EAST PROVIDENCE, R.I. – Rhode Island’s top prosecutor – who also sues alleged wrongdoers on behalf of the state – welcomed the news that a federal judge had agreed with his request to reject Purdue Pharma’s bankruptcy plan.
Attorney General Peter Neronha said it would be “unfair and unlawful” for the family behind Purdue Pharma, the Sacklers, to get bankruptcy protection in the deal when they were not themselves out of money. The deal would have closed off opportunities for the state of Rhode Island to bring them and their company to civil trial in Rhode Island.
“Everyday Rhode Islanders can’t go into court and seek protection from their creditors if they have lots and lots and lots of money,” Neronha told the Globe Friday. “And to say the Sacklers have lots and lots and lots of money would be an enormous understatement.”
Neronha was one of nine attorneys general who objected to the deal, a minority of stakeholders in the sprawling and high-stakes litigation. A New York federal judge on Thursday agreed with them and other objectors who raised concerns about giving the Sacklers protection in the Purdue Pharma bankruptcy.
Purdue Pharma said it would appeal the decision.
“While the district court decision does not affect Purdue’s rock-solid operational stability or its ability to produce its many medications safely and effectively, it will delay, and perhaps end, the ability of creditors, communities, and individuals to receive billions in value to abate the opioid crisis,” Steve Miller, chairman of the Purdue Pharma L.P. board of directors, said in an emailed statement. “These funds are needed now more than ever as overdose rates hit record-highs, and we are confident that we can successfully appeal this decision and deliver desperately needed funds to the communities and individuals suffering in the midst of this crisis.”
Purdue Pharma is the company behind the opioid painkiller OxyContin. Last year, 384 Rhode Islanders died after accidentally overdosing on drugs, the highest year on record. This year 329 accidental drug overdoses have been reported, but with the year not yet over and a lag in reporting, the number is sure to increase. Even if it doesn’t surpass 2020′s total, is poised to become at least the second-deadliest year on record.
U.S. District Judge Colleen McMahon’s decision Thursday rejecting the bankruptcy settlement puts the opioid overdose squarely in the context of drugs like OxyContin. “About 80 percent of people who use heroin first misused prescription opioids,” she wrote, citing government statistics.
As lawsuits mounted in the wake of the opioid epidemic, Purdue Pharma in 2019 filed for a type of bankruptcy that would allow it to reorganize. By September this year, it had reached a deal in bankruptcy court under which the Sackler family would pay $4.3 billion, in addition to $225 million they’d already paid the Justice Department. Purdue Pharma would be dissolved and a new entity would, in addition to making OxyContin, also make opioid addiction treatment and overdose reversal medications.
But the family had taken more than $10 billion out of the company from 2008 to 2017, putting it out of the reach of bankruptcy courts, the decision said. They would remain, according to The New York Times, one of the richest families in the country. At the same time, the deal would have shielded them from lawsuits, giving them the protection of laws for people who have gone broke even when they were still wealthy, objectors like Neronha said.
Under the terms of the bankruptcy settlement that Neronha objected to, Rhode Island would have gotten $2.4 million a year for nine years. Neronha walked away.
“That’s a number worth fighting over,” Neronha said. “Two-point-four million a year, and for the Sacklers to be sitting on 10 billion, at least, that they moved offshore – I’m not prepared to go away for that money. That money is just insufficient.”
Sufficient or not, that money is now off the table for the time being, as are obstacles to suing Purdue Pharma and the Sacklers. Not every state or city involved in the sprawling litigation has actually filed lawsuits. But Rhode Island has. The litigation has named Purdue Pharma, members of the Sackler family, and an associated company based in Coventry called Rhodes Pharmaceuticals.
The litigation against Sackler family members included claims for funneling money out of the company, which the lawsuit calls “fraudulent.”
“In our view, that was done deliberately to avoid paying the consequences of this conduct,” Neronha said.
The state has also sued other opioid manufacturers and distributors. It’s set for trial in state court in January, Neronha said, but the bankruptcy case had put a halt to efforts to bring Purdue Pharma and associated defendants to trial. Even depositions had to stop. When a person or a company files for bankruptcy, court cases against them are paused, at least temporarily. Neronha said the court’s decision Thursday could clear the way for Purdue Pharma to go on trial in January, although appeals could complicate that.
Neronha’s office is best known for its criminal enforcement, but he has also highlighted the importance of filing lawsuits to recover money. Though Thursday’s decision will be appealed, it clears the way for that to go forward, Neronha said.
“You don’t need a federal judge to tell you when someone has a ton of money and is trying to get out of the claims against them through the bankruptcy process, there’s something very wrong with the process,” Neronha said.