into repairing the damage of the opioid crisis it is alleged to have helped cause.
Democratic attorneys general are skeptical the deal will be as large as their GOP counterparts suggest, because its size is largely determined by the sale of the Sackler’s international drug company and the volume of drugs the new Purdue trust sells in the future.
“Frankly any suggestion that Purdue has put $10 billion to $12 billion on the table is false. … No one has offered $10 to $12 billion in guaranteed cash. It’s all very contingent,” said Connecticut Attorney General William Tong, a Democrat.
The Texas attorney general’s office says it is confident the deal would bring a minimum of $4 billion.
The settlement does not touch moneys the Sackler family allegedly pulled out of Purdue over the years, several attorneys general said, and many are wary of appearing to let them off the hook.
The holdouts seem “less interested in securing whatever money they can get, the realistic money that is out there, [than] sending a political message,” said John Leppard, who tracks health policy implications on financial markets for Washington Analysis.
Colorado’s Weiser says it’s about leverage, keeping the pressure on the Sacklers to get a better deal.
“As long as the Sacklers have to worry about their liability, they have a considerable incentive to reach a fair and just settlement,” he said.
To that end, North Carolina on Tuesday became the latest state to sue the Sackler family in state court, saying they “helped create and fuel the opioid crisis.”
“The Sacklers have not been willing to put meaningful skin in the game to help clean up the mess they’ve helped create,” Stein said in a statement. The Sacklers must be held accountable. They need to write a check.”
One of the critical issues the court will decide is whether Democrats will have a chance to fight for a bigger check by holding out, or are mistakenly putting their citizens at the back of a very long line.
“This is a very high stakes game of poker they are playing right now and they are trying to see who blinks first,” said Jonathan Lipson, an expert in bankruptcy law at Temple University.
If the bankruptcy judge stays or ends all outside litigation against the Sacklers, states that agree to the deal could be paid well ahead of the states that did not.
“There’s a pecking order in bankruptcy … and those who have agreed to a settlement kind of have first dibs,” said Leppard.
While Republicans tend to be closer than Democrats to the pharmaceutical industry, they say they are cutting the deal for pragmatic reasons. Protracted litigation will only slow their access to billions of dollars needed for public health programs to fight the opioids crisis, the GOP attorneys general say. The longer Purdue is tied up in legal proceedings, the less money the company will have left for any payout.
And they are skeptical of the Democratic attorneys general plans to take on the Sackler family directly.
“Even if you were able to get to personal liability, most of this money is located overseas in a series of trusts. What you’re talking about is taking a long shot to litigate over 10 to 12 years to chase … money around the globe. … That doesn’t strike me as a good risk,” said Ohio Attorney General Dave Yost, a Republican.
That argument won over New Mexico and Michigan, the two Democratic-led states that agreed to the settlement. Nebraska is the only state that hasn’t joined in the litigation.
Michigan Attorney General Dana Nessel said her state is “best served by an infusion of funds into our state as quickly as possible.”
“No one is doubting the moral culpability of anyone involved, but moral culpability doesn’t necessarily translate into legal liability for one, and it doesn’t translate into those damages actually being paid,” said an official for the Texas attorney general’s office.
States on both sides say their deliberations continue. “Nobody has stopped talking,” said Connecticut’s Tong.