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The novel plan aims to determine opioid suits



The move, if successful, could end – or at least dramatically shrink – one of the largest and most complex litigation the United States has ever seen.

Drug makers and distributors face 2,500 lawsuits filed by virtually every state, as well as cities, counties, Native American tribes and others who prosecute the drug industry for helping to provide widespread opioid addiction.

Issues have become political flashpoints as communities look for ways to raise money to deal with the costs of addiction treatment including over-harvested hospitals and first responders, and to care for babies born with opioid addiction.

Five Drug Makers Fighting the Case – Endo, J&J,

Teva Pharma Industries
Ltd.

,

Allergan

PLS and

Mallinckrodt

PLS ̵

1; is looking to introduce a global solution to the lawsuit that would be implemented through OxyContin manufacturer Purdue's Chapter 11 case, according to a person familiar with the case. The mechanism will, if successful, give companies the opportunity to contribute money to a trust created through the bankruptcy in exchange for a complete release from liability.

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The idea is still in its early stages, the person said, and no dollar figures have been discussed yet. The concept will require the purchase of Purdue and its owners, the Sackler family, as well as a critical mass of state attorneys general and local municipalities suing the companies. The bankruptcy judge overseeing Purdue's case must also agree that he has jurisdiction to let the other companies into the case.

A Purdue spokesman declined to comment.

Endo works with attorneys at Skadden, Arps, Slate, Meagher & Flom, the company's long-time corporate lawyer, on the proposed agreement, according to internal documents and a person familiar with the case.

Endo, which makes the opioid painkiller Opana, does not consider filing for bankruptcy, however, the person said it faces significant debt.

Purdue, which has been the primary target for plaintiffs in the opioid lawsuit, went bankrupt in mid-September to execute a multi-billion dollar deal with about half the states and thousands of local governments to resolve much of the lawsuit on face.

Purdue has valued the settlement of $ 10 billion to $ 12 billion, which includes at least $ 3 billion in cash from Sacklers, as well as money from future OxyContin beer and the development of addiction treatment drugs.

But Purdue's proposed deal still faces a strong backlash from the mostly Democratic attorney general from about two dozen states, including New York and Massachusetts. Adding other companies to the talks can further complicate the negotiations.

Endo, Allergan and Mallinckrodt recently reached settlements valued cumulatively at $ 45 million to avoid a landmark opioid lawsuit beginning in late October that would test Ohio Cuyahoga allegations and summits. This lawsuit has been chosen to serve as a watchmaker of around 2,000 of the opioid lawsuits that were centralized in federal court in Cleveland.

The U.S. District Judge oversees the thousands of federal court opioid cases,

Dan Polster,

has pushed both sides to settle matters rather than wasting time and money in protracted litigation. However, finding a way to fully take responsibility from cases brought by local and state authorities in various courts around the country has been a challenge. Using Purdue's case in Chapter 11 can provide a way to resolve claims on an almost complete basis.

A scenario where companies use bankruptcy proceedings to resolve legal obligations, without filing for bankruptcy themselves, has some precedent. Car manufacturers sued with Takata Corp. over defective airbags, had an opportunity to contribute money and settle the cases through Takata's bankruptcy plan.

The settlement mechanism was optional on both sides, and only

Honda Motor
Co.

had signed from February 2018, when Takata's plan was confirmed. Unlike Purdue's co-accused drugmakers, car makers have been big creditors in Takata's bankruptcy since they were owed money to fund the recall of millions of cars as well as to fund the bankruptcy case.

Walmart
Inc.

in 2014 achieved liability release over hazardous plastic gasoline boxes as part of a $ 162 million settlement built into the Chapter 11 plan of Blitz USA, which made the boxes. The dealer was sued for selling Blitz boxes.

So-called third-party releases, which clear a company that is not itself liable for bankruptcy in exchange for some kind of value, are prohibited in some parts of the country. That's not the case in New York, where Purdue filed for bankruptcy, or Delaware, where Takata was granted protection.

Endo, Teva and Mallinckrodt each have significant debts in addition to the lawsuit on opioids. Reaching a global resolution can help them avoid seeking bankruptcy protection or make adjustments.

Endo had approximately $ 8.4 billion in debt and $ 1.8 billion in cash at the end of June, according to the company's latest quarterly report. Endo has more $ 1.4 billion in bonds at 6% maturing in 2023. These bonds traded at about $ 62 a dollar last week, according to MarketAxess.

Mallinckrodt at the end of June reported $ 4.82 billion in long-term debt and total liabilities of $ 7.15 billion. Teva reported $ 25.96 billion in long-term debt.

Write to Sara Randazzo at sara.randazzo@wsj.com and Patrick Fitzgerald at patrick.fitzgerald@wsj.com

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