CLEVELAND — Settlement talks between Purdue Pharma and the states and cities suing the opioid maker stalled last week after state officials asked for $4.5 billion from the owners of Purdue, the Sackler family, instead of a previously discussed guarantee of $3 billion, said two sources familiar with the talks.

The company and the family rejected the request from the state attorneys general, said the sources.

Purdue, the Sackler family, plaintiffs attorneys for cities and counties and a group of state attorneys general had been trying for months to find a way to avoid trial and determine Purdue's responsibility for the opioid crisis, which has cost 400,000 American lives over the past two decades. Purdue is manufacturer of OxyContin.

As previously reported by NBC News, in late August Purdue Pharma and the Sackler family had crafted a proposed deal that was valued by their lawyers between $10 billion and $12 billion. That deal would have permitted Purdue, which is a defendant in more than 2,000 lawsuits by states, cities and counties, to declare bankruptcy and then allow the profits from its business to go to the plaintiffs.

Now, because of the impasse Purdue is increasingly expected to file for "freefall" bankruptcy. The attorneys general alerted their counterparts across the nation to the likelihood of a bankruptcy filing in an email on Saturday.

Bottles of prescription painkiller OxyContin pills made by Purdue Pharma LP. George Frey / Reuters file

The breakdown also puts the first federal trial over the opioid epidemic on track to begin on Oct. 21 and sets the stage for a complex legal drama involving nearly every state and hundreds of local governments.

The email from the attorneys general of Tennessee and North Carolina, obtained by The Associated Press, said that Purdue and the Sackler family had rejected two offers from the states over how payments under any settlement would be handled and that the family declined to offer counterproposals.

"As a result, the negotiations are at an impasse, and we expect Purdue to file for bankruptcy protection imminently," Tennessee Attorney General Herbert Slatery and North Carolina Attorney General Josh Stein wrote in their message, which was sent to update attorneys general throughout the country on the status of the talks.

Purdue spokeswoman Josephine Martin said in a statement today that "negotiations continue" and Purdue Pharma remains "dedicated to a resolution that genuinely advances the public interest."

A failure in negotiations sets up one of the most tangled bankruptcy cases in the nation's history. It would leave virtually every state and some 2,000 local governments that have sued Purdue to battle it out in bankruptcy court for the company's remaining assets. Purdue threatened to file for bankruptcy earlier this year and was holding off while negotiations continued.

It's not entirely clear what a breakdown in settlement talks with Purdue means for the Sackler family, which is being sued separately by at least 17 states.

Those lawsuits are likely to continue but face a significant hurdle because it's believed the family — major donors to museums and other cultural institutions around the world — has transferred most of its multibillion-dollar fortune overseas.

Pennsylvania Attorney General Josh Shapiro, who was one of the four state attorneys general negotiating with Purdue and the Sacklers, said Saturday he intends to sue the Sackler family, as other states have.

"I think they are a group of sanctimonious billionaires who lied and cheated so they could make a handsome profit," he said. "I truly believe that they have blood on their hands."

In March, Purdue and members of the Sackler family reached a $270 million settlement with Oklahoma to avoid a trial on the toll of opioids there. The Sacklers did not respond to a request for comment.

Under one earlier proposed settlement, Purdue would enter a structured bankruptcy that could be worth $10 billion to $12 billion over time. Included in the total would be $3 billion from the Sackler family, which would give up its control of Purdue and possibly contribute up to $1.5 billion more by selling another company it owns, Cambridge, England-based Mundipharma.

Shapiro said the attorneys general believed what Purdue and the Sacklers were offering would not have been worth the reported $10 billion to $12 billion.

In their latest offers, the states also sought more assurances that the $4.5 billion from the Sacklers would actually be paid, according to the message circulated Saturday: "The Sacklers refused to budge."

In their message, Tennessee's Slatery and North Carolina's Stein said the states have already begun preparations for handling bankruptcy proceedings.

"Like you, we plan to continue our work to ensure that the Sacklers, Purdue and other drug companies pay for drug addiction treatment and other remedies to help clean up the mess we allege they created," they wrote.

The nearly 2,000 lawsuits filed by city and county governments — as well as unions, hospitals, Native American tribes and lawyers representing babies who were born in opioid withdrawal — have been consolidated under a single federal judge in Cleveland.

Most of those lawsuits also name other opioid makers, distributors and pharmacies in addition to Purdue, some of which have been pursuing their own settlements.

Purdue also faces hundreds of other lawsuits filed in state courts and had sought a wide-ranging deal to settle all cases against it.

The company has been the most popular target of state and local governments because of OxyContin, the prescription painkiller many of the government claims point to as the drug that gave rise to the opioid epidemic. The lawsuits claim the company aggressively sold OxyContin and marketed it as a drug with a low risk of addiction despite knowing that wasn't true.

The impasse in the talks comes about six weeks before the scheduled start of the first federal trial under the Cleveland litigation, overseen by U.S. District Judge Dan Polster. That trial will hear claims about the toll the opioid epidemic has taken on two Ohio counties, Cuyahoga and Summit.

A bankruptcy filing by Purdue would most certainly remove the company from that trial.

The bankruptcy judge would have wide discretion on how to proceed. That could include allowing the claims against other drugmakers, distributors and pharmacies to move ahead while Purdue's cases are handled separately. Three other manufacturers have already settled with the two Ohio counties to avoid the initial trial.