Endo International PLC, Johnson & Johnson and other drugmakers
that face sprawling litigation over the opioid crisis are exploring a
way to settle the cases by participating in Purdue Pharma LP’s
bankruptcy, according to internal documents and a person familiar with
the matter.
The move, if successful, could bring an end to — or at least
dramatically shrink — one of the largest and most complex pieces of
litigation the U.S. has ever seen.
Drugmakers and distributors face some 2,500 lawsuits brought by
virtually every state as well as cities, counties, Native American
tribes and others accusing the pharmaceutical industry of helping fuel
widespread opioid addiction.
The cases have become political flashpoints as communities look for
ways to recover money to address the costs of treating addiction,
including overstressed hospitals and first responders and to care for
babies born with opioid dependence.
Five drugmakers battling the cases — Endo, J&J, Teva
Pharmaceutical Industries Ltd., Allergan PLC and Mallinckrodt PLC — are
looking to enact a global settlement of the litigation that would be
implemented through OxyContin maker Purdue’s chapter 11 case, according
to a person familiar with the matter. The mechanism, if successful,
would allow the companies to contribute money into a trust set up
through the bankruptcy in exchange for a complete release from
liability.
The idea is still in the early stages, the person said, and no dollar
figures have yet been discussed. The concept would need buy-in from
Purdue and its owners, the Sackler family, as well as a critical mass of
state attorneys general and local municipalities suing the companies.
The bankruptcy judge overseeing Purdue’s case would also need to agree
he has jurisdiction to allow the other companies into the case.
A Purdue spokesman declined to comment.
Endo is working with lawyers at Skadden, Arps, Slate, Meagher &
Flom, the company’s longtime corporate counsel, on the proposed deal,
according to internal documents and a person familiar with the matter.
Endo, which makes the opioid painkiller Opana, isn’t considering
filing for bankruptcy, the person said, though it faces significant
debt.
Purdue, which has been the primary target of plaintiffs in the opioid
litigation, entered bankruptcy court in mid-September to implement a
multibillion-dollar deal with about half the states and thousands of
local governments that would resolve much of the litigation it faces.
Purdue has valued the settlement at $10 billion to $12 billion, which
includes at least $3 billion in cash from the Sacklers, as well as
money from future OxyContin sales and the development of
addiction-treatment drugs.
Purdue’s proposed deal, however, still faces strong pushback from
mostly Democratic state attorneys general from some two dozen states,
including New York and Massachusetts. Adding other companies into the
talks could further complicate negotiations.
Endo, Allergan and Mallinckrodt recently reached settlements
cumulatively valued at $45 million to avoid a landmark opioid trial
slated to start in late October that will test the claims of Ohio’s
Cuyahoga and Summit counties. That trial has been selected to serve as a
bellwether of some 2,000 of the opioid lawsuits centralized in federal
court in Cleveland.
The U.S. district court judge overseeing the thousands of
federal-court opioid cases, Dan Polster, has pushed both sides to settle
the cases rather than waste time and money in protracted litigation.
Finding a way to fully cap liability from cases brought by local and
state governments in different courts around the country has been a
challenge, however. Using Purdue’s chapter 11 case could provide a way
to resolve claims on a near-complete basis.
A scenario in which companies use a bankruptcy proceeding to resolve
legal liabilities, without filing for bankruptcy themselves, has some
precedent.
Car makers that were sued along with Takata Corp. over defective air
bags had an option to contribute money and settle the cases through
Takata’s bankruptcy plan.
The settlement mechanism was optional on both sides, and only Honda
Motor Co. had signed on as of February 2018, when Takata’s plan was
confirmed. Unlike Purdue’s co-defendant drugmakers, the car makers were
major creditors in Takata’s bankruptcy since they were owed money for
funding the recall of millions of vehicles, as well as funding the
bankruptcy case.
Walmart Inc. in 2014 obtained a release of liability over dangerous
plastic gasoline cans as part of a $162 million settlement built into
the chapter 11 plan of Blitz USA, which made the cans. The retailer had
been sued for selling the Blitz cans.
So-called third-party releases, which clear a company that is not
itself in bankruptcy of liability in exchange for some kind of value,
are prohibited in some parts of the country. That isn’t the case in New
York, where Purdue filed for bankruptcy, or Delaware, where Takata
obtained protection.
Endo, Teva and Mallinckrodt each face significant debt in addition to
the opioid lawsuits. Reaching a global resolution could help them avoid
seeking bankruptcy protection or implementing broader restructurings.
https://www.marketscreener.com/ENDO-INTERNATIONAL-PLC-15914394/news/Drugmakers-Look-to-Use-Purdue-Pharma-s-Bankruptcy-to-Settle-Opioid-Suits-29315683/
