Opioid Maker’s Bankruptcy Plan Would Cut Payments to Victims by $1 Billion
Opioid Manufacturer Agrees to Reduced Settlement Payments in Opioid Crisis Compensation
In a recent disclosure, a major opioid manufacturer that had pledged $1.7 billion in compensation for its involvement in the opioid crisis revealed that it had reached an agreement with its creditors to decrease the settlement payments by $1 billion.
Mallinckrodt Pharmaceuticals, the manufacturer in question, had initially agreed to pay the $1.7 billion over an eight-year period to state and local governments, individuals, and other parties that had filed lawsuits against the company for its contribution to the opioid crisis. These funds were intended to aid addiction victims in rebuilding their lives and to support government initiatives such as providing medication to reverse opioid overdoses.
In a regulatory filing made on Wednesday, Mallinckrodt announced its plan to file for bankruptcy for the second time in three years. According to the plan, the majority of the remaining $1.25 billion owed under the original settlement agreement would be canceled, with a final payment of $250 million to be made prior to the company's entry into its second bankruptcy.
This revised plan was devised with the support of hedge funds that would assume control of the company during its second bankruptcy. These funds had lent money to Mallinckrodt and held the power to prioritize repayment to lenders over compensating victims.
Approval from the bankruptcy court is still required for the revised plan. Siggi Olafsson, the company's CEO, expressed in a news release that Mallinckrodt was "committed to ensuring that we achieved a meaningful resolution" for the trust responsible for distributing the settlement payments to victims. Mallinckrodt did not immediately respond to requests for additional comments.
The original settlement plan, finalized last year as Mallinckrodt emerged from its first bankruptcy, shielded the company and its former executives from future liability associated with its opioid sales.
Mallinckrodt fulfilled its first and only payment of $450 million under the original settlement agreement last year. However, the company is now overdue on its second payment, which was due in June.
The revised plan was agreed upon by a master trust overseeing the distribution of payments to subordinate trusts responsible for disbursing funds to victims. While governments have begun receiving the initial funds, the money designated for individuals has yet to be distributed, but it is expected to be disbursed soon.
Joseph Steinfeld, a lawyer representing approximately half of the 40,000 individuals entitled to receive payments as part of the settlement, stated that the revised plan would decrease the amount allocated to this group by approximately $100 million.
"What was promised represented a significant amount to many of the victims who were relying on it," Mr. Steinfeld remarked. "They will now receive about 70 percent less than what was initially pledged."
Mallinckrodt is one of several manufacturers, pharmacy chains, and distributors that have reached substantial settlements with governments and other victims who accused them of contributing to the public health crisis by promoting prescription opioids and downplaying their addictive nature.
While Purdue Pharma has gained notoriety for its role in the opioid crisis, Mallinckrodt has received less recognition, despite its product Roxicodone being widely misused as a legal painkiller. Documents revealed during the company's first bankruptcy filing demonstrated how Mallinckrodt aggressively marketed its prescription painkillers as the opioid crisis took hold in communities nationwide.
Source: The New York Times