A New York bankruptcy judge approved a disclosure statement last week laying out Purdue Pharma’s proposed reorganization plan – despite an objection alleging the disclosure omits information about the US government’s plan to seize Purdue money that could be used to compensate prescription opioid victims under the Mandatory Victims Restitution Act instead.
It’s been five years since Purdue Pharma pleaded guilty to charges of conspiracy in a New Jersey federal court, including for unlawfully dispensing opioid products without a legitimate medical purpose. In a press release at the time, the Department of Justice emphasized that the convictions were part of a strategy to defeat the opioid crisis.
But the plea agreement did not include restitution for opioid victims, reasoning that it would not be “administratively feasible” to distribute the funds. Since then, opioid victims have been unable to seek settlements from Purdue, as the company’s 2019 bankruptcy filing stayed civil lawsuits against the company, and will likely instead be settled in bankruptcy court as part of the reorganization plan.
Creighton Bloyd – a plaintiff in a class-action suit against Purdue demanding the company pay for prescription opioid victims’ recovery treatment – objected to the disclosure statement in the bankruptcy court this month.
In his objection, he alleged that the disclosure statement omitted relevant information about US government plans to seize $225m that could instead go to prescription opioid victims under the Mandatory Victims Restitution Act (MVRA), which requires prosecutors to financially compensate victims of criminal cases.
Purdue agreed to forfeit $2bn for the value of “misbranded” drugs that may have led patients to become addicted. Bloyd argued that $225m of that should go to opioid victims under the MVRA, because a federal attorney acknowledged these misbranded drugs harmed individuals.
Instead, the New Jersey plea deal gives that money to the Department of Justice, citing administrative hurdles to distributing the funds as restitution. Information about the MVRA and the possibility of using the $225m as restitution is not included in the bankruptcy disclosure statement.
Val Early III, an attorney representing personal injury claimants in the bankruptcy case, said the disclosure statement was a “frustrating” read, because “a lot of it was in brackets in the body of the document. Brackets, meaning ‘to be determined’, right?”
Despite the omission in the disclosure statement, a New York bankruptcy judge approved it on Friday, and set a September deadline for creditors, including personal injury claimants, to vote to approve or reject the plan.
“If you’re asking me to vote on something, and you don’t even know what you’re asking me to vote on, then how can I possibly vote on it?” Early said.
Adam Zimmerman, a law professor at the University of Southern California, said it was unlikely that a judge would find the MVRA applies in this case, because there are “a variety of exceptions” to the law, including for cases that are large or complex.
“We might call [Purdue’s case] a ‘mega mass tort’, because of the size and scope of the problem it’s trying to address here,” Zimmerman explained, adding: “We’re not dealing with a product that just affected a small group of people … We have not just private parties suing, but we have cities suing, Native American tribes suing. We have counties suing. We have states suing. We even have foreign countries that are suing.”
Zimmerman added that “bankruptcy is a really powerful tool for defendants [such as Purdue]” because it allows them to reach what’s called a global settlement with all the parties all at once, rather than litigating every claim separately in court. This also means that plaintiffs have fewer opportunities to negotiate individual settlements.
Frank Ozment, another lawyer representing personal injury claimants, disagrees that the case is too complex for the MVRA to apply. He says that, since all personal injury claimants had to file claims in the bankruptcy court by a specific deadline along with their names and addresses, it should be relatively simple to identify victims and compensate them.
Ozment also rejects the argument that it would be too administratively difficult to ensure prescription opioid victims use payouts for treatment and nothing else. He says the money could be distributed via reloadable payment cards, which allow victims and no one else to purchase medication and nothing else from a pharmacy located in the victim’s zip code, similar to how people receive certain Medicaid and Supplemental Nutrition Assistance Program (Snap) payouts.
Purdue Pharma and the Department of Justice did not respond to the Guardian’s request for comment.
