Purdue Pharma has filed a modified bankruptcy plan that increases the Sackler family's settlement contribution to up to $7 billion and restructures the controversial third-party releases to comply with a recent Supreme Court ruling. The changes, outlined in an updated disclosure statement filed on May 16, 2025, with the U.S. Bankruptcy Court for the Southern District of New York, represent a significant overhaul of the opioid manufacturer's restructuring strategy.
The revised Thirteenth Amended Joint Chapter 11 Plan comes nearly a year after the Supreme Court's 5-4 decision in Harrington v. Purdue Pharma L.P., which ruled that the Bankruptcy Code does not authorize non-consensual releases of claims held by non-debtors against other non-debtors – invalidating a central component of Purdue's previous reorganization plan.
"The Plan incorporates a number of updates and changes to the previous 12th amended plan to comply with the U.S. Supreme Court's ruling," the disclosure statement explains. "The Third-Party Releases in the Plan will only bind those creditors who elect to grant them. Those creditors will receive additional distributions in exchange for their release of direct claims against the Sackler Parties and other released parties."
Under the revised settlement terms, members of the Sackler family and related entities will pay up to $7 billion over 15 years – a substantial increase from the previously proposed $5.5 billion over 18 years. Up to $1.5 billion of that total would be due on the plan's effective date, with more than 40% of the $6.5 billion total due in the first three years.
The settlement structure now features two parallel components: the Estate Claims Settlement, which resolves claims held by Purdue's bankruptcy estate, and the Direct Claims Settlements, which address claims held directly by creditors against the Sackler family. Creditors who elect to grant third-party releases will receive distributions from both settlement components, while those who decline will only receive their share from the Estate Claims Settlement once their claims are allowed.
"For the avoidance of doubt, a creditor that does not elect to grant the Third-Party Release will be able to pursue litigation against the Shareholder Released Parties, subject to any limitations set forth in the Plan or the Confirmation Order," the disclosure statement notes.
A key innovation in the revised plan is the creation of a $200 million "Special Operating Reserve" to cover litigation costs incurred by the Sackler parties related to creditor claims that don't participate in the Direct Claims Settlement. Those costs could potentially reduce the Sackler parties' future settlement payment obligations.
Mark Dubiel, a bankruptcy attorney not involved in the case, commented, "This revised plan attempts to thread the needle between preserving the core economic terms of the settlement while making the third-party releases entirely voluntary, as required by the Supreme Court. The Special Operating Reserve mechanism is particularly notable, as it creates financial consequences for creditors who opt out of the settlement."
Under the plan, Purdue Pharma would transfer its business operations to a newly created company, Knoa Pharma LLC, which would be wholly owned by an independent 501(c)(4) charitable entity called the Foundation. The plan states that "NewCo will be a private company, will be required to operate in a responsible and sustainable manner, and will be subject to the same laws and regulations as any other U.S. pharmaceutical company."
The disclosure statement highlights progress on Purdue's public health initiatives during the bankruptcy, including FDA approval in August 2024 of Zurnai, an auto-injector for opioid overdose reversal, and the July 2023 FDA approval of RiVive, a low-cost over-the-counter naloxone nasal spray. The document notes that RiVive's market entry has "driven significant downward pressure on the cost of naloxone nasal sprays," with prices dropping from approximately $140 to as low as $24 in some markets.
The plan also provides for significant distributions to various creditor trusts: approximately $263.5 million to the Hospital Trust, $394.9 million to the Third-Party Payor Trust, $5.8 million to the Emergency Room Physician Trust, $40.5 million to the Public School Trust, and $865.8 million for personal injury victims (including $114 million for NAS victims and $751.8 million for non-NAS PI victims).
The revised plan appears to maintain support from most major creditor constituencies, though the disclosure statement notes that the document's language regarding support is "subject to ongoing review."
Purdue Pharma filed for bankruptcy protection in September 2019 amid thousands of lawsuits alleging the company's marketing of OxyContin contributed to the national opioid crisis. The case has been closely watched as one of the largest and most complex pharmaceutical bankruptcies in U.S. history.
Davis Polk & Wardwell LLP represents the Debtors in the bankruptcy proceedings, which are being overseen by Judge Sean H. Lane in the Southern District of New York under Case No. 19-23649 (SHL).
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