Burned in tobacco deal, cities in opioid fight want share of payouts

U.S. cities and counties are increasingly at odds with their own state governments over how to divvy up $641.5 million that consulting firm McKinsey & Co. has offered to settle its liability for work with the opioid industry.

In the past two months, McKinsey reached final agreements with all 50 states to resolve lawsuits claiming it helped boost sales of the addictive drugs. But since then, more than 20 cities, counties and Native American tribes have sued the consultant, hoping for their own payouts. Local governments in New York even sought to block the state’s pact with McKinsey because it would harm their separate suits against the firm.

McKinsey says almost all the states agreed that the deal they signed covers any other claims, setting up a legal fight between the company and local governments pressing ahead with their cases. At the heart of the dispute is who decides the fate of money intended to combat addiction and crime linked to the U.S. opioid crisis that’s killed hundreds of thousands of people.

“There’s going to be a lot of litigation,” said Alexandra Lahav, a University of Connecticut law professor who specializes in mass tort cases. “Every state takes its own view of the powers an attorney general has to resolve claims on behalf of local governments within the state’s borders.”

The outcome could have wider implications. Thousands of cities and counties are pursuing opioid lawsuits against drug makers like Johnson & Johnson and distributors like McKesson Corp. While lawyers for local governments are participating in settlement discussions with those defendants, the widening rift between states and municipalities could complicate future talks with companies that remain holdouts — including pharmacy owners such as Walmart Inc., CVS Health Corp. and Rite Aid Corp.

Local officials like Thomas Haine, the state prosecutor in Madison County, Ill., want to avoid opioid litigation becoming a repeat of the 1998 settlement that ended smoking-related litigation, where much of the $246 billion that tobacco makers paid ended up in state general funds. His county of 263,000 people outside St. Louis sued McKinsey in February, just days before Illinois agreed to accept $19.8 million from the firm.

That amount is “a pittance when you quantify the damages caused by their actions,” Haine said in an interview. “I felt we owed it to the taxpayers of Madison County, who have shouldered a heavy burden in dealing with the opioid crisis, to seek recovery from every party potentially at fault.”

A growing number of local officials are also pursuing separate claims against McKinsey, including King County, Wash.; Montgomery County, Ohio; Pembroke Pines, Fla.; Green County, Ky.; and Mingo County, W.Va., — one of the states hit hardest by the opioid epidemic.