Purdue Pharma said Friday that the U.S. Bankruptcy Court for the Southern District of New York has indicated it intends to approve the company’s long-running Chapter 11 reorganization plan, a step that would unlock billions of dollars for opioid-abatement efforts and compensation for people harmed by the company’s drugs.
The announcement followed a confirmation hearing in which the court signaled the plan satisfies the requirements of the Bankruptcy Code after a six-year process involving extensive mediation, witness testimony and negotiations with creditors. More than 99% of voting creditors supported the proposal, according to Purdue.
Purdue sought bankruptcy protection in 2019 as it faced lawsuits from states, municipalities, tribes and individuals alleging the company’s marketing of OxyContin fueled the nation’s opioid epidemic. The litigation created potentially massive liability, leading Purdue to pursue reorganization as a way to resolve claims collectively and channel funds to treatment and prevention programs.
Purdue said the court also indicated the plan reflects the U.S. Supreme Court’s requirement that individual creditors be allowed to decide whether to release any direct claims against members of the Sackler family, who controlled the company before stepping away in 2018.
Under the plan, Purdue would be dissolved and its assets transferred to a new entity, Knoa Pharma, which will be owned by an independent foundation and operate under strict monitoring. The new company is expected to distribute opioid-use-disorder treatments and overdose-reversal medications without a traditional profit-driven mandate.
The plan is expected to generate roughly $7.4 billion in cash for creditors, including state and local governments, tribes and individuals. The Sacklers are slated to contribute between $6.5 billion and $7 billion, beginning with a $1.5 billion payment when the plan takes effect. Additional recoveries could come from insurance and other litigation.
A pool of up to $865 million is earmarked for individual victims.
Purdue said the court’s review included testimony from nearly 20 fact and expert witnesses, thousands of pages of filings and statements from people affected by the opioid crisis.
Once the plan receives formal confirmation, Purdue will begin the final steps required to exit bankruptcy and activate the settlement structure. The company also plans to create a public repository containing millions of internal documents related to its sales and marketing practices.
If finalized, the reorganization would mark one of the largest pharmaceutical bankruptcies in U.S. history and close a significant chapter in nationwide litigation over Purdue’s role in the opioid epidemic.
