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A debate is raging in federal court over whether the owners of Purdue Pharma LP, members of the billionaire Sackler family, secured protection for themselves from future opioid lawsuits by abusing the U.S. bankruptcy system, Bloomberg News reported. U.S. District Judge Colleen McMahon is worried about the answer and its implications for her upcoming ruling on an appeal of the drugmaker’s opioid settlement. The deal would rout billions of dollars to opioid abatement efforts and see Purdue’s assets turned over to the states, cities and counties suing it over its role in the crisis. Particularly troubling to Judge McMahon is how aggressively Purdue’s owners siphoned cash out of the company after a 2007 guilty plea over the way it marketed OxyContin. Distributions skyrocketed to more than $10 billion -- though close to half went to taxes -- from 2008 to 2018, compared to about $1.3 billion in a more-than-10-year period preceding the plea. That’s important, because members of the family are receiving sweeping legal protection from future opioid lawsuits in exchange for a more-than-$4 billion contribution to the settlement. The releases would even bar people who don’t agree to them -- including a handful of state attorneys general -- from bringing civil suits against the family members over their role in the opioid crisis. Judge McMahon said Purdue’s owners may have “made themselves necessary” to the settlement by taking so much cash out of the company. The explanation for the uptick in cash transfers, according to lawyers for descendants of Mortimer Sackler and Raymond Sackler, is simple and in no way nefarious: Purdue started making a lot more money than it once did. Read more. 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

The U.S. Federal Trade Commission has reached a settlement with Vyera Pharmaceuticals over allegations it sought to block generic versions of its life-saving drug Daraprim, but is preparing for a Dec. 14 trial against Martin Shkreli, who once led the company, Reuters reported. Tuesday's settlement, worth up to $40 million, addressed claims in a lawsuit by the FTC and seven U.S. states that Shkreli and co-defendant Kevin Mulleady launched Vyera with a goal of buying an important drug, raising the price, and using illegal anticompetitive strategies to thwart cheaper generics. The January 2020 lawsuit said Vyera, then called Turing Pharmaceuticals, protected its dominance of Daraprim by ensuring that generic drugmakers could not obtain needed samples for a cheaper version and kept potential rivals from buying a key ingredient. Shkreli gained notoriety when he boosted the price of Daraprim, which is used to treat toxoplasmosis, overnight to $750 from $17.50 per tablet. Toxoplasmosis is a common parasitic infection that can cause serious problems in people with weakened immune systems. The settlement calls for Vyera to pay $10 million upfront plus up to $30 million over 10 years, and stop the anticompetitive practices it used to protect Daraprim. Mulleady, who like Shkreli was also a Vyera chief executive, agreed to a seven-year ban on most roles in the pharmaceutical industry.

Members of the Sackler family on Monday said billions of dollars they collected from Purdue Pharma before the company filed for chapter 11 was the result of extra cash, not part of a "secret plan" to abuse the bankruptcy system, Reuters reported. In court papers, lawyers for the Sackler family members, who controlled Purdue, rejected U.S. District Judge Colleen McMahon’s suggestion that the more than $10 billion Purdue paid out in the years leading up to the 2019 bankruptcy could amount to an abuse of the chapter 11 process. Around half of the money went to taxes or business investments, according to court documents. The Sacklers are alleged to have drained Purdue of cash over several years. When it eventually filed for bankruptcy in the face of lawsuits over the epidemic, the company needed Sacklers' money to settle the billions of dollars of legal claims. In return, the Sacklers were able to demand protection from the lawsuits. The Sacklers rejected the notion that there was any "scheme" to "deliberately weaken Purdue so it could not reorganize without" their financial contribution. There is no evidence to suggest the payments “were made as part of a secret plan” to abuse the bankruptcy system, the Sackler lawyers said. They called the idea “pure fiction.” McMahon is considering whether to overturn a bankruptcy court ruling that shields the Sacklers from liability over the opioid epidemic. If she finds that there is sufficient evidence of abuse, she could send the matter back to the bankruptcy court to reconsider the shield.

A bankruptcy judge cleared Mallinckrodt PLC of liability for allegedly charging anticompetitive prices to health insurers on its flagship product, rejecting their claims for $382 million in antitrust damages, WSJ Pro Bankruptcy reported. Judge John Dorsey of the U.S. Bankruptcy Court in Wilmington, Del., ruled yesterday that Humana Inc. and other health insurers had failed to prove that the high price charged by Mallinckrodt for its H.P. Acthar gel product after its chapter 11 filing last year stemmed from ongoing anticompetitive conduct. As a result, the insurers aren’t entitled to the $382 million in top-ranking administrative claims they had brought against Mallinckrodt in its chapter 11 proceedings, Judge Dorsey said. Humana and others had sued Mallinckrodt before its bankruptcy over price increases for Acthar, which is used to treat infantile spasms, multiple sclerosis and other ailments and costs roughly $38,000 a vial, up from about $50 in 2001. The insurer argued the cost of any wrongdoing should continue to accrue while Mallinckrodt is in bankruptcy and be treated as administrative expenses, which must be paid in full ahead of other creditors for the company to leave chapter 11. Humana has said it continues to pay about $7.5 million every month for the drug, a price it alleged is inflated by anticompetitive conduct.

Johnson & Johnson is trying to figure out how to divide its supply chain and substantial financial holdings as part of a planned split into two publicly-traded businesses, the Wall Street Journal reported. The New Brunswick, N.J.-based healthcare and consumer-goods giant last month said it would split off its consumer-health business, which sells Tylenol medicines, Band-Aid bandages and Johnson’s Baby Powder, into a so-far unnamed company in 18 months to two years. The company is considering spinning out the unit and holding a stock offering. J&J’s consumer-health unit generated $14.1 billion in sales last year, compared with $45.6 billion for pharmaceuticals and $23 billion for medical devices, according to a filing with securities regulators. The company operated 90 manufacturing facilities globally at the end of 2020. J&J’s split won’t necessarily be more complex or challenging than those of other companies, but questions remain about how issues such as litigation will be handled, said Damien Conover, director of healthcare research at research firm Morningstar Inc. For example, it is unclear which business would handle future litigation relating to when the companies were one, he said. A spokeswoman for J&J declined to comment. The company in October placed into bankruptcy its liabilities for thousands of lawsuits tying talc-based products to cancer. “It’s pretty likely that litigation stays with the separate companies and the cash flows are strong enough to support that, but still, there’s a bit of uncertainty,” Mr. Conover said.

The investor who bought Philadelphia’s Hahnemann University Hospital before its collapse failed to win a bankruptcy court’s approval to take out a $17.5 million loan on the defunct healthcare center’s underlying real estate, WSJ Pro Bankruptcy reported. Joel Freedman was denied court approval to put up the former hospital’s property as collateral for a mortgage loan he said he needs to cover ongoing costs stemming from Hahnemann’s 2019 bankruptcy, which left him in control of its downtown real estate. After the bankruptcy, Hahnemann closed its doors for good despite protests from doctors, nurses and community groups. Bankruptcy administrators have been probing how Freedman split the hospital’s healthcare operations from its real estate, which wasn’t included in the chapter 11 filing. Freedman in October sought a bankruptcy-court order confirming he could encumber the properties to secure a $17.5 million loan from Gordon Brothers, a restructuring and investment firm. The proposed 15-month loan would refinance the existing mortgages on certain assets, including the premises once occupied by Hahnemann, while granting a first-priority lien to Gordon Brothers, according to court papers. Freedman said in court filings that, despite the hospital being closed, the property requires ongoing maintenance, security and upkeep to preserve its value. Professional fees and pension obligations stemming from Hahnemann’s closure are also adding up, according to his papers.

A U.S. judge yesterday questioned whether members of the Sackler family that owned Purdue Pharma abused the bankruptcy system, as she considers whether to overturn a ruling that shielded the Sacklers from liability over the opioid epidemic, Reuters reported. U.S. District Judge Colleen McMahon in Manhattan said that she wanted more information about more than $10 billion that the Sacklers, according to court documents, received from Purdue between 2008 and 2018, when they left the company’s board. “I’m looking for whether there was abuse,” she said during a hearing. One Sackler family lawyer replied that there was no evidence to suggest abuse. The Sacklers have denied wrongdoing and did not themselves file for bankruptcy. They contributed $4.5 billion to the bankruptcy settlement in exchange for protection against future litigation. Judge McMahon's remarks came during arguments over appeals of a bankruptcy court’s approval in September of Purdue’s reorganization plan, which included releases of future opioid-related civil claims against the Sacklers. The U.S. Department of Justice’s bankruptcy watchdog and a small group of states are challenging the plan's approval, claiming the Sacklers should not receive the legal protections it provides. Judge McMahon suggested that the Sacklers may have protected their wealth by taking as much money from Purdue as they could in the years before the bankruptcy. “People were aware claims were going to be asserted. Advisors told them to take steps to protect the family,” she said. 

Valley Hospice of Arizona, a Mesa-based end-of-life care facility, has voluntarily filed for bankruptcy protection with at least $2.49 million owed to scores of creditors, ABC15.com reported. Valley Hospice on Nov. 12 declared Chapter 11 bankruptcy, which is the most common type of bankruptcy used to reorganize a failing business. This business is not connected to Hospice of the Valley, a larger chain of health care centers in the area. Documents on file with U.S. Bankruptcy Court for the District of Arizona show that the company owes money to 77 creditors, many of which are unsecured. Valley Hospice owes at least $2.4 million to these unsecured creditors, but it filed under subchapter V of chapter 11, meaning it has less than $7.5 million in total debts owed.