Opioid Suits Against Sackler Family's Purdue May Cost Teva Up to $3 Billion

Purdue Pharma said to be exploring bankruptcy filing as litigation pressures mount

FILE PHOTO: A man cleans near the logo of Teva Pharmaceutical Industries at their plant in Jerusalem December 14, 2017.
Reuters

OxyContin maker Purdue Pharma is exploring filing for bankruptcy to address potentially significant liabilities from roughly 2,000 lawsuits that allege the drug maker contributed to the deadly opioid crisis sweeping the United States, people familiar with the matter told Reuters Monday.

The potential move shows how Purdue and the Sackler family, the American-Jewish family that owns the company and has made significant contributions to Israel, are under increasing pressure to respond to mounting litigation.

>> Sackler name is everywhere at Tel Aviv U., but not the opioid controversy plaguing the family 

The company is accused of misleading doctors and patients about risks associated with prolonged use of its prescription opioids. Purdue denies the allegations, arguing that the U.S. Food and Drug Administration-approved labels for its opioids carried warnings about the risk of abuse and misuse associated with the pain treatments.

Concerns about Purdue’s problems have spread to other drugmakers that manufacture or distribute narcotic painkillers. That included Teva Pharmaceuticals, which makes the opioids Fentore and Actiq as well as a generic version of OxyContin.

The complaints that have been filed against Teva and others in the past five years allege that the drugmakers engaged in improper marketing and distribution of opioids.

In addition, Teva’s Anda drug distribution subsidiary, along with other distributors and manufacturers, has been cited in lawsuits for failing to employ internal controls that could have been used to identify suspicious orders of opioids and prevent their abuse.

Teva acquired Anda, the fourth-largest generic-drug distribution company in the United States, for $500 million from Allergan in 2016, shortly after its $39 million purchase of Actavis Generics.

Shares of Endo International, which has also been named in lawsuits related to the U.S. opioid epidemic, closed down 17% and had fallen another 5.6% by early afternoon local time in New York Tuesday.

Shares of Teva traded quietly Monday but closed 4.9% lower at 59.20 shekels ($16.36) on the Tel Aviv Stock Exchange Tuesday, making the stock the biggest loser for the day among companies in the TA-125 index. In New York, they were down just 1% in early afternoon local time at $16.61.

Over 1,600 lawsuits have been filed accusing Purdue and other opioid manufacturers of using deceptive practices to push addictive drugs that led to fatal overdoses. Most of the federal cases have been consolidated into a case being heard in Ohio federal court.

Opioids, including prescription painkillers, heroin and fentanyl, were involved in 47,600 overdose deaths in 2017, a sixfold increase from 1999, according to the latest data from the U.S. Centers for Disease Control and Prevention.

Filing for Chapter 11 protection would halt the lawsuits and allow Purdue to negotiate legal claims with plaintiffs under the supervision of a U.S. bankruptcy judge, the sources said.

Purdue hired law firm Davis Polk & Wardwell LLP for restructuring advice, Reuters reported in August, fueling concerns among litigants, including Oklahoma Attorney General Mike Hunter, that the company might seek bankruptcy protection before the trial.

Purdue is estimated to control about 60% of the U.S. market for branded opioids. Endo has about a 20% share, Johnson & Johnson 8% and Teva about 6% through its Fentore and Actiq products. Smaller makers Mallinckrodt and Insys have 3% and 2%, respectively.

Teva disclosed in its fourth-quarter financial statement that it could not yet estimate the financial exposure the lawsuits pose to it.

“None of the complaints specifies the exact amount of damages at issue; however, an adverse resolution of any of these lawsuits or investigations may involve large monetary penalties and could have a material and adverse effect on Teva’s reputation, business, results of operations and cash flows,” it said.

It warned: “Responding to governmental investigations and managing legal proceedings is costly and involves a significant diversion of management attention. Such proceedings are unpredictable and may develop over lengthy periods of time.”

Purdue has held discussions to resolve the litigation with plaintiffs’ lawyers, who have often compared the cases to widespread lawsuits against the tobacco industry that resulted in a $246 billion settlement in 1998.

Using that settlement as the basis for estimated damages, Bloomberg Intelligence estimated that all the drugmakers together could be liable for anywhere between $5 billion and $50 billion — the top figure in line with the penalties in the tobacco settlement.

Purdue’s shares could be anywhere from $3 billion to $30 billion while Teva’s could be as little as $300 million and as much as $3 billion.

In addition, Massachusetts Attorney General Maura Healey in June became the first attorney general to sue not just Purdue but Sackler family members.

Records in her case, which Purdue has asked a judge to dismiss, accused Sackler family members of directing deceptive marketing of opioids for years while enriching themselves to the tune of $4.2 billion.

Some other states have since also sued the Sacklers. The Sacklers are currently discussing creating a nonprofit backed by family financial contributions to combat addiction and drug abuse, a person familiar with their deliberations said.

In addition to the Tel Aviv University medical school named for the Sacklers, the family owns 73% of the tiny Israel drug company Rafa Laboratories. Rafa employs 280 people and had sales of about 200 million shekels in 2017.