Purdue Pharma Faces Potential Dissolution After Criminal Sentencing
OxyContin Maker Purdue Pharma on Brink of Dissolution
Newark, N.J. (AP) — A federal judge is expected to deliver a criminal sentence to Purdue Pharma on Tuesday, paving the way for a massive legal settlement to take effect by the week's end. The settlement resolves thousands of lawsuits and could see the company dissolved and replaced by a new entity focused on the public good.
Purdue Pharma reached a deal with the U.S. Department of Justice in 2020 to resolve criminal and civil probes the company was facing. The Stamford, Connecticut-based company admitted that it did not have an effective program to keep its powerful prescription painkillers from being diverted to the black market, despite telling the U.S. Drug Enforcement Administration that it did. Additionally, Purdue admitted to paying doctors through a speakers program to prescribe the drugs and paying an electronic medical records company to send doctors information on patients that encouraged more opioid prescriptions.
The guilty plea and civil settlement with the federal government included $8.3 billion in forfeitures, fines, and penalties. However, the federal government agreed to collect just $225 million in exchange for Purdue reaching a separate settlement of the thousands of lawsuits it faced from state, local, and Native American tribal governments, along with other groups.
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Comparison of Settlements
| Settlement | Value |
|---|---|
| Total value of settlements | $50 billion |
| Purdue Pharma settlement value | $8.3 billion |
| Payments to individual victims | $8,000 to $16,000 |
The broader sentence was approved by a bankruptcy judge in November, but it cannot take effect until the criminal sentence is given. U.S. District Judge Madeline Cox Arleo heard impact statements from victims of the opioid crisis on Tuesday, with many asking her to reject the negotiated sentence. Despite this, the settlement is expected to take effect as soon as Friday, with payments to individual victims expected to range from $8,000 to $16,000.
As part of the settlement, members of the Sackler family who own Purdue Pharma would contribute up to $7 billion over 15 years. Most of the money would go to government entities to use to fight the opioid crisis. Purdue would cease to exist and be replaced by a new company, Knoa Pharma, with a board appointed by the states and an aim of combating the opioid crisis. Millions of internal Purdue documents are to be made public.
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Timeline
- 1999: The opioid crisis in the U.S. begins
- 2020: Purdue Pharma reaches a deal with the U.S. Department of Justice to resolve criminal and civil probes
- November 2023: The broader sentence is approved by a bankruptcy judge
- Tuesday, 2023: U.S. District Judge Madeline Cox Arleo is expected to deliver a criminal sentence to Purdue Pharma
- Friday, 2023: The settlement is expected to take effect
Investor Takeaway
The potential dissolution of Purdue Pharma may have significant long-term implications for the pharmaceutical industry and the opioid crisis.
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