The Supreme Court has temporarily halted a proposed insolvency plan for Purdue Pharma that aimed to allocate billions of dollars to address the nation's opioid crisis. The plan would have also provided protection for the family that owns the company from future lawsuits. The court agreed to review the case and determine whether the U.S. insolvency code permits such agreements. Arguments are scheduled for December.
The delay in the insolvency case means that settlement funds intended for victims, their families, and local and state governments may be postponed. Attorney Edward Neiger, representing thousands affected by the opioid crisis, expressed disappointment but acknowledged the Supreme Court's recognition of the urgency surrounding the matter.
The appeal to the Supreme Court comes after the U.S. Court of Appeals for the Second Circuit approved the insolvency plan, stating that shielding the Sackler family from lawsuits was necessary for a fair distribution of settlement funds. Under the proposed deal, the Sacklers would contribute up to $6 billion over nearly two decades to address the crisis.
The Office of the U.S. Trustee, a branch of the Department of Justice, is challenging the lower court's decision. The Justice Department argues that shielding the Sacklers is an abuse of the insolvency system and sets a precedent for corporations and individuals to evade liability through insolvency.
Purdue Pharma expressed optimism that the Supreme Court will validate the legality of the plan but expressed disappointment in the U.S. Trustee's ability to delay funds that should be used for victim compensation and addressing the opioid crisis.
Plaintiffs assert that Purdue Pharma's aggressive marketing of OxyContin contributed to the public health crisis, despite mounting evidence of its addictive nature. Drug manufacturers, distributors, and pharmacies face numerous lawsuits from victims, cities, and states seeking accountability for the toll caused by pain pills. These legal actions have resulted in significant settlements, with over $50 billion allocated to governments nationwide to combat the opioid crisis.
In 2019, a New York insolvency judge initially approved a negotiated deal that required Sackler family members to contribute over $4 billion while shielding them from future claims. The Justice Department and some states objected, noting that the family had received over $10 billion in payouts from the company, with nearly half going toward taxes. The deal was overturned by a federal district judge in December 2021. After further negotiations, the Sacklers reached a new agreement.
