US drug-maker Purdue Pharma has filed for bankruptcy protection, as part of efforts to deal with thousands of lawsuits that accuse the firm of fuelling the US opioid crisis.
The company’s board approved the Chapter 11 filing on Sunday.
The move is designed in part to resolve more than 2,600 lawsuits filed against Purdue over its alleged role in the opioid epidemic.
Last week, the firm reached a tentative deal to settle most of those lawsuits.
Purdue had been facing legal action from thousands of cities and counties across the US. The lawsuits claimed that Purdue and its owners, the billionaire Sackler family, had aggressively marketed the prescription painkiller OxyContin, while at the same time misleading doctors and patients over addiction and overdose risks.
The drugmaker has reached a deal with 24 states and five US territories, but another two dozen states remain opposed to the proposed settlement.
In a statement reported by Reuters, members of the Sackler family said: “It is our hope the bankruptcy reorganisation process that is now under way will end our ownership of Purdue and ensure its assets are dedicated for the public benefit.”
Terms of the deal
Chapter 11, a section of the US Bankruptcy Code, postpones a US company’s obligations to its creditors, giving it time to reorganise its debts or sell parts of the business.
Under the terms of the deal, Purdue is to be dissolved and the money raised – estimated to be about $10bn-$12bn (£8bn-£9.7bn), including a minimum cash contribution of $3bn from the Sackler family – will go towards settling the lawsuits. The Sacklers have also offered an additional $1.5bn from the eventual sale of Mundipharma, another pharmaceutical firm owned by the family.
Several of the states that oppose the deal, such as New York, Connecticut and Massachusetts, have questioned how Purdue came up with the contribution figure.
The states want the Sackler family to put in more of its own money into the deal.
New York state prosecutors have alleged that the Sacklers had been moving billions of dollars offshore to different banks, including accounts in Switzerland.
The New York Attorney General’s office has requested records from 33 financial institutions. However it found $1bn in wire transfers in records from just one institution.
What is the opioid crisis?
Opioids are a group of drugs that range from codeine to illegal drugs such as heroin. Prescription opioids are primarily used for pain relief but can be highly addictive.
On average, 130 Americans die from an opioid overdose every day, according to the US Center for Disease Control and Prevention, which says more than 200,000 Americans have died from opioid-related overdoses in the last two decades.
Fatal drug overdose numbers rose every year from 1999 to 2017, including a sharp spike between 2014 and 2017, according to the Centers for Disease Control and Prevention (CDC).
Experts partially blame the over-prescription of powerful and addictive painkillers for the epidemic.
Firms including Purdue are accused of using deceptive practices to sell opioids, including downplaying their addictive quality.
Purdue argued the US regulator, the Food and Drug Administration, had approved labels for OxyContin that had warnings about the risks.