As Purdue settles first opioid case, analysts say the company could face billions in total costs

Oklahoma Attorney General Mike Hunter is expected to announce the Purdue settlement Tuesday afternoon. (www.oag.ok.gov)

Purdue Pharma is under intense scrutiny for its opioid marketing, and now the company has inked its first settlement. The company struck a $270 million deal with Oklahoma to wrap up allegations that it played a role in the state's opioid crisis by deceptively marketing powerful pain drugs.

The deal includes nearly $200 million for a new National Center for Addiction Studies and Treatment at Oklahoma State University, the state's Attorney General Mike Hunter said Tuesday afternoon. Purdue is also paying up to $60 million to offset the state's litigation expenses. 

As part of the deal, descendants of Raymond and Mortimer Sackler will pay $75 million to fund work at the center. While the Wall Street Journal quoted University of Georgia law professor Elizabeth Burch saying there's now "blood in the water" regarding other potential settlement talks, the families stressed the deal isn't a "financial model for future settlement discussions."

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In a Tuesday morning note to clients—before the deal announcement—Cantor Fitzgerald analysts wrote that legal experts view Purdue and Johnson & Johnson as the two “largest targets” in the national opioid litigation. Settlements by the companies could “run into the billions,” they predict, noting that Oklahoma sought more than $20 billion in damages from 13 opioid companies. 

Oklahoma sued Purdue and other companies in August 2017 alleging the opioid makers “manipulated” residents into believing their pain drugs were safe to use for long periods of time. The state seeks to recoup “catastrophic” damages it has suffered due to the misleading marketing and the ensuing opioid crisis.

“These companies have waged a fraudulent, decade–long marketing campaign to profit from the anguish of thousands of Oklahomans,” Hunter said at the time. “These companies have made in excess of $10 billion a year, while our friends, family members, neighbors and loved ones have become addicts, gone to prison or died because of the opioid epidemic."

Oklahoma alleged violations of the state’s Medicaid false claims act and consumer protection act and said the companies created a public nuisance. The state also sued J&J, Teva's Cephalon unit and Allergan. The trial against other defendants is set to start on May 28.

Last month, Pew reported that the Oklahoma case—one of dozens brought by states against opioid companies—could precipitate a national settlement because it's the first scheduled to go to trial. Cantor Fitzgerald analysts wrote Tuesday that the deal could “pave the way for a framework for settlements” in the multidistrict litigation, which is housed in Cleveland federal court. 

RELATED: Purdue eyes bankruptcy filing to cope with mounting opioid accusations 

Aside from the state lawsuits, thousands of cities and counties have sued Purdue and other opioid companies. Reuters reported earlier this month the beleaguered opioid company was weighing bankruptcy to protect against thousands of legal claims.

Cantor analysts spoke with legal experts on a recent call and wrote Tuesday they believe Purdue proposed bankruptcy to “drive leniency” when negotiating for a settlement. Other opioid makers won’t likely face bankruptcy, they wrote.

The firm's legal experts said Purdue's practices—and the fact that the company actively promoted OxyContin, a drug closely associated with the crisis—will put it on the hook for "one of the largest shares of any settlement." And that could run "into the billions of dollars, pushing [Purdue] into bankruptcy,” the analysts wrote.

“The lawyers believe that the plaintiffs will also go after [Johnson & Johnson]," the analysts added, "given this company's deep pockets and ability to pay a large settlement, with some reports suggesting [J&J] may be the largest target for Oklahoma.” 

Generic drugmakers, on the other hand—such as Teva—face lower potential liabilities because they made FDA-approved drugs and didn’t market them, the lawyers said.

Editor's note: This story was updated with more details after Tuesday's settlement announcement.

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