A federal judge in the United States has thrown out a sweeping bankruptcy settlement reached by OxyContin maker Purdue Pharma which had sought to put to rest thousands of lawsuits connected to the company’s role in the opioid epidemic.
Federal Judge Colleen McMahon on Thursday ruled that a key provision of the settlement – that members of the Sackler family, which own the company, could not face separate lawsuits – was not legal.
In her ruling, she said because the bankruptcy code “confers no such authority, the order confirming the plan must be vacated”.
Forty-three US states had previously approved the plan but the Department of Justice and a handful of other states challenged it. They argued that it denied victims the right to sue the company.
US Attorney General Merrick Garland hailed Thursday’s ruling.
“The bankruptcy court did not have the authority to deprive victims of the opioid crisis of their right to sue the Sackler family,” he said.
The settlement in question, which was approved by a judge in September, saw the Sackler family give up ownership of Perdue Pharma and pay $4.5bn towards efforts to combat the opioid crisis. Under the terms of the deal, the company would be sold by 2024 to be replaced by a new entity managed by a trust. Its involvement in selling opioid products would be restricted.
Profits from the entity would be funnelled into fighting the ongoing crisis in the US, which has caused more than 500,000 overdose deaths. Under the deal, the company would also develop new anti-addiction and anti-overdose drugs and provide them at little or no cost.
In her ruling, Judge McMahon acknowledged that striking down the immunity granted to the Sacklers “will almost certainly lead to the undoing of a carefully crafted plan that would bring about many wonderful things, including especially the funding of desperately needed programs to counter opioid addiction.”
Meanwhile, Steve Miller, the chairman of the Purdue board of directors, said the ruling would “delay, and perhaps end, the ability of creditors, communities, and individuals to receive billions in value to abate the opioid crisis”.
The company has said it will appeal the ruling.
For his part, Connecticut Attorney General William Tong, who was among a handful of state officials seeking to have the deal undone, called the ruling “a seismic victory for justice and accountability”.
Tong said the ruling will “reopen the deeply flawed Purdue bankruptcy and force the Sackler family to confront the pain and devastation they have caused.”
Amid the avalanche of litigation from individuals as well as local and state governments, Purdue Pharma last year also pleaded guilty to three criminal charges over its aggressive drive to push sales of OxyContin, a highly addictive prescription painkiller.