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Endo International PLC is moving toward a bankruptcy filing, potentially setting off intense conflicts with state and local governments that have sued the pharmaceuticals company for its alleged role in fueling the opioid crisis, WSJ Pro Bankruptcy reported. Without a deal with opioid plaintiffs after years of negotiations, Endo is considering filing for bankruptcy as a means to restructure its more than $8 billion of debt and thousands of outstanding lawsuits. The company has been in negotiations with a group of secured creditors since it failed to make interest payments owed to its junior bondholders last month, said the people. Endo is aiming to reach a deal with the secured creditors before it enters a near-term chapter 11 process, though is unlikely to file for bankruptcy with an agreement also in place with its junior bondholders and opioid plaintiffs, the people said, cautioning that the situation is fluid and circumstances may change. Other pharmaceutical companies, including Purdue Pharma LP and Mallinckrodt PLC, have sought bankruptcy protection to resolve opioid liabilities, filing for chapter 11 with settlements in place with most U.S. states.

Teva Pharmaceutical Industries and AbbVie's Allergan unit on Tuesday reached a $58 million settlement with the city of San Francisco just before completion of a trial over claims that they fueled an opioid epidemic in the city, Reuters reported. Under the deal announced by City Attorney David Chiu, Israel-based Teva will pay $25 million in cash and contribute a $20 million supply of the overdose-reversal drug Narcan. AbbVie will pay $13 million. "This will bring significant resources to help with education, prevention and treatment, and the addition of tens of millions of dollars worth of overdose reversal medication will save lives in the Bay Area," said Paul Geller, a lawyer who represented the city in negotiating the settlement. Teva's settlement also resolves the city's claims against Teva-owned drug distributor Anda Inc. San Francisco will receive $54 million, while $4 million will go toward attorneys' fees.

Sequencing technology firm Genapsys is considering bankruptcy amid an escalating power struggle between the firm's former CEO and cofounder and his successor, GenomeWeb.com reported. According to court documents obtained by GenomeWeb, Genapsys in May sought and received permission from the Delaware Court of Chancery to hire New York-based financial services firm Lazard "to explore both financing transactions and bankruptcy." This activity appears to be related to a "special finance and risk committee" created by the Genapsys board in March. This revelation comes from proceedings related to one of two lawsuits filed earlier this year by Genapsys Cofounder and former CEO Hesaam Esfandyarpour against the firm and current CEO Jason Myers, among others. Esfandyarpour, still on the Genapsys board, opposed the formation of the committee, just one in a series of actions that have pitted him against the company. In his second suit, filed in April, he demanded more visibility on the special committee's activities. As first reported by Law360, Esfandyarpour alleged that the committee is "acting in secret" and denying him access to information. The defendants, including Myers and other board members, have disputed the allegations that Esfandyarpour has not received information about the company's finances, Court Vice Chancellor Morgan Zurn said during a June 10 hearing, and they have claimed the ex-CEO is "adverse to the company's financing efforts and therefore can be excluded from the committee's work."

Millions of Americans will now see a cleaner bill of health on their credit reports, making it easier for many to get an apartment or apply for a loan, the Wall Street Journal reported. Effective July 1, the three major credit reporting bureaus have removed medical debts that went into collection but were subsequently paid. In the past, these types of debts would remain on reports for as long as seven years. More changes are coming too. Beginning next year, credit reports will also be stripped of all unpaid medical debts up to $500. The two changes combined should scrub 70% of the approximately $88 billion in medical debt that currently shows up on the credit reports of 43 million Americans, according to the Consumer Financial Protection Bureau. Removing these blemishes should help some people when getting credit checks by landlords, employers, or when applying for loans, consumer advocates said. Some people could see a modest boost to their credit score, and others will benefit merely from having traces of the past debts deleted. Equifax, Experian PLC and TransUnion, the biggest credit-reporting firms, announced these changes to reporting practices in March, a month after a report from the CFPB suggested it would look into “whether policies should be implemented to eliminate unpaid medical billing data on credit reports altogether.” Though unpaid medical bills account for 58% of all debt in third-party collection, according to the CFPB, the agency’s research has found it isn’t a very good predictor of overall creditworthiness. FICO, which powers the most widely used credit scores, also found that paid medical collections are even less predictive of a person’s ability to repay than unpaid medical collections. (Subscription required.)

A jury yesterday convicted former Theranos executive Ramesh “Sunny” Balwani of collaborating with disgraced Theranos CEO Elizabeth Holmes in a massive fraud involving the blood-testing company that once enthralled Silicon Valley, the Associated Press reported. The 12 jurors found Balwani guilty on all 12 felony counts of defrauding both Theranos investors and the patients who relied on wildly unreliable blood tests that could have jeopardized their health. The outcome puts Balwani and Holmes in similar situations. Holmes was convicted on four counts of investor fraud and conspiracy earlier this year. During that trial, Holmes tearfully accused Balwani of sexually and emotionally abusing her while the two were romantically involved. An attorney for Balwani has vehemently denied those charges. Both Holmes, 38, and Balwani, 57, face up to 20 years in prison. After the verdicts, U.S. District Judge Edward Davila raised Balwani’s bail to $750,000 from $500,000 and set Nov. 15 as his sentencing date. Holmes, who is free on $500,000 bail, is scheduled to be sentenced Sept. 26. 

A bankruptcy judge said he would consider appointing an independent expert to assist in evaluating the mass claims linking Johnson & Johnson’s talc-based baby powder to cancer, WSJ Pro Bankruptcy reported. Judge Michael Kaplan of the U.S. Bankruptcy Court in New Jersey on Wednesday floated the idea of appointing an outside expert to help him wade through legal, financial and scientific questions around allegations that J&J’s talc products contained asbestos and caused ovarian cancer. Personal-injury lawyers and the healthcare company disagree about how much those tort claims are worth. J&J has denied that its baby powder was unsafe but moved its talc-related liabilities into chapter 11 in October to drive a settlement of roughly 40,000 pending talc cases as well as future injury claims. J&J created subsidiary LTL Management LLC to carry those or the company’s talc liabilities into chapter 11, keep its consumer-health business out of bankruptcy and freeze lawsuits in place. Plaintiffs’ lawyers have decried the bankruptcy filing, saying it will deny injury claimants their constitutional right to a jury trial. J&J has said that victims can be compensated more quickly and efficiently in a chapter 11 plan than through costly litigation in the tort system. Judge Kaplan agreed with J&J in February that the chapter 11 was filed in good faith and for a valid reorganizational purpose. A federal appeals court is now reviewing those findings. Meanwhile, mediated talks are continuing, though both sides appear to be at an impasse regarding a settlement proposal mediators have put forth, according to Judge Kaplan, who said he was considering how to move the process forward and encourage a resolution.

A federal judge has ruled that the nation’s three largest drug distributors cannot be held liable for the opioid epidemic in one of the most ravaged counties in the country — a place where 81 million prescription painkillers were shipped over eight years to a population of less than 100,000, the New York Times reported. Judge David A. Faber of the U.S. District Court for the Southern District of West Virginia released the opinion on the July 4th holiday, almost a year after the end of a trial pursued by the city of Huntington and Cabell County, which were the focus of an Oscar-nominated documentary called “Heroin(e)” about the effect of the prescription painkillers. The fatal overdose rate in Cabell County increased to 213.9 from 16.6 per 100,000 people, from 2001 to 2017, according to the ruling. In absolving the drug distribution companies — AmerisourceBergen, McKesson and Cardinal Health — Judge Faber acknowledged the terrible cost on the county and the city, but added that “while there is a natural tendency to assign blame in such cases, they must be decided not based on sympathy, but on the facts and the law.” His decision points to the difficulty of determining responsibility for a decades-long disaster in which many entities had a role, including drug manufacturers, pharmacy chains, doctors and federal oversight agencies, as well as the drug distributors. Drug distributors generally fulfill pharmacy orders by trucking medications from the manufacturers to hospitals, clinics and stores, and are responsible for managing their inventory. Like other companies in the drug supply chain, distributors are supposed to comply with federal limits established for controlled substances like prescription opioids, and have an internal monitoring system to detect problematic orders. Lawyers for the city and county argued that the distributors should have investigated orders by pharmacies that requested addictive pills in quantities wildly disproportionate to the population in these small communities. But Judge Faber ruled: “At best, distributors can detect upticks in dispensers’ orders that may be traceable to doctors who may be intentionally or unintentionally violating medical standards. Distributors also are not pharmacists with expertise in assessing red flags that may be present in a prescription.”

Endo International Plc, the latest drugmaker impaired by opioid lawsuits, must decide whether to skip more than $90 million in interest payments as it contemplates a potential bankruptcy filing, Bloomberg News reported. The company has been discussing its options with creditor groups that have conflicting views over its best path for dealing with lawsuits over its role in America’s opioid epidemic, a mounting debt load and a dimmed outlook for its bestselling drug. The company’s senior lenders have advocated for a bankruptcy filing and want the company to skip upcoming interest payments to preserve cash, according to people with knowledge of the talks. Endo’s lower-ranking creditors — the ones that would collect the bulk of interest due Thursday and at the end of July, are pressing options that would allow the drugmaker to restructure outside of court. Endo has a payment due on June 30 to holders of 6% bonds maturing in 2028. At the end of July the company is scheduled to pay $55 million more in interest to various other creditors, according to data collected by Bloomberg. Senior lenders have argued the advantages of skipping the interest payments and filing for bankruptcy. Endo and the lenders have been trading proposals as they try to come to a deal. The 6% unsecured notes due 2028 traded at 6 cents on the dollar Wednesday, according to Trace data. Meanwhile, the 5.875% first-lien bonds due 2024 changed hands at approximately 76 cents on the dollar.