Speculation is growing about the role letters of credit (L/Cs) may play in an anticipated slew of lawsuits anticipated as some of the US' largest pharmaceutical firms and their owners face massive fines for their part in the country's devastating opioid epidemic.

Thousands of lawsuits are anticipated, and companies likely to face legal action in the coming months and years include Johnson and Johnson, Purdue Pharma and Insys, the latter of which has decided to file for bankruptcy and seek an injunction on lawsuits.

Oklahoma settlement

Purdue Pharma settled a case in Oklahoma in March that includes L/Cs issued by a third party that guarantees that even if the company's owners, the Mortimer and Raymond Sackler families fail to make payments agreed under the settlement then the L/Cs can be drawn upon.

The settlement requires the establishment of a foundation to fund the National Centre for Addiction Studies and Treatment at Ohio State University's Centre for Wellness and Recovery.

The centre will be dedicated to addiction studies, treatment and education, including education to eliminate the stigma associated with addiction and treatment, and will receive funds from the foundation.

Sackler donations

The foundation will be funded by US$75 million provided by the Mortimer and Raymond Sackler's families, either directly or through their business entities but not through Purdue itself.

The Sacklers must make five annual payments of US$15 million over the next five years.

L/C guarantees

The settlement also required these payments be guaranteed by five L/Cs issued by the Bank of Oklahoma which the foundation will be entitled to draw if the terms of the settlement, including non-payment, are not met.

With several US states suing pharmaceutical firms alleging deceptive marketing practices, similar settlements may well be in prospect.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.