U.S. Supreme Court decision halts Purdue Pharma opioid settlement

Key Takeaways

On June 27, the U.S. Supreme Court issued a 5-4 ruling in Harrinton v. Purdue Pharma, a case centering on a controversial provision shielding the Sackler family (who own Purdue Pharma, the maker of OxyContin) from civil lawsuits as part of their $6 billion opioid settlement agreement. Though the Court’s decision may expose the Sacklers to potential future financial liability for their role in fueling opioid crisis, it also upends the hard-fought deal requiring the Sacklers to pay up to $6 billion over 18 years toward victims as well as state, tribal and local governments, most of whom voted to approve the bankruptcy plan. 

Hundreds of county governments are represented among the claimants expecting an imminent release of funds under the Purdue Pharma settlement agreement. With the liability shield for the Sackler family struck down, negotiations must now proceed without that provision, which many saw as a key incentive for their agreement to a $6 billion payout. The fate of these critical resources to help county governments address the devastating aftermath of the opioid epidemic is now uncertain. 

The Purdue Pharma Settlement Agreement 

• In 2019, facing thousands of claims related its role in fueling the nationwide opioid epidemic due to the manufacturing and aggressive marketing of OxyContin, Purdue Pharma filed for bankruptcy. 
• Bankruptcy proceedings led to a reorganization plan establishing trusts available for victim compensation funded by assets of the Purdue bankruptcy estate. Critically, the Sackler family negotiated an agreement to contribute up to $6 billion to those trusts in exchange immunity from all current and future opioid lawsuits. The plan was approved by over 95 percent of the voting opioid claimants, though some objected 

Legal Challenge 

• A group of dissenters quickly challenged the legality of the agreement on the grounds that U.S. laws surrounding bankruptcy cannot be used to shield the Sackler family from future liability because they had not personally filed for bankruptcy. Lower courts have generally been split on this legal question. 
• The agreement was thrown out in district court, but ultimately overturned in an appeal in June 2023. In July 2023, the U.S. Trustee, functioning in its oversight role over the bankruptcy process, then petitioned the Supreme Court to stay the Second Circuit’s ruling and hear the case.
• In a 5-4 decision written by Justice Neil M. Gorsuch, the majority held that bankruptcy law does not permit protecting the Sackler family from being sued. The decision has implications not just for the agreement at hand but other bankruptcy settlements involving claims of mass injury, as the liability shield has become a popular incentive in those negotiations.

Implications for Counties

• State, local and tribal governments have negotiated a series of opioid settlements with various drug companies, totaling more than $50 billion overall. However, the Purdue Pharma settlement would have ranked among the largest and was only the second so far to include direct payments to victims. 
• With the deal struck down by the Supreme Court, Purdue and the claimants must now return to the negotiating table, which both parties have expressed willingness to do. However, without the promise of a liability shield, it is uncertain how much funding the company will be willing to commit to families and communities. Meanwhile, another delay means ongoing legal fees which continue to consume potential payouts to those impacted.
• County governments across the country who were slated to receive funds under the Purdue Pharma settlement agreement now face uncertainty and further delays in accessing these critical resources

NACo will continue to monitor the Purdue Pharma litigation and bankruptcy negotiations.