Court clears way on bankruptcy deal for opioid maker

A federal appeals court cleared the way on Tuesday for the maker of OxyContin to settle thousands of legal claims tied to the opioid epidemic, while shielding the wealthy owners of Purdue Pharma, the Sackler family, from future lawsuits.

Under the plan approved by the Second Circuit Court of Appeals in New York, members of the wealthy Sackler family would give up ownership of Purdue, which would become a new company known as Knoa, with its profits being sent to a fund to prevent and treat addiction.

The Sacklers would also contribute $5.5 billion to $6 billion in cash over time, or around half of what the court found to be their collective fortune, much of it held offshore. A chunk of that money — at least $750 million — is to go to individual victims of the opioid crisis and their survivors. Payments are expected to range from about $3,500 to $48,000.

The Sacklers earned billions of dollars from the sale of OxyContin and other opioids. Its family members have denied wrongdoing and said they would not fund the $6 billion settlement payment unless they were fully released from civil liability.

The Justice Department could ask the Supreme Court to review Tuesday's ruling.

The ruling by the second circuit court reversed a December 2021 decision by a district judge who found that a bankruptcy judge who approved Purdue's settlement plan did not have the authority to grant protections from opioid-related lawsuits to the Sackler family.

The proposed legal safeguards for the Sacklers have long divided the parties involved in Purdue's bankruptcy, which began in September 2019.

In total, Purdue values its plan at more than $10 billion. That includes the development and distribution by Purdue's planned successor company of medicines to reverse opioid overdoses and treat opioid-use disorder that Purdue officials said could be worth several billion dollars.

For 2.5 years after Purdue filed for Chapter 11 bankruptcy, several states strongly opposed an agreement with the company. They appealed a bankruptcy judge's approval in September 2021 of Purdue's settlement plan because they were unhappy with the terms proposed by the company and the Sacklers.

But after a wave of negotiations during the first two months of last year, the nonconsenting states forged a deal with Purdue and the Sacklers that was announced in March last year. The settlement amount increased to $6 billion.

Lindsey Simon, who studies bankruptcy law at the University of Georgia School of Law, described the latest ruling as a solid victory for proponents of the deal.

"It's very clear that in the 2nd Circuit, this kind of (bankruptcy) remedy is appropriate under certain circumstances," Simon told National Public Radio. "There were some questions about whether it would be permitted going forward. It is."

Purdue's aggressive marketing of OxyContin is widely seen as having spurred the national opioid crisis. Prescription pain pill overdoses have killed hundreds of thousands of people in the US. Public health experts said the spread of OxyContin and other pain medications also opened the door to the wider heroin-fentanyl epidemic.

Agencies contributed to this story.