Generic drug manufacturer Mallinckrodt Pharmaceuticals has tentatively agreed to pay $1.6 billion to settle thousands of lawsuits in a federal case attempting to determine who should be held financially responsible for the ravages of the opioid crisis.
Mallinckrodt, one of the largest manufacturers of generic opioids, is set to pay the money to a trust across eight years and enter its generics business into Chapter 11 bankruptcy. The move will absolve all opioid-related claims against the company.
The announcement comes the same week that OxyContin manufacturer Purdue Pharma, which declared bankruptcy in September, started a comprehensive, nationwide information blitz targeting potential claimants.
Mallinckrodt reached the agreement, which still must be finalized and accepted, with a group of lawyers representing thousands of municipalities that have sued companies up and down the opioid supply chain. The framework for the agreement also has been approved by 47 state and territory attorneys general, who have brought separate cases against opioid companies.
Mallinckrodt is the first company to reach a tentative global agreement with parties involved in the sprawling federal case based in Cleveland and could serve as an impetus for settlement with dozens of other companies as trial dates loom. U.S. District Judge Dan A. Polster, who is overseeing the Cleveland case, has said he wants to see a global settlement of all claims.
Tuesday’s announcement followed shortly after more than 20 attorneys general signed a letter rejecting an $18 billion settlement deal proposed by three of the nation’s biggest opioid distributors. Negotiations are ongoing, as are talks to settle the claims in the Cleveland case.
“In negotiations, our goal – and the goal of the communities we represent – is to create resource streams into localities that long have, and still are, battling the crisis,” the three co-lead plaintiff lawyers in the Cleveland case said in a statement. “Our pursuit of corporate accountability against a host of other defendants across the entire drug supply chain will not stop.”
Under the proposed agreement with Mallinckrodt, plaintiffs would receive warrants for 20 percent of the company’s outstanding shares. Mallinckrodt’s Ireland-based parent company will remain out of bankruptcy.
“Reaching this agreement in principle for a global opioid resolution and the associated debt refinancing activities announced today are important steps toward resolving the uncertainties in our business related to the opioid litigation,” said Mark Trudeau, president and chief executive of Mallinckrodt.
Next month, numerous drug companies are scheduled to go to trial in New York, and later this year, additional cases are slated in West Virginia and Cleveland.
Two Ohio counties, Cuyahoga and Summit, reached a $260 million settlement with three opioid distributors and Mallinckrodt in October, averting an imminent trial. The counties also reached a $20.4 million settlement with Johnson & Johnson.
Elizabeth Chamblee Burch, a University of Georgia law professor, said the tentative agreement is a test case for companies negotiating in the Cleveland case, known as multidistrict litigation. It is less costly for a company to declare bankruptcy with a subsidiary than to put the parent company through Chapter 11.
“Bankruptcy as an option, I think, is one alternative to negotiating a global settlement or a holistic closure” to the case, she said. “It’s like, all right, if you’re not going to play ball with us, this is our last move because we can always say well, we’ll just declare bankruptcy.”
As a condition of Purdue Pharma’s bankruptcy, it began a $23.8 million information campaign Monday to notify individuals who might have claims against the firm that they must file those claims by June 30.
In a statement, the company called the information blitz “another important step” in its “ongoing effort to achieve a global settlement.”
Purdue’s proposal would provide more than $10 billion to jurisdictions around the country to combat the opioid crisis. The company has faced a cascade of lawsuits alleging it played a key role in driving the crisis, including aggressively and deceptively marketing OxyContin. Purdue has denied the claims.
The ad campaign was approved by a bankruptcy judge in White Plains, N.Y., on Jan. 24 and Purdue developed it in partnership with the Official Committee of Unsecured Creditors and a court-approved claims agent, Prime Clerk. The ads were designed to reach 95 percent of U.S. adults an average of six times per person, ensuring that even those in the nation’s most isolated communities – including people who live in rural areas, on Native American reservations, in U.S. territories and those experiencing homelessness – will see or hear the information.
According to court documents, the coalition behind the ad campaign has detailed plans to display ads in online spaces such as Facebook, Instagram, Twitter and YouTube based on keyword search, hash tags and topical community groups.
It also will flood popular health and fitness magazines, trade publications, 80 local newspapers in 11 states and three nationally circulated newspapers: USA Today, the Wall Street Journal and the New York Times. The ad spots also will air on TV and radio, and appear in other public spaces, such as movie theaters and billboards.
The ads direct people to a website, where they can read about the case and learn how to file a claim.