November 21, 2019 / 8:28 PM / 15 days ago

Bankrupt Insys reaches deal to divvy cash among opioid victims

WILMINGTON, Del (Reuters) - Drugmaker Insys Therapeutics Inc outlined a deal on Thursday to divide its dwindling cash among governments, insurers, hospitals and individuals who accused the company of fueling the U.S. opioid crisis.

The company was largely adopting a plan it had filed in September, which now had the support of numerous groups that initially opposed it, said Brenda Funk, who represents the company, at Thursday’s hearing before a U.S. bankruptcy judge Kevin Gross in Delaware.

The agreement addresses a problem that looms over the thousands of U.S. opioid lawsuits against some of the biggest drug companies - how to carve up the tens of billions of dollars from legal settlements among the plaintiffs.

The Insys agreement established the company owed various parties a combined $1 billion, well below the billions of dollars that could have been claimed. In addition, the Department of Justice would have a claim of $243 million, along with undetermined claims for forfeiture and restitution.

“I think this compromise is sufficiently bad for everyone, but everyone should go along with it,” said Andrew Troop, who represents New York.

Most will get pennies on the dollar. Chandler, Arizona-based Insys has only $39 million in cash, according to filings.

Insys also has estimated it could receive $60 million from an agreement to sell its fentanyl spray Subsys, $56 million from insurance and funds from lawsuits.

John Kapoor, the founder and former billionaire, would seem a likely legal target. He was found guilty of conspiracy to bribe doctors to prescribe Subsys and misleading insurers.

However, federal prosecutors have said they plan to seek $242 million in restitution from Kapoor. His lawyers say that demand exceeds his personal wealth. Kapoor also faces up to 20 years in prison.

Insys filed for bankruptcy in June just days after the company struck a $225 million settlement with the Justice Department that included an agreement by a subsidiary to plead guilty to fraud.

Insys, like numerous makers or distributors of opioids, also faced lawsuits by state attorneys general, local governments, health insurers, hospitals, guardians for children harmed by exposure to opioids in the womb and classes of individuals.

The opioid crisis has contributed to more than 400,000 U.S. deaths since 1997.

In September, OxyContin maker Purdue Pharma LP also filed for bankruptcy and has proposed to settle its lawsuits for what it says is $10 billion. The judge overseeing that bankruptcy has warned the parties about fighting over the proceeds.

Reporting by Tom Hals in Wilmington, Delaware; Editing by Bill Berkrot

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