Judge rules Purdue Pharma must pay $7bn in bankruptcy settlement

Purdue Pharma, maker of the addictive painkiller OxyContin, has reached a bankruptcy settlement that requires the company to pay $7bn to creditors, ending a six-year legal saga.

In a ruling read aloud over more than two hours on Tuesday, US bankruptcy Judge Sean Lane affirmed Purdue’s Chapter 11 reorganisation that will entail Purdue’s longtime owners, the Sackler family, paying $7bn to government groups and families affected by the opioid crisis over 15 years. A $1.5bn payment is due as soon as the plan goes into effect.

More than 99 per cent of creditors — ranging from hospitals to Native American tribes — approved the plan, the judge said.

Purdue will be reorganised as Knoa Pharma in a corporate structure known as a public benefit corporation. The PBC structure prioritises both profits and a social good, and is used by artificial intelligence company Anthropic among others. An independent trust will own Knoa and use its proceeds to fund treatments for opioid addiction.

A handful of claimants have objected to the bankruptcy plan, arguing that it protects the Sacklers from criminal liabilities. But Lane said: “It is crystal clear in the plan that no criminal liability is affected by the plan,” adding that Purdue pleaded guilty to criminal allegations in 2020.

Over shouting from one of the objecting parties at the proceedings, Lane said: “People don’t have to agree with my ruling . . . One thing we can’t do in cases this large is go backwards.”

The deal on Tuesday comes after the Supreme Court nullified an initial resolution last year, ruling in a 5-4 decision that the Sacklers could not get the benefit of bankruptcy protections without filing for bankruptcy themselves.

Purdue, owned by the Sacklers since 1952, developed and aggressively marketed OxyContin into a blockbuster drug. The family withdrew more than $10bn from Purdue as OxyContin sales boomed, before settling civil misconduct charges with the US government in 2020.

The Department of Justice said the Sacklers approved aggressive OxyContin sales tactics that prompted doctors “to prescribe opioids for uses that were unsafe, ineffective and medically unnecessary, and that often led to abuse.”

From 1999 to 2023, about 806,000 people died from an opioid overdose, including prescription and illegal opioids, according to the Centers for Disease Control and Prevention. As the extent of the opioid crisis became known, the Sacklers came under fire with many cultural institutions, including the New York Metropolitan Museum of Art, distancing themselves from the family.

Purdue filed for federal bankruptcy protection in 2019. The company agreed to pay billions of dollars to states and thousands of opioid victims. The Sackler family would contribute up to $6bn to fund opioid abatement programmes. But the family insisted the deal should end any litigation against them.

Purdue’s bankruptcy had been one of the most expensive cases in US bankruptcy history, costing more than $1bn in legal and administrative fees.