Washington leads coalition of states appealing plan that gives Sacklers immunity

OLYMPIA — Washington State Solicitor General Noah Purcell will be in federal court in New York City today, fighting the flawed Purdue Pharma bankruptcy plan that grants the company’s owners, the Sackler family, a lifetime shield from civil lawsuits. Attorney General Bob Ferguson announced the appeal in September, asserting that the plan is inadequate, and does not provide sufficient accountability.

A key issue in the appeal is whether Congress intended to allow the owners of a closely held corporation to break the law for years, extract immense wealth in the process, and escape accountability from state attorneys general by putting the corporation, but not themselves, into bankruptcy.

The Sackler family will remain one of the wealthiest families in the country if the bankruptcy plan is approved. An audit of Purdue introduced during the bankruptcy proceedings in late 2019 showed that the Sackler family pulled nearly $11 billion out of Purdue since 2008.

Washington is leading a coalition of five states in appealing the bankruptcy plan in the U.S. District Court for the Southern District of New York: Washington, Connecticut, Delaware, Rhode Island, and Virginia. A total of nine states are appealing. The federal government also appealed.

"The Sacklers are attempting an unprecedented abuse of the bankruptcy process,” Ferguson said. “The Sacklers fueled the opioid epidemic by repeatedly violating the law to increase their company’s profits, extracted over $10 billion from the company, steered their company into bankruptcy after depleting its value, and then conditioned any contribution from their personal fortune on a lifetime legal shield. The public rarely pays attention to bankruptcy matters, but here they are rightly outraged by what the Sacklers are attempting to perpetrate. If this isn’t an abuse of the bankruptcy process, nothing is.”

The approved bankruptcy plan is unlawful

Ferguson and the state attorneys general from Connecticut, Delaware, Rhode Island, and Virginia challenge the lawfulness of the approved Purdue bankruptcy plan on multiple grounds. They assert that it violates the law and abuses the bankruptcy process.

“No federal court, anywhere, has ever approved a non-debtor release remotely like the one Appellees seek here,” the five attorneys general write in their brief. “This Court should not be the first, especially when the beneficiaries of the release — the Sacklers — are so uniquely unworthy of that unprecedented relief.”

Sackler family retain immense wealth under the terms of the approved bankruptcy plan

During testimony before the bankruptcy court, Dr. Kathe Sackler conceded that, as she wrote in a 2001 email, her family “amassed a vast fortune” and created “layers and layers” before their “true support system would be affected.”

As noted in a New York Times op-ed, by the time they are finished paying this settlement, the Sacklers will be wealthier than they are now: “Their current fortune is estimated to be at least $11 billion. Conservatively, with interest and investments, this means they can expect a 5 percent annualized rate of return on that fortune. If that’s the case, they’ll be able to pay the fine without even touching their principal. When they’re done paying in 2030, they will probably be richer than they are today.”

Bankruptcy plan fails to provide a transformative amount of money

Purdue’s bankruptcy plan, approved Sept. 1 by U.S. Bankruptcy Judge Robert Drain, requires the Sackler family to pay $4.3 billion over nine years to the group of states, municipalities and private plaintiffs, including Washington, that sued or have claims against the company. But the plan includes a lifetime legal shield for the Sackler family. In other words, every state, including Washington, is blocked from pursuing civil litigation against the Sackler family in the future.

All funds are conditioned on court approval of the bankruptcy plan. Washington’s opposition to the bankruptcy plan does not prevent Washington from receiving its share of the funds if the courts ultimately approve the plan.

Washington’s share is approximately $70 million, spread out over nine years. Factoring in inflation, the estimated total value in today’s dollars is $53 million to $60 million spread out over nearly a decade.

Case background

Washington is one of 48 states that sued Purdue Pharma, the maker of OxyContin, for fueling the opioid epidemic. Washington’s lawsuit asserts Purdue embarked on a massive deceptive marketing campaign to convince doctors and the public that OxyContin is effective for treating chronic pain and has a low risk of addiction, all without evidence to support its claims. This deceptive marketing resulted in the deaths of Washingtonians and devastation to Washington families.

The lawsuit contends Purdue conducted an uncontrolled experiment on the American public without any reliable clinical evidence that opioids are effective at treating chronic pain. To doctors and patients, Purdue consistently downplayed the risks of addiction from long-term use and deceptively represented opioids as safe for treating long-term chronic pain.

Ferguson’s work on the opioid epidemic

For the last several years, the Attorney General’s Office has taken on complex cases to hold major corporations accountable for their role in the opioid crisis.

Washington is currently in trial in King County Superior Court against the three largest distributors of opioids — McKesson Corp., Cardinal Health Inc. and AmerisourceBergen Drug Corp. Ferguson’s lawsuit, filed in 2019, asserts the corporations made billions of dollars feeding the opioid epidemic by shipping huge amounts of oxycodone, fentanyl, hydrocodone and other prescription opioids into the state even when they knew or should have known those drugs were likely to end up in the hands of drug dealers and addicts.

Earlier this year, a multinational consulting firm that worked with Purdue was legally required to pay $13.4 million to the Attorney General’s Office. The consulting firm, McKinsey, discussed ways for Purdue to “turbocharge” sales of OxyContin.

In January 2020, Ferguson filed a lawsuit against Johnson & Johnson, one of the largest suppliers of the raw materials used to produce opioid pain medications, accusing the multinational company of playing a key role in driving the entire pharmaceutical industry to vastly expand the use of prescription opioids. That case is set for trial in January.

In the summer of 2017, the Attorney General’s Office hosted a summit on Washington’s opioid epidemic in partnership with the Washington State Patrol and the Washington Association of Prosecuting Attorneys. A report developed by the organizations after the summit included a range of recommendations, several of which became the subject of Attorney General request legislation in the 2018 legislative session. Those proposals included limits on new opioid prescriptions. The following year, state medical boards implemented new opioid prescription limits in Washington state similar to those requested by Ferguson.

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