Purdue Pharmaceuticals and the Sackler family who owns the company are reportedly prepared to settle opioid lawsuits, underscoring how most of the major drug companies view a drawn-out court battles as a no-win situation.
The company and family are said to be prepared to settle for between $5 billion and $12 billion — by filing for Chapter 11 bankruptcy — to resolve the nearly 2,000 pending opioid lawsuits they face. Purdue would then create a public trust from which to pay out the settlement.
The possible settlement, first reported by NBC News, would take the company and family out of the multi-district litigation in Ohio in October.
In a statement to Yahoo Finance, a Purdue spokesperson said the company believes it is unnecessary to litigate the opioid crisis in multiple venues in perpetuity.
“While Purdue Pharma is prepared to defend itself vigorously in the opioid litigation, the company has made clear that it sees little good coming from years of wasteful litigation and appeals,” the statement said.
“The people and communities affected by the opioid crisis need help now. Purdue believes a constructive global resolution is the best path forward, and the company is actively working with the state attorneys general and other plaintiffs to achieve this outcome,” it added.
Michael Panagrossi, a former associate general counsel with Purdue who left in 2017, said the global settlement strategy is likely the one that will be employed by all the defendants in the opioid lawsuits.
“Everyone is seeing the writing on the wall, except for J&J, that this is a loser case,” Panagrossi told a call hosted by UBS on Tuesday.
Judges and juries “are going to bend over backwards to find them responsible,” he added.
The only roadblock facing the settlements is getting the cities, counties and states litigating together on the same page about what the settlements look like, Panagrossi said.
While it’s been known for some time that the company and family were weighing a global settlement and bankruptcy, movements toward settling have come faster than anticipated, experts say.
Nicolas Terry, a professor at the Indiana University McKinney School of Law, said the strategy was first telegraphed after the Massachusetts attorney general filed a suit in January.
“It was pretty clear we were going to see something like this,” he said, adding it reinforced the idea that the $270 million settlement with Oklahoma was an indication that the company hadn’t gotten a clear plan together yet.
“It came far faster than everyone was expecting,” he added.
How it could affect other players
Yet how Purdue’s move will play out for other defendants—like Johnson & Johnson (JNJ), Teva (TVA) and Mallinckrodt (MNK)— remains to be seen. Teva has settled with Oklahoma for $85 million, but is still not completely off the legal hook.
OxyContin, the Purdue drug at the heart of the opioid crisis, saw its sales peak at nearly $3 billion annually in 2012, which have since fallen to under $2 billion.
However, the epidemic remains as deadly as ever, with National Institutes of Health data showing opioid deaths have skyrocketed from under 17,000 in 1999, to over 70,000 in 2017.
“Does any settlement that Purdue pays through that process get deducted from settlement negotiated by others or judgements by others?” Terry said.
“If the allegations against Purdue and the Sacklers are true, which I’d like to point out we haven’t seen proof yet, then as far as we know at the moment, there are more smoking guns at Purdue than at the other drug companies. If you take Purdue out of the case, the other pharma companies and distributors strengthen somewhat,” he said.
Once you take the bad apple out of the barrel, maybe the barrel doesn’t smell as bad,” Terry added.
Earlier this month, a court hearing in Massachusetts revealed that the company profited by $200,000 per opioid patient. Yet Drug Enforcement data showed Purdue only supplied a small percentage of the drugs currently on the market — compared to three other companies which profited from a majority of opioid sales.
But the state has also alleged the family clearly intended to continue to profit off of opioids by introducing opioid overdose reversal and addiction treatments.
In the past two months, New York and Arizona have pursued the Sackler family’s finances. Meanwhile, Purdue stopped marketing its opioids and has laid off its sales force in the past year. It also plans to close a plant in North Carolina by the end of the year, signaling more layoffs.
Also, New York has issued several subpoenas to various financial institutions, including some big names like Citibank (C), Goldman Sachs (GS), Morgan Stanley (MS), Bank of America (BAC) and JPMorgan Chase (JPM), among others.
Anjalee Khemlani is a reporter at Yahoo Finance. Follow her on Twitter: @AnjKhem