SCOTUS to scrutinize controversial Purdue Pharma opioid crisis settlement that would give Sackler family immunity

On Monday, the Supreme Court will take on one of its highest-profile bankruptcy cases in recent memory: Whether or not to approve OxyContin-maker Purdue Pharma’s controversial agreement that would give billions of dollars to victims of the opioid epidemic while protecting members of the Sackler family, who owned the company, from current and future opioid-related civil lawsuits.

While the up-to-$6 billion deal was initially approved by a New York court in May, it was blocked from moving forward after the US Trustee Program, a division of the US Justice Department, requested that the highest court review the settlement. The Supreme Court is scheduled to hear oral arguments on Monday.

Purdue Pharma, which was owned and operated by the families of the late brothers Mortimer and Raymond Sackler, has said there will be no $6 billion settlement without releasing family members from liability, but the US Trustee has argued that such an arrangement is unprecedented.

At its core, the issue facing the Supreme Court is one of grave national importance: the fate of a company and its leaders who produced and promoted a highly addictive drug, OxyContin, in the early days of an opioid crisis that has claimed the lives of hundreds of thousands of Americans and shattered many more – and whether victims could ever again hold the Sacklers accountable in court.

What is in Purdue Pharma’s settlement?

The bankruptcy deal in question would have the Sackler family personally pay out between $5.5 billion to $6 billion over 18 years to help fight the ongoing opioid epidemic. Most of the money would go to states, local governments and Native American tribes.

The deal also sets aside $700 million to $750 million to pay individual victims and families of victims. The fund would pay out between $3,500 to $48,000, with payments to some victims spread out over 10 years. Purdue has said its bankruptcy deal is the only major opioid settlement to provide “meaningful recoveries” to victims.

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If the deal were to be approved by the Supreme Court, Purdue Pharma would cease to exist and a new company, Knoa Pharma, would be created in its place. Knoa Pharma would develop and distribute opioid addiction treatments and overdose reversal medicines, while continuing to produce Purdue Pharma products, including OxyContin. The company would be governed by a new independent board, and would have a “public-minded mission,” according to Purdue Pharma.

In exchange for the deal, members of the Sackler family would be granted immunity from all other civil (though, not criminal) lawsuits.

In a brief submitted to the Supreme Court, Purdue Pharma argued that it was necessary to release members of the Sackler family from other claims, so as not to deplete the assets set aside for the agreed-upon bankruptcy settlement.

A historic case for the Supreme Court

All 50 US states either supported or no longer opposed Purdue Pharma’s bankruptcy plan by its initial approval in May, the company said.

At the time, the families of Mortimer and Raymond Sackler said they were satisfied with the court’s decision.

“The Sackler families believe the long-awaited implementation of this resolution is critical to providing substantial resources for people and communities in need,” the families said.

But the US Trustee petitioned the Supreme Court to review the deal, calling it an “abuse” of the bankruptcy system. Barring individual victims from pursuing their own lawsuits against the Sackler family “raises serious constitutional questions,” the department argued.

“The plan’s release ‘absolutely, unconditionally, irrevocably, fully, finally, forever and permanently releases’ the Sacklers from every conceivable type of opioid-related civil claim – even claims based on fraud and other forms of willful misconduct that could not be discharged if the Sacklers filed for bankruptcy in their individual capacities,” Solicitor General Elizabeth Prelogar wrote in court papers, adding that the families “withdrew approximately $11 billion from Purdue in the eleven years before the company filed for bankruptcy.”

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Experts say it’s unclear how the Supreme Court will rule in this case. They say it is one of the biggest bankruptcy cases the court has taken on in years, not only because of the national interest in the opioid crisis but also because of the question of whether a bankruptcy judge was allowed to shield the individual members of the Sackler family from future lawsuits in a bankruptcy proceeding for the company they once owned.

“My take is that it’s the biggest bankruptcy case to go to the Supreme Court in 30 or 40 years. It’s huge,” Anthony Casey, a law professor at the University of Chicago and director of the school’s Center on Law and Finance, said.

An ongoing epidemic

Purdue Pharma first introduced the opioid drug OxyContin in the 1990s as a painkiller. The company – and its founders – have been accused of helping to fuel the opioid epidemic in the United States by aggressively marketing the drug as safer and less addictive, encouraging doctors to prescribe the drug over longer periods of time. OxyContin’s commercial success helped the Sackler family earn billions of dollars and the family became known for philanthropy around the world. The Sackler name appeared on university buildings and museums like the Guggenheim in New York and the Louvre in Paris. Many institutions have since removed it.

As the country’s opioid crisis worsened, attention shifted to the role played by Purdue Pharma and the Sackler family. In 2007, an affiliate company, Purdue Frederick, pleaded guilty to misbranding the drug and paid a fine of $600 million, but additional lawsuits began to pile up. Many of the suits allege that the Sackler family knew of OxyContin’s addictive properties but, nevertheless, continued to promote the drug.

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The Supreme Court hearing comes at a time of devastating losses due to drug overdoses in the US. From 1999 to 2021, nearly 645,000 people died from an opioid overdose, according to the Centers for Disease Control and Prevention.

“In Purdue Pharma, you have a court system that’s not designed to solve societal problems dealing with the aftermath of a societal crisis,” Lindsey Simon, a bankruptcy law associate professor at Emory University, said. “But bankruptcy isn’t intended to please everyone. Its rules and procedures are made to help the parties find the fairest possible outcome in an inherently bad situation.”

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