Purdue Pharma agrees to $270 million settlement in Oklahoma opioid case

(Reuters) – OxyContin maker Purdue Pharma LP and members of the wealthy Sackler family that own the company reached a $270 million settlement to resolve a lawsuit brought by the state of Oklahoma accusing the drugmaker of fueling an opioid abuse epidemic.

The settlement unveiled by Oklahoma Attorney General Mike Hunter on Tuesday was the first to result from a wave of lawsuits accusing Purdue of deceptively marketing painkillers, helping create a deadly crisis sweeping the United States.

Hunter’s 2017 lawsuit was set to go to a jury on May 28 in what would have been the first trial from roughly 2,000 lawsuits filed in federal and state courts against Purdue and other drugmakers.

Hunter alleged Purdue, Johnson & Johnson and Teva Pharmaceutical Industries Ltd engaged in deceptive marketing that downplayed the addiction risk from opioids while overstating their benefits, contributing to the epidemic.

Opioids, including prescription painkillers, heroin and fentanyl, were involved in a record 47,600 overdose deaths in 2017 in the United States, according to the U.S. Centers for Disease Control and Prevention.

“The addiction crisis facing our state and nation is a clear and present danger,” Hunter said. Of more than 3,000 Oklahomans admitted to hospitals last year for drug overdoses that they survived, 80 percent involved prescription opioids, he said.

The companies deny wrongdoing. Purdue has argued that U.S. Food and Drug Administration-approved labels for its opioids carried warnings about the risk of abuse and misuse associated with them.

The settlement came after Purdue’s chief executive this month said the company was weighing filing for bankruptcy protection to address potential liabilities from the lawsuits, a move that Reuters had reported earlier.

Companies facing mounting litigation often consider a bankruptcy filing to halt lawsuits and negotiate with plaintiffs in one federal court proceeding. Hunter said the bankruptcy threat factored into the settlement talks.

He said Purdue was convinced to settle after being presented with an option that provides for nearly $200 million for establishing a center at Oklahoma State University (OSU) that would take a national approach toward treating addiction.

“It is going to save countless lives, and it’s going to keep families together,” Hunter said at a news conference.

‘START OF THE DOMINOES FALLING’

Avoiding the trial with a settlement relieves immediate pressure on Purdue to seek bankruptcy protection, said Alexandra Lahav, a professor at the University of Connecticut School of Law.

While the company has not ruled out a bankruptcy filing, it now plans to focus on attempting a settlement with other state and local governments pursuing similar cases, a person familiar with Purdue’s deliberations said.

Around 1,600 lawsuits are consolidated before a federal judge in Ohio, who has pushed for a settlement ahead of the first trial scheduled before him in October.

“This may be the start of the dominoes falling for Purdue,” Lahav said.

Members of the Sackler family in a statement called allegations that they contributed to the opioid crisis “not accurate” and argued that Tuesday’s agreement did not represent “a financial model for future settlement discussions.”

The settlement covers only Purdue, leaving claims pending against J&J and Israel-based Teva. The deal was announced a day after the Oklahoma Supreme Court rejected an effort by Purdue and its co-defendants to delay the May 28 trial.

The lawsuit alleged that Purdue’s marketing efforts helped fuel the opioid epidemic and turn OxyContin into a top-selling painkiller that by 2017 had generated an estimated $35 billion in sales since its release in 1996.

Purdue and three executives in 2007 pleaded guilty to federal charges related to the misbranding of OxyContin and agreed to pay a total of $634.5 million in penalties.

Oklahoma had been seeking more than $20 billion in damages, according to court papers.

Under the terms of Tuesday’s settlement, Purdue will contribute $102.5 million to help fund an addiction treatment center at OSU, and donate $20 million worth of medications to support its treatment mission.

The Sacklers, who were not named as defendants in Oklahoma’s lawsuit, agreed to contribute $75 million toward the university center as well.

Another $12.5 million will be made available to Oklahoma localities to help address the opioid epidemic in their communities, and another $60 million will go toward costs and legal fees stemming from the lawsuit.

Lawyers for plaintiffs pursuing similar cases nationally against Purdue and other opioid manufacturers welcomed Tuesday’s settlement as a breakthrough that could help secure other deals.

They have often compared the cases against Purdue to widespread lawsuits against the tobacco industry that resulted in a $246 billion settlement in 1998.

Paul Hanly, a lead lawyer for the plaintiffs in the federal opioid litigation, said they are “hopeful that the Oklahoma settlement is the beginning of a good-faith program on the part of Purdue to settle all of the nationwide litigation.”