U.S. Wants $11 Billion in Purdue Pharma Bankruptcy Case

(Bloomberg) -- The U.S. Department of Justice is demanding Purdue Pharma LP, maker of the infamous OxyContin opioid painkiller, pay more than $11 billion in criminal and civil penalties as part of its bankruptcy reorganization plan, according to people familiar with the claims.

Federal prosecutors want Purdue to pay as much as $6.2 billion on the criminal side and about $5 billion in civil compensation for tax dollars spent battling the U.S. opioid epidemic and the havoc wreaked by allegedly illegal marketing of the drug, said the people who asked not to be identified because they're not authorized to speak publicly about the filing of the claims.

The government filed its claims by last week's deadline to insure its place in line with other creditors seeking compensation as part of Purdue's Chapter 11 case. Those other creditors include individuals who lost a loved one to opioid addiction, hospitals who treated addicts and state and local governments that spent tax dollars on the fallout from the epidemic.

Alison Kjergaard, a Justice Department spokeswoman, didn't immediately return a call or an email after regular business hours seeking comment on the government's claims in the Purdue bankruptcy case.

Purdue sought protection from creditors in U.S. Bankruptcy Court in White Plains, New York, last year to short-circuit more than 2,000 lawsuits against the company and its owners, the billionaire Sackler family. Their $10 billion settlement plan calls for the family to hand over Purdue to a trust controlled by the states, cities and counties that have sued to recoup billions spent battling opioid addictions and overdoses. It also would require the family to come up with $3 billion themselves.

Daniel Connolly, a lawyer for one wing of the Sackler family, said his clients wouldn't comment on the government's filing.

“The Sackler family continues to support the proposed settlement framework valued at more than $10 billion, which is also supported to date by more than 28 states and territories and thousands of municipalities,” he said in an emailed statement. “We look forward to the conclusion of this process when all of Purdue's documents will be public, making clear that the Sackler family acted ethically and responsibly at all times.”

Opposing States

While many states and local government support the Purdue bankruptcy plan, others, such as Massachusetts and Connecticut, oppose it and that has slowed progress in getting U.S. Bankruptcy Judge Robert Drain to approve it.

The Justice Department shouldn't expect to collect more than $11 billion from Purdue, which would leave nothing for other creditors, said Chuck Tatelbaum, a Connecticut-based bankruptcy lawyer who has worked on other big-dollar Chapter 11 cases.

“Just because you file a claim, doesn't mean the bankruptcy court is going to allow it,” Tatelbaum said. “These filings are placeholders. They can be amended at any time during the case.”

As part of the DOJ's claims, if the government were to successfully prosecute the company for criminal violations tied to the allegedly illegal OxyContin marketing, it could also seek to force Purdue forfeit an additional $3 billion, according to the people familiar with the claim. No recent criminal charges have been filed.

Purdue resolved a federal criminal prosecution in 2007. The company and three of its top executives pleaded guilty to “misbranding” OxyContin and collectively agreed to pay more than $630 million in civil and criminal penalties in one of the largest pharmaceutical settlements in U.S. history at the time. The company specifically acknowledged that it trained its sales representatives to mislead physicians about opioid risks. The executives served no time in jail.

The bankruptcy case is Purdue Pharma LP 19-23649, U.S. Bankruptcy Court for the Southern District of New York (White Plains).

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