UPDATED JUNE 6, 2020, TO REFLECT EXTENDED DEADLINE
A federal court in New York is overseeing bankruptcy claims related to the prescription opioid crisis. Purdue Pharmaceutical, the maker and marketer of Oxycontin and other prescription opioids, filed for bankruptcy protection in September 2019 and a July 30, 2020, deadline looms for parties to file a claim with the bankruptcy court.
With $10 billion at stake, should an employer file a claim to try and recoup its health and disability costs related to its employees and family members who were victims of the opioid crisis?
Lockton comment: Many employers are well versed with the class-action lawsuits related to prescription drug pricing. Typically, these lawsuits allow an employer to opt in to the settlement if they can provide an adequate proof of a claim. There is no class-action settlement here, so the process in filing a claim is different. Interested parties, including employers with self-funded plans, need to file a claim in bankruptcy as an unsecured creditor of Purdue Pharmaceuticals.
The bankruptcy court allows for four types of claims:
- Government opioid: Claims of state and local governments and Native American tribes related to their costs for treating opioid addiction, including their costs under state Medicaid programs and the Indian Health Service.
- Personal injury: Claims of individuals, or next of kin, who were injured by opioid use. This would include, for example, people who were treated for opioid addiction or the surviving spouse or children of an individual who died from opioid addiction.
- Non-opioid: Claims wholly unrelated to opioids. This would include claims for vendors owed money by Purdue on account of the bankruptcy, such as the paper supplier of Purdue who has an unpaid bill at the time of the bankruptcy filing.
- General opioid: These would include opioid claims unrelated to personal injury and would appear to include claims by employers for opioid prescriptions paid under its health plan, and perhaps disability and other claims related to employee or dependent opioid addiction.
This begs the question as to how much money will be available to employers. The tobacco settlements of the 1990s saw state and local governments receive large settlements, while other claimants received substantially less. Employers are also familiar with other class-action lawsuits that seemed to provide large recoveries for their plans but resulted in relatively trivial recoveries for the plaintiffs. Although $10 billion seems like a huge pot of money for opioid claims, employers will be competing for settlement dollars with governmental entities and individuals who were harmed by opioid addiction.
Employers with self-funded plans may want to ask their third-party administrator (TPA) or pharmacy benefit manager (PBM) if they intend to file claims on behalf of their self-funded clients. Based on an informal survey, the answer appears to be “no.” Consequently, employers will need to decide for themselves whether to file a claim. While counsel is not mandated to pursue a claim in bankruptcy, an employer would be well served to discuss this issue with their lawyer or legal team and make a reasoned decision about whether to pursue a recovery.
Lockton comment: It remains to be seen how large a recovery a typical employer might receive. However, an employer should not dismiss the potential claim out of hand. Their fiduciary obligation to the plan requires that they consider the potential and pursue a recovery if they believe there is a meaningful amount to recover. Some plans may come to the conclusion that the out-of-pocket costs and administrative hassles of filing a claim outweigh the potential recovery, but they will want to at least consider the option.