Purdue Pharma seeks captive option in bankruptcy motion

US drug firm Purdue Pharma has been granted an interim court order that will allow it to continue vital insurance cover and set up new captive arrangements as part of its bankruptcy protection, which was approved at the weekend in direct response to thousands of opioid lawsuits in the US. Listed among a series of Chapter 11 motions to a US bankruptcy court, Purdue Pharma said the market for product and general liability insurance is “challenging”. It added that it is “in the process of evaluating captive options” or “creating a segregated account within a licenced insurer”, to meet requirements for $10m in product liability insurance and up to $27m for general liability. Purdue Pharma, which makes opioid drug OxyContin and is owned by the wealthy Sackler family, listed 22 insurance policies in force totalling premiums worth $3.2m. Half of the policies are due to expire in October. Brokered by Marsh, the carriers include Liberty Mutual Fire for general liability cover, Liberty Insurance, Old Republic, ACE, The Insurance Company of the State of Pennsylvania, Factory Mutual, FM Global Transit and Zurich, as well as a separate account in Bermudan rent-a-captive Isosceles Insurance. The interim order grants Purdue Pharma the authority to continue the insurance policies with the named insurers “without interruption” and pay any fees owed. It also authorises the firm to renew polices or seek new insurance cover and “create, capitalise and obtain insurance from the product and general liability captive” option proposed by the firm. Purdue Pharma sought bankruptcy protection after receiving more than 2,500 state and federal lawsuits linked to its prescription painkiller OxyContin. The cases allege the drug is addictive for users and helped to create an opioid epidemic in the US. Together with the filing, Purdue Pharma proposed a $10bn plan to settle the legal cases, which will see the firm place its assets in trust via a new company headed by trustees approved by the bankruptcy court. The sum includes $3bn from the Sackler family, “with the potential for substantial further monetary contributions from the sales of their ex-US pharmaceutical businesses”, the court documents said. About half of the US states that have filed lawsuits have backed the proposed settlement. But the company is facing pressure from opposing states – New York and Massachusetts among them – to be heard in court. In a statement, Purdue Pharma said the proposed settlement “avoids wasting hundreds of millions of dollars and years on protracted litigation, and instead will provide billions of dollars and critical resources to communities across the country trying to cope with the opioid crisis”. In August, Johnson & Johnson was ordered to pay the state of Oklahoma $572m in a landmark US opioid case, after the court found the firm played down the dangers and oversold the benefits of opioids. Purdue Pharma was a defendant in the Oklahoma case but settled in May for $270m, along with fellow defendant Teva Pharmaceuticals.

Purdue Pharma seeks captive option in bankruptcy motion

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