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Chapter 11 bankruptcy may be part of drug company settlement

| Aug 30, 2019 | Chapter 11 |

Over many years, drug company Purdue Pharma made billions of dollars manufacturing, marketing and selling opioid narcotics like OxyContin across the United States, including New Jersey. However, with 400,000 people in the United States having lost their lives due to opioid overdose since the year 2000, drug manufacturers are starting to experience pressure from the public in the form of lawsuits and sometimes criminal investigations.

Currently, local and state governments have brought over 2,000 lawsuits against Purdue Pharma alone, alleging that it pressured doctors into prescribing OxyContin while downplaying the risks of patients becoming addicted. Reportedly, Purdue Pharma is currently negotiating a settlement agreement that would put these lawsuits to rest. One of the terms of the agreement would require the company to file for Chapter 11 bankruptcy

In addition to filing Chapter 11, the company would no longer be a for-profit company under the current terms of the settlement. Rather, the company would restructure into a public benefit trust corporation. The family currently at the head of Purdue Pharma would cede ownership, and the bankruptcy court would appoint trustees to oversee it in their stead. Any proceeds that the newly restructured company brings in, including drug sale profits, would go to the plaintiffs who have filed the lawsuits. It would be the responsibility of the trustees to ensure that the proceeds go to the intended recipients. 

According to a Columbia Law School professor, it is a novel approach to settle a civil action by creating a public benefit trust corporation. There are other organizations of this type in the United States, but they exist for other reasons. 

Lawsuits are one factor that can cause a business to get into financial trouble. Company owners considering filing Chapter 11 bankruptcy may wish to contact an attorney.