Purdue's opioid deal: Worth less than OxyContin maker promised?

Court documents show Purdue Pharma may provide less than half of the $10bn it estimated in its bankruptcy filing.

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    Purdue Pharma LP filed for bankruptcy protection in New York this week, bowing to pressure from thousands of lawsuits that allege the company helped heighten the US opioid epidemic [File: George Frey/Bloomberg]
    Purdue Pharma LP filed for bankruptcy protection in New York this week, bowing to pressure from thousands of lawsuits that allege the company helped heighten the US opioid epidemic [File: George Frey/Bloomberg]

    Purdue Pharma LP's deal to escape thousands of lawsuits over its role in the U.S. opioid crisis may provide less than half the $10 billion that the closely held drugmaker projected in its Chapter 11 filing, said three people familiar with details of the proposal.

    The settlement Purdue filed in bankruptcy court Sunday includes just $4.4 billion in guaranteed cash, said the people, who declined to be identified discussing confidential negotiations. The rest is based on money that's far from guaranteed -- optimistic assumptions of insurance payments and future sales of its highly addictive OxyContin painkiller over seven years, they said.

    While Purdue won agreements with 24 states, five U.S. territories and more than 1,000 counties, cities and Native American tribes, many states oppose the deal because there aren't enough cash guarantees. Opponents also want more from the Sackler family, the owners of Purdue who created a$13 billion fortune on expanded sales of OxyContin over the past decade.

    "The Sacklers would like the public to believe they're cutting a check for billions of dollars. They're not," Massachusetts Attorney General Maura Healey said in an emailed statement Wednesday. "Their proposal, which we believe is worth far less than they say, wouldn't require them to pay back a dime of the billions they've earned from OxyContin sales."

    The Sacklers have pledged $3 billion to the settlement, which would cover the company's share of liability for a U.S. opioid epidemic that killsabout 130 people a day. More than two dozen other drugmakers, distributors and pharmacies face thousands of suits by cities, counties and states.

    The deal also includes $500 million of Purdue cash and roughly $900 million in expected proceeds from an eventual liquidation of the drugmaker, according to the people familiar with the details. Another $500 million in cash-on-hand will be used to operate Purdue for an unspecified period before its sale, possibly generating $500 million a year, though the exact amount is far from certain, one of the people said.

    Davidson Goldin, a spokesman for one wing of the Sackler family, declined to comment on criticism of the settlement proposal. Purdue's press office didn't immediately return a call for comment.

    The settlement was hammered out in Cleveland talks between lawyers for the company, plaintiffs and various attorneys general, according to the people.

    A bankruptcy judge in White Plains, New York, must approve any settlement, and the states that oppose it are expected to file objections soon and attempt to carry on with their lawsuits against Purdue and the Sacklers in state courts.

    Insurance proceeds

    Lawyers for the company said in court Tuesday that the U.S. will benefit from the case because control of Purdue is being handed over to the people and governments harmed by the opioid crisis. The company and the Sacklers, who have denied wrongdoing, have repeatedly said that opposition to the deal is unwarranted and unproductive.

    The people familiar with provisions of the deal say it includes insurance proceeds that aren't known and may be challenged by insurers. The settlement also relies on continued sales of OxyContin in the U.S., where the patent expires in 2023, and income from drugs in Purdue's pipeline that haven't won regulatory approval and may not have the demand the company expects, according to the people.

    Attorneys general from New York and Massachusetts have also publicly condemned provisions of the deal that require states and other plaintiffs to essentially get into the OxyContin-sales business. Revenue from U.S. sales would go into a public trust run by the settling entities.

    The states and plaintiffs would also be relying on overseas sales of OxyContin for years.

    According to court documents, the Sackler family agreed to sell Purdue's U.K.-based international unit, Mundipharma, to raise their $3 billion share of the settlement. Mundipharma includes about 100 companies spread across the globe, from China to western Europe.

    But the Sacklers have seven years to unload Mundipharma, allowing them to sell each unit country by country and avoid using any of the money they've already made from OxyContin sales and allegedly stashed away in overseas accounts, the people said.

    Lawyers for the New York attorney general's office said last week they'd uncovered evidence the Sacklers made about $1 billion in transfers among themselves and their shell companies, some of which ended up in Swiss bank accounts.

    The case is Purdue Pharma LP 19-23649, U.S. Bankruptcy Court for the Southern District of New York (White Plains).

    SOURCE: Bloomberg