OxyContin Maker Purdue Pharma Files for Chapter 11 Bankruptcy Protection

OxyContin Maker Purdue Pharma Files for Chapter 11 Bankruptcy Protection

Purdue Pharma, the manufacturer of the prescription pain reliever OxyContin, has a hearing scheduled in federal court in White Plains, New York, for the company’s Chapter 11 bankruptcy case. Along with filing for bankruptcy protection, the drugmaker has negotiated a settlement that may well cost several billion dollars to deal with thousands of outstanding lawsuits filed against it.

Multi-billion Dollar Proposed Settlement

Under the proposed plan, $10-$12 billion would be paid to local and state governments. The funds would be used to reimburse them for costs associated with OxyContin use and compensate them for damage caused by prescription pain medications and illegal drugs, such as heroin. These drugs have been blamed for more than 400,000 deaths in the United States over the past 20 years.

To date, two dozen states have agreed to be part of the settlement plan, along with attorneys who represent a number of the 2,000 local governments suing Purdue Pharma. Other states have refused to sign the proposed settlement.

Focus on Keeping Doors at Purdue Pharma Open for Now

The initial court appearance will focus on making sure that the company has the means to keep its bills paid during its Chapter 11 bankruptcy. Judge Robert Drain will hear motions from the parties to authorize payments for employees’ wages, vendors, utilities and other important entities.

The judge will also hear from lawyers who object to the Chapter 11 filing. These attorneys will describe it as a “bad faith claim.” The judge may choose not to hear those arguments at the same time as the motions about wage and accounts payable matters.

The court will have to make a decision between the following options:

1. Approve the proposed settlement in its current form
2. Reject the settlement
3. Order the parties to make modifications to the proposed settlement.

Several states have already indicated they have objections to the proposed settlement, which the judge may consider when making his decision. At the same time, the Sackler family, which owns the company, would like to see more states agree to the proposed settlement.

Judge Drain will also decide when the lawsuits against the Sackler family in state court will be allowed to proceed as well as what happens to the company proper. Under the provisions of the proposed settlement, Purdue Pharma would continue to operate. The company’s profits would be used to pay for the settlement. The judge could also order that the company be sold outright.

One Settlement May be Best Way to Resolve Multiple Lawsuits

According to bankruptcy expert Jerry Reisman, settling multiple claims with one settlement is often considered the best way to resolve these types of cases. He said that the money would be placed into one pool to be divided among the claimants. The advantage of this option is that it would reduce the costs associated with bringing separate lawsuits through different courts. If each lawsuit is being heard separately, there is a race to have each one heard before the company runs out of money.