Purdue Pharma L.P.
Bankruptcy

Statement /Informational Brief filed by Eli J. Vonnegut on behalf of Purdue Pharma L.P.

Southern District of New York (Bankruptcy), nysb-7:2019-bk-23649

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19-23649-rdd Doc 17 Filed 09/16/19 Entered 09/16/19 03:41:02 Main Document Pg 1 of 64 DAVIS POLK & WARDWELL LLP 450 Lexington Avenue New York, New York 10017 Telephone: (212) 450-4000 Facsimile: (212) 701-5800 Marshall S. Huebner Benjamin S. Kaminetzky Timothy Graulich James I. McClammy Eli J. Vonnegut Proposed Counsel to the Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: Chapter 11 PURDUE PHARMA L.P., et al., Case No. 19-[ ] (RDD) Debtors.1 (Joint Administration Pending) DEBTORS' INFORMATIONAL BRIEF 1 The Debtors in these cases, along with the last four digits of each Debtor's registration number in the applicable jurisdiction, are as follows: Purdue Pharma L.P. (7484), Purdue Pharma Inc. (7486), Purdue Transdermal Technologies L.P. (1868), Purdue Pharma Manufacturing L.P. (3821), Purdue Pharmaceuticals L.P. (0034), Imbrium Therapeutics L.P. (8810), Adlon Therapeutics L.P. (6745), Greenfield BioVentures L.P. (6150), Seven Seas Hill Corp. (4591), Ophir Green Corp. (4594), Purdue Pharma of Puerto Rico (3925), Avrio Health L.P. (4140), Purdue Pharmaceutical Products L.P. (3902), Purdue Neuroscience Company (4712), Nayatt Cove Lifescience Inc. (7805), Button Land L.P. (7502), Rhodes Associates L.P. (N/A), Paul Land Inc. (7425), Quidnick Land L.P. (7584), Rhodes Pharmaceuticals L.P. (6166), Rhodes Technologies (7143), UDF L.P. (0495), SVC Pharma L.P. (5717) and SVC Pharma Inc. (4014). The Debtors' corporate headquarters is located at One Stamford Forum, 201 Tresser Boulevard, Stamford, CT 06901. 19-23649-rdd Doc 17 Filed 09/16/19 Entered 09/16/19 03:41:02 Main Document Pg 2 of 64 TABLE OF CONTENTS PAGE I. Introduction ..........................................................................................................................1 II. The Debtors, the Debtors' Corporate Structure, and the Debtors' Business .......................7 A. Purdue Pharma L.P. and Purdue Subsidiaries ..........................................................8 1. Branded Prescription Medication Business .................................................8 2. Generic Prescription Medication Business / API Business .........................9 3. Over-the-Counter Medication Business .....................................................11 4. Public Health Initiatives: Opioid Overdose Reversal and Addiction Treatment Medications ..............................................................................12 B. Purdue Pharma Inc. ................................................................................................14 1. PPI's Board of Directors ............................................................................14 2. Committees of the Board ...........................................................................15 C. Ownership of the Debtors ......................................................................................16 III. Opioid Medications in General ..........................................................................................17 IV. The Market for Prescription Opioids in the United States .................................................20 V. OxyContin ..........................................................................................................................22 A. OxyContin Is an Extended-Release Opioid Medication ........................................23 B. The FDA Has Continuously Determined That OxyContin Should Remain Available, Striking a Policy Balance Between the Need for Effective Opioid Analgesics and Their Potential for Abuse .............................................................25 VI. Purdue Has Taken Significant Steps to Reduce the Risk of Abuse of Its Medications .....29 A. Since the 1990s, Purdue Has Devoted Considerable Resources to Developing Abuse-Deterrent Technologies ..............................................................................29 B. Purdue Has Been an Active Participant in Efforts to Counter Opioid Abuse .......31 C. In February 2018, Purdue Stopped Promoting Opioid Medications to Prescribers Via a Sales Force .................................................................................32 VII. Purdue Accepted Responsibility for Improper Marketing Between 1996 and 2001 .........32 VIII. Today's Opioid Crisis ........................................................................................................34 i 19-23649-rdd Doc 17 Filed 09/16/19 Entered 09/16/19 03:41:02 Main Document Pg 3 of 64 IX. The Debtors Face Thousands of Lawsuits in Connection with Their Marketing of Opioid Medications ............................................................................................................36 A. The Pending Actions Have Been Brought in Dozens of State and Federal Courts Across the Country .....................................................................................37 B. The Pending Actions Have Been Brought By a Wide Array of Plaintiffs Representing Diverse Interests ..............................................................................38 C. The Pending Actions Are at Various Procedural Stages, Including Some That Are Set for Trial This October ...............................................................................39 D. The Pending Actions Assert a Wide Range of Novel Legal Theories Predicated on Various State and Federal Laws .......................................................................40 E. There Are a Number of Common Legal and Factual Defenses to the Claims Asserted in the Pending Actions ............................................................................40 F. No Court Has Ever Found That the Defendant Debtors' Conduct Caused Any of the Harms Alleged by the Plaintiffs in the Pending Actions .............................42 X. The Debtors, Their Ultimate Owners, and a Critical Mass of Plaintiffs in the Pending Actions Have Agreed on a Settlement Structure ...............................................................44 XI. The Alternative to the Consensual Resolution Envisioned by the Settlement Structure Is Chaotic, Value Destructive and Unsustainable Litigation .............................................45 A. The Pending Actions Are Depleting the Debtors' Financial and Operational Resources and Cannot Be Permitted to Continue ..................................................45 B. A Case-by-Case Approach to Resolving Claims Against the Debtors Is Neither Sustainable nor Equitable ......................................................................................47 C. Plaintiffs' Attempts to Be First to the Courthouse Continue to Frustrate Resolution of the Pending Actions and Settlement Discussions ...........................48 XII. This Bankruptcy Presents the Only Rational and Feasible Forum for Constructing and Consummating a Global Resolution of the Pending Actions ............................................49 ii 19-23649-rdd Doc 17 Filed 09/16/19 Entered 09/16/19 03:41:02 Main Document Pg 4 of 64 I. Introduction Purdue Pharma L.P. ("Purdue Pharma") and its subsidiaries that are debtors in possession in the above-captioned chapter 11 cases (collectively, "Debtors" or "Purdue")2 are pharmaceutical companies that manufacture, sell, or distribute, among other products, extended- release, long-acting, abuse-deterrent opioid pain medications. OxyContin® Extended-Release Tablets CII ("OxyContin"), Purdue Pharma's most prominent pain medication, has been the target of over 2,600 civil actions pending in various state and federal courts and other fora across the United States and its territories ("Pending Actions"). These Pending Actions name as defendants Purdue Pharma and certain of the other Debtors ("Defendant Debtors"), among other parties, and generally allege that the Defendant Debtors falsely and deceptively marketed OxyContin and opioid pain medications, and are liable for the national opioid crisis. Unlike most debtors, the Debtors have no funded debt and no material past due trade obligations. Nor do they have any judgment creditors.3 Nonetheless, the onslaught of lawsuits has proved unmanageable and poses a grave threat to the Debtors' continued viability. Indeed, although the Debtors have contested – and continue to contest – their liability in the Pending Actions, continued litigation of thousands of Pending Actions to judgment and through appeals in the civil tort system will benefit no one; it will result only in the financial and operational destruction of the Debtors and the immense value they could otherwise provide, and the squandering of hundreds of millions of dollars on lawyers' and professionals' fees. Purdue Pharma, the Debtors' main operating entity, is projected to spend approximately $263 million on 2 The terms "Debtors" and "Purdue" also include Purdue Pharma's general partner, Purdue Pharma Inc., discussed in Section II.B, infra. 3 In fact, the only two cases litigated to final judgment – one in North Dakota and another in Connecticut – both resulted in dismissals as a matter of law on substantive grounds in favor of the Defendant Debtors. See Order Granting Mot. to Dismiss, State of North Dakota ex rel. Wayne Stenehjem v. Purdue Pharma L.P., et al., No. 08- 2018-CV-01300 (N.D. Dist. Ct. Burleigh Cty. May 10, 2019); City of New Haven v. Purdue Pharma L.P., No. X07 HHD CV 17 6086134 S, 2019 WL 423990 (Conn. Super. Ct. Jan. 8, 2019). 1 19-23649-rdd Doc 17 Filed 09/16/19 Entered 09/16/19 03:41:02 Main Document Pg 5 of 64 legal and related professional costs in 2019, the vast bulk of which is related to the litigations and government investigations, and the financial pressure resulting therefrom. Indeed, by even the narrowest measure, Purdue Pharma has spent $63 million in the first half of this year on costs and fees related to litigating the Pending Actions in court, and is projected to spend $121 million by year end – a rate of over $2 million per week. Moreover, "Copycat" complaints are being filed against the Defendant Debtors by the day, further exacerbating an already untenable situation. In addition, case-by-case mass tort litigation of the type the Defendant Debtors currently face in the civil tort system is neither an efficient, nor an equitable, way to resolve their alleged liability. Such litigation has only incentivized a multiplicity of "races to the courthouse" as various plaintiffs vied to be the first to trial – and employed ever more aggressive and creative means to that end. Several states even commenced administrative proceedings seeking dozens of trial days to bypass the normal court process and expedite the time to a final determination of their claims. This kaleidoscope of piecemeal litigation was and is all but guaranteed to continue to result in inconsistent outcomes and inequitable treatment, as well as unsustainable cost. Any judgments or settlements extracted in the process would, at best, potentially have benefited only those select few plaintiffs who happen to be positioned at the beginning of the trial and judgment queue. And it would not have benefited even them, because defending over 2,600 lawsuits to conclusion would almost certainly have forced the Defendant Debtors to file for chapter 11 protection even had they suffered only a small number of significant adverse judgments at the trial level. In its Supreme Court filing, the state of Arizona articulated the problem at hand: "Absent resolution in a single forum, these disputes will be fought over and over in nearly every 2 19-23649-rdd Doc 17 Filed 09/16/19 Entered 09/16/19 03:41:02 Main Document Pg 6 of 64 state in the Nation. This is likely to take years, lead to inconsistent judgments, and create an inequitable distribution of money damages."4 There is a better way. After a year of intense and arduous negotiations, the Debtors, the Debtors' ultimate owners (trusts for the benefit of members of the Sackler families ("Sackler Families")), and a critic