The US Supreme Court on Thursday struck down a controversial provision in Purdue Pharma’s bankruptcy plan that would have shielded members of its former owners from lawsuits related to the opioid crisis.

Prior to Purdue’s bankruptcy declaration in 2019, it had been owned by the Sacklers, one of the countries wealthiest families. The Sacklers attempted to leverage the company’s bankrupty proceedings to shield themselves from further liability over the opioid crisis. The Supreme Court’s ruling thus marks a significant turn in ongoing efforts to hold pharmaceutical executives accountable for their roles in the devastating public health emergency that has claimed hundreds of thousands of lives since the 1990s.

In addition, the ruling reveals a narrow and contentious split. Representing a minority of four, Justice Brett Kavanaugh described the majority opinion as “wrong on the law and devastating for more than 100,000 opioid victims and their families.” Writing for the majority, Justice Neil Gorsuch wrote of the minority: “while the dissent reaches a contrary conclusion, it does so only by elevating its view of the bankruptcy code’s purported purpose over the text’s clear focus on the debtor.”

In this explainer, we examine the factual and legal underpinnings of the case, the Supreme Court’s ruling, and the case’s anticipated impact.

How did the US opioid crisis begin?

The opioid crisis originated in the late 1990s when Purdue Pharma and other drug companies marketed prescription opioids as safe and non-addictive.

A combination of aggressive marketing and inadequate regulation led doctors to prescribe drugs like Purdue’s OxyContin liberally. Court documents state that between 1996 and 2019, Purdue generated some $34 billion in revenue, mostly from the sale of OxyContin, generating enormous wealth for the Sacklers, which came to be known as among the wealthiest in the US.

By the early aughts, it was clear that Purdue’s claims had been misleading, prompting the Department of Health & Human Services to send the company a warning letter. Despite this and several subsequent legal challenges, Purdue persisted with the aggressive sales techniques that ultimately earned its owners, the Sackler family, some $12-13 billion in profits.

But surging prescription levels gave way to widespread misuse, and as regulators moved to block prescription flows, many users transitioned to heroin and later to dangerous synthetic opioids like fentanyl.

What’s the legal background of the case?

A Purdue affiliate’s 2007 admission of guilt to federal charges of having misbranded OxyContin as less addictive than other pain medications, “with the intent to defraud or mislead, a felony.” The plea opened the floodgates to civil lawsuits seeking damages for the losses caused by addiction and overdose deaths.

With Purdue facing financial ruin in 2019 over the snowballing legal claims, the Sackler family stepped down from its board, albeit not before shielding assets and establishing indemnity clauses aimed at protecting them from personal liability.

The company then filed for bankruptcy and proposed a mass settlement that offered partial repayments to victims in exchange for guarantees the Sacklers would not face additional claims or prosecution.

In October 2020, the US Justice Department announced a “global resolution of criminal and civil investigations” with Purdue, and a civil settlement with the Sackler family, broadly shielding them from future liability. Critics, including numerous opioid victims and state entities, vehemently opposed the plan, arguing it shielded the Sacklers from accountability without the victims’ consent.

Notably, the month after the plea was announced by then-President Donald Trump’s Justice Department, now-President Joe Biden was voted in to replace him. Under Biden, US prosecutors have challenged the legality of the settlement. Years of legal battles led to a divided Second Circuit Court of Appeals in 2023 upholding Purdue’s reorganization plan, allowing it to move forward.

US prosecutors appealed to the Supreme Court, seeking clarification on whether the country’s bankruptcy code authorizes non-consensual third-party releases of liabilities and related injunctions.

How did the Supreme Court rule?

The Supreme Court sided with the government, holding:

Confining ourselves to the question presented, we hold only that the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a non-debtor without the consent of affected claimants

But the split was narrow — 5-4 — and contentious.

Key to the decision was the fact that while Purdue declared bankruptcy, the Sackler family did not. Instead, as part of the reorganization plan, the Sackler family offered to contribute about $4.3 billion to the bankruptcy estate in exchange for protection from future opioid-related claims.

Justice Neil Gorsuch, writing for the 5-4 majority, emphasized that the bankruptcy code generally reserves discharge for debtors who place substantially all their assets on the table. The Court found that the Sacklers were seeking to “pay less than the code ordinarily requires and receive more than it normally permits.” Gorsuch focused on the text — as opposed to the policy goals and implications — of the relevant laws, stating: “No one has directed us to a statute or case suggesting American courts in the past enjoyed the power in bankruptcy to discharge claims brought by non-debtors against other non-debtors, all without the consent of those affected.”

In his dissenting opinion, Justice Brett Kavanaugh described the majority opinion as “wrong on the law and devastating for more than 100,000 opioid victims and their families.” The purpose of the bankruptcy system, he argued, is to enable bankruptcy courts to apply equitable relief and ensure the debtors who filed fastest don’t reap all the benefits of a defendant’s liability.

Kavanaugh went on to describe the bankruptcy plan, as approved by the Second Circuit, as a “shining example of the bankruptcy system at work,” arguing:

In this mass-tort bankruptcy case, the Bankruptcy Court exercised [its] discretion appropriately — indeed, admirably. It approved a bankruptcy reorganization plan for Purdue Pharma that built up the estate to approximately $7 billion by securing a $5.5 to $6 billion settlement payment from the Sacklers, who were officers and directors of Purdue. The plan then guaranteed substantial and equitable compensation to Purdue’s many victims and creditors, including more than 100,000 individual opioid victims. The plan also provided significant funding for thousands of state and local governments to prevent and treat opioid addiction

Gorsuch wrote of the minority: “while the dissent reaches a contrary conclusion, it does so only by elevating its view of the bankruptcy code’s purported purpose over the text’s clear focus on the debtor.”

The Court was not split along partisan lines in this case. Joining Gorsuch for the majority were Justices Clarence Thomas, Samuel Alito, Amy Coney Barrett, and Ketanji Brown Jackson. With Kavanaugh for the minority were Justices John Roberts, Sonia Sotomayor, and Elena Kagan.

The ruling’s anticipated impact

Given that the Sacklers had sought protection through their company’s bankruptcy proceedings, this ruling marks a significant turn in ongoing efforts to hold pharmaceutical executives accountable for their alleged role in a public health crisis that has claimed hundreds of thousands of American lives over the past two decades.

With regard to the opioid crisis, despite increased awareness and various intervention efforts, the epidemic continues to evolve, presenting ongoing challenges for public health officials, lawmakers, and healthcare providers.