Can Purdue Pharma become a Social Enterprise?
Purdue Pharma is undergoing Chapter 11 Bankruptcy restructuring with a proposed plan that it will emerge as a Public Benefit Corporation.
Publications such as the Guardian have posed the interesting question as to whether a Public Benefit Company can have its primary business as the mass production and distribution of opioids given the scale of the opioid epidemic in the US and elsewhere.
Several Democratic Senators have also criticized the plan, which they suggest was proposed by the billionaire Sackler family (who are the primary shareholders of Purdue) and will only “function as a rebranding opportunity for the company and the family’s image”.
I thought it was an interesting question worth exploring in more detail since it allows us to consider the unique questions that Social Enterprises pose. More importantly, it also asks a fundamental question as to whether a benefit corporation must have an ethical business as its primary method of generating revenue, even if it plans to redirect some of this revenue towards a social cause.
As is often the case in a new legal area such as Social Enterprises, I believe the answer depends largely on the specific set of facts (I know that this is a very “lawyer” answer – but what can I do).
I’d suggest that it might not be the best endeavor to start a social business where its primary revenue generation plan is to distribute a harmful substance. But it’s much less clear when the company is already in existence and it already employees hundreds of people. Furthermore, it’s difficult to argue that substances like OxyContin are solely harmful.
The fact that a company already exists is not necessarily an argument that it should continue – but it’s certainly a factor that should be taken into account. Additionally, it’s fair to say that drugs such as OxyContin do have some positive effects for pain management .
The key problem is abusive practices undertaken by certain companies which lead to opioid dependency, and the consequent social harm.
Given this, it actually could be beneficial to have a social benefit company as a market participant because this would give the public confidence that there is at least one participant that is providing a vital service but will hopefully not become entrenched in the negative practices which contributed to the wave of opioid dependency we’ve experienced in the recent past.
Furthermore, in keeping with its social purpose, it could redirect a large portion of the proceeds of its sales to research and development on: (i) alternatives to opioids for pain management; and (ii) methods for reducing opioid dependency (individually and on a society-wide scale).
After having given it some thought, I wouldn’t say that a drug distributor must be precluded from becoming a social benefit company and I believe that there are actually hopeful opportunities for a company like Purdue to emerge from Chapter 11 as a positive social force under the right circumstances.
Disclaimer. The information in this article is provided for informational purposes only. You should consult with an attorney before you rely on this information. This information should not be seen as legal advice and does not create an attorney-client relationship. This article is meant to be a general discussion and may not include all relevant information regarding the issues covered.