Municipalities fear they will lose out in opioid payment
• Local government lawyers reject $50bn in settlement offers by drugmakers and distributors to handle crisis
About $50bn in settlement offers by drugmakers and distributors have sparked a fight between state attorneysgeneral and thousands of local governments over how much the pharmaceutical industry should pay for its role in creating the US opioid epidemic.
Drugmaker Teva said on Monday it offered $23bn in treatment medications and $250m towards a settlement of more than 2,700 lawsuits by states and municipalities.
That follows a proposal by Johnson & Johnson (J&J) for $4bn and another for $18bn by opioid distributors McKesson, Cardinal Health and AmerisourceBergen, along with $2.5bn in distribution services.
While many attorneysgeneral are backing the offers, lawyers for local governments have rejected them. Municipalities fear they would not get enough money to address their opioid problems, citing the experience of the 1998 Big Tobacco settlement, in which some states put the cash into their general funds.
“It’s not the best offer,” said Mark Lanier, who has been tapped by the cities and counties as their lead litigator.
“We should not let politics influence our good judgment on what is the best way to help the folks who are hurting.”
The offer by Israel-based Teva helped to revive the company’s slumping shares. The stock rose as much as 14% in Tel Aviv trading, tracking its gain in US trading on Monday. Teva’s €1.5bn of bonds due October 2024 rose 3c on the euro to 83.5c, the highest in four months, according to data compiled by Bloomberg.
“We’re in the early to middle innings of a lengthy process, and I just don’t see this as bringing us much closer to a global settlement,” Piper Jaffray analyst David Amsellem said.
“The government wants to extract a pound of flesh. States and municipalities want money in their coffers as soon as possible to help deal with the epidemic. To be frank, I think there are competing political and pragmatic considerations.”
The companies “could have paid a premium to dodge an adverse verdict”, says analyst Holly Froum.
“The $50bn reportedly offered for a global settlement, if in cash, could be in the ballpark for the pact’s total.
“A potential deal by opioid makers Purdue, J&J, Endo, Teva, Mallinckrodt and peers may cost about $25bn-$30bn,” she said. And distributors could be closing in on a global deal that may be $20bn-$30bn.
Teva publicly disclosed its offer hours after the company, along with McKesson, Cardinal Health and AmerisourceBergen, agreed to pay a combined $260m to resolve lawsuits over opioids, according to Joe Rice, one of the lead lawyers for the plaintiffs. The distributors will pay $215m, while Teva will contribute $20m in cash and $25m of anti-addiction and overdose treatments generic suboxone, buprenorphine and naloxone over three years.
The agreement, just before the start of the first federal opioid trial, could become a benchmark for a wider industry settlement.
“While the companies strongly dispute the allegations made by the two counties, they believe settling the bellwether trial is an important stepping stone to achieving a global resolution and delivering meaningful relief,” said AmerisourceBergen, McKesson and Cardinal, which together control 90% of the US drugdistribution market.
Drugmakers are accused of pushing opioid prescriptions on doctors across the US and downplaying the risks of addiction, while distributors and pharmacies are accused of turning a blind eye to suspicious orders and failing to meet government-compliance requirements covering the painkillers.
More than 400,000 Americans have died of opioid overdoses over two decades as US addiction rates surged, and local communities have sued to recover expenses on more drug treatment and police services.
Elizabeth Burch, a University of Georgia law school professor who teaches about mass torts, said municipalities will want some control over settlement funds as they seek the most money possible. “The cities and counties have no assurance about what they’ll get once the funds trickle down to them,” Burch said. “The other issue is how will the legal fees the cities’ and counties’ lawyers get taken care of.”
Attorneys-general argue that each state’s top lawyer should be responsible for the litigation, not municipalities and their attorneys.
MORE NEGOTIATIONS
“We believe this is going to bring a national solution,” Josh Shapiro, Pennsylvania’s attorney-general, said on a conference call on Monday with reporters.
Once a deal is struck, 15% of the money will go to the state treasuries, 15% to municipal governments and 70% will be used for treatment and support services, he said.
Plaintiffs’ attorneys said there are still more negotiations needed before a global settlement can be reached.
Paul Hanly, who is representing US cities and counties in their lawsuits, said $18bn from the distributors over 18 years “simply won’t cut it”.
Walgreens Boots Alliance, the last remaining defendant in the Ohio counties’ case, has not yet reached a deal and is due to face a trial at a later date. A separate trial, involving claims by West Virginia municipalities, is scheduled for next year.
Walgreens, Walmart Stores and CVS Health face claims they failed to properly handle suspicious orders for the addictive painkillers in another 2020 trial.
‘PILL MILLS’
“The allegations against Walgreens are very different,” company spokesperson Phil Caruso said. “We never manufactured, marketed or wholesaled prescription opioid medications. We never prescribed any opioid medication, and never sold opioid medications to pain clinics, internet pharmacies or the ‘pill mills’ that fuelled the national opioid crisis.”
US district judge Dan Polster, overseeing the cities and counties cases consolidated in federal court in Cleveland, said he had seen the Ohio counties’ plan for using the settlement proceeds.
Polster said he is confident the municipalities will use the funds “in an appropriate way” to address opioid addictions and overdoses.
The Summit and Cuyahoga deal was reached around midnight after weekend-long talks in Cleveland. Other defendants in the case had already settled.
Earlier on Monday, a small distributor, Henry Schein, said it will pay $250,000 of Summit County’s expenses and will make a $1m donation for a pain-management education foundation.
J&J agreed to resolve the Ohio counties’ case for $20.4m. Generic opioid manufacturer Mallinckrodt settled for $30m. A unit of Endo International offered to pay $10m and donate $1m worth of drugs to avoid the trial, and Allergan agreed to pay $5m.
WE’RE IN THE EARLY TO MIDDLE INNINGS OF A LENGTHY PROCESS; I DON’T SEE THIS AS BRINGING US MUCH CLOSER TO A GLOBAL SETTLEMENT