States Aimed to Control Purdue Victim Payouts, Insider Says (1)

Sept. 29, 2021, 3:06 PMUpdated: Sept. 29, 2021, 8:43 PM

Attorneys general across the country worked to direct settlement money from the Purdue Pharma bankruptcy into state coffers rather than to victims of the opioid crisis, survivors of those who died from overdoses and babies born dependent on opioids, according to a new book by an insider in the court proceedings.

“When the doors were closed and cameras were off, the same people who spoke with such compassion and understanding about overdoses didn’t necessarily want to hear from” victims, Ryan Hampton wrote in his non-fiction book “Unsettled.”

Hampton is a victims’ advocate who was on the committee representing individuals in the bankruptcy. The book, a copy of which Bloomberg Law obtained in advance of its Oct. 5 publication, is his account of confidential bankruptcy negotiations.

His assessments of the state AG’s efforts to get control of as much money as possible was confirmed by three other people involved in the bankruptcy case. They spoke to Bloomberg Law on condition of anonymity due to the confidential nature of the behind-the-scenes negotiations.

Hampton said he worried that the states would put the settlement money in their general funds, as they did with money from litigation against Big Tobacco; let it sit, unspent, in the same way that federal addiction dollars sent to states remain unspent every year; or go toward state-selected addiction treatment programs that he says are ineffective and already well funded.

“Whatever they were doing was disconnected from what the community needed,” Hampton wrote. “If the states’ way of dealing with the epidemic worked, we wouldn’t have empirical proof of an increasing treatment gap and more deaths.”

Ultimately, state and local governments received control over the majority of the bankruptcy proceeds, about $4 billion, while the nearly 135,000 individuals harmed by addiction would share about $750 million, or an average of roughly $5,555 per person before lawyers’ fees (though the actual amount each person receives will vary based on the specifics of their claims). About $45 million of that will go to infants born dependent on opioids.

“Victims of Purdue Pharma were put through the wringer to collect documents, prescriptions, medical records, all the traces of the worst moments of their lives for recoveries that don’t even cover the cost of a funeral,” said attorney Charlotte Bismuth. A former assistant district attorney who prosecuted the doctor who was New York City’s most prolific opioid prescriber, Bismuth also said that she had great respect for the investigations by state attorneys general.

Money to Addicts Nixed

Hampton writes that some states, led by the office of New York Attorney General Letitia James, initially suggested that individual claimants should receive no money at all.

Some of the attorneys general and others involved in the case had concerns that people would use settlement payments to buy drugs, according to Hampton and two of the other insiders.

James, in a statement, said “no deal is perfect” and there would never have been enough money to truly pay for the damage done.

“But this resolution will deliver $4.5 billion into communities ravaged by opioids on an accelerated timetable and it gets one of the nation’s most harmful drug dealers out of the opioid business once and for all,” James said.

That wasn’t satisfactory for Ed Bisch, whose 18-year-old son, Eddie died of an opioid overdose after taking OxyContin. He was shocked when he learned the dollar amount allotted for him and other victims.

“I thought, without the victims there would be no case; and this is insulting and sad,” he told Bloomberg Law.

The states contend they were doing what they believe is best to address a dire crisis, and that they already had the processes to distribute funds to existing treatment and prevention programs.

“There is not enough money in the world to undo the suffering and horror brought on by and continuing from the opioid epidemic because of the conduct of Purdue and others,” said John Guard, chief deputy attorney general in Florida, in a statement.

“The states involved in opioid litigation were faced with an impossible problem: what to do with the limited amounts of money that are recoverable from the entities responsible,” he added. “The states and the federal government agreed that a substantial majority of the monies recovered would be utilized to help victims through abatement programs and services to save as many lives as possible.”

Prescription opioid misuse in the U.S. has a total economic burden of $78.5 billion a year, according to the Centers for Disease Control. That figure includes the cost of healthcare, lost productivity, addiction treatment, and the criminal justice system.

“Purdue and the Sacklers did not come close to paying what they owe to the people they hurt,” Massachusetts Attorney General Maura Healey said in a statement. “Until my team investigated and sued them, the Sacklers were going to keep their company, their secrets, their reputation, and their fortune, just like they had always gotten away with it before.”

“We fought to expose the truth and get help for victims, but we have no illusions: much more help is needed, and all of us must work to deliver it,” added Healey, who at one point ask the court to grant more time for victims to be notified of their eligibility in the bankruptcy.

The problem with the states’ approach, according to Hampton, was that they have long failed to fund long-term assistance in housing, employment, harm-reduction measures including naloxone, and community-based care for people struggling with substance abuse.

“Those unmet needs, big surprise, were always overlooked and undervalued as a solution. We wanted to change that by interrupting the cycle of overdose, ER, to back on the street,” Hampton wrote.

Money Toward Abatement

U.S. Bankruptcy Judge Robert Drain, who oversaw the case in the Southern District of New York, indicated early on that he preferred the Purdue money go toward broader efforts to address the crisis, including addiction treatment and prevention, rather than the individual victims.

The individual claimants included many people, such as Hampton, who were in long-term recovery. Many others were family members who had lost a loved one to overdose, in some cases raising orphaned children born dependent on opioids.

Drain and, many parties involved in the bankruptcy, questioned whether some individuals would be able to prove they were prescribed Purdue’s OxyContin, which had a relatively small market share among opioids.

Early in the bankruptcy proceedings, advocates proposed creating a $200 million emergency relief fund through a newly created nonprofit, Hampton wrote. Both groups of attorneys general opposed the idea, instead calling for the money to be directed to them for use in state-selected treatment and prevention programs, according to the book.

The Justice Department also opposed the idea, saying it would take the majority of the monies from the case unless the vast majority of it went to the states, Hampton wrote. That prompted Drain to kill the idea.

As for the money going to states, Hampton has dire predictions based on the existing data.

Despite the states’ best efforts, the rate of opioid overdose deaths continues to rise steadily every year, going from 8,050, or 2.9 per 100,000 deaths in 1999 to 49,860, or 15.5 per 100,000 in 2019, the most recent year for which CDC data is available.

“They had the tools to fix the crisis: law firms, public health teams, and funding. But they didn’t use them, or didn’t use them correctly,” Hampton wrote.

(Adds new eighth, thirteenth and fourteenth graphs to include comment from Bismuth and Bisch)

To contact the reporter on this story: Valerie Bauman in Washington at vbauman@bloomberglaw.com

To contact the editor responsible for this story: Bernie Kohn at bkohn@bloomberglaw.com

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