McKesson Opioid Deal in West Virginia May Spur More Accords

By Jef Feeley | May 3, 2019

McKesson Corp.’s settlement of an opioid lawsuit with West Virginia — the state with the highest U.S. rate of drug-overdose deaths — may encourage other states to seek quick cash to cope with the rising societal costs of addiction.

West Virginia agreed to accept $37 million from McKesson to settle claims of improper distribution of the painkillers to pharmacies, though the company admitted no wrongdoing, Attorney General Patrick Morrisey said Thursday. The money will help defray some of the $8.8 billion in costs to the state’s economy associated with the opioid crisis.

States including West Virginia, Ohio and Kentucky have sued drug makers and distributors for allegedly understating the risks of prescription opioids, overstating their benefits, and failing to halt suspiciously large shipments to pharmacies. The West Virginia accord is the first by a distributor, which may set an industry-favoring benchmark for other claims.

“There’s no question the damage done by McKesson’s actions is considerably more than the $37 million it paid,” said Richard Ausness, a University of Kentucky law professor who has been following opioid lawsuits nationwide. “It may be Mr. Morrisey is looking for money now, rather than waiting to take a share of a larger recovery five years from now.”

Kristin Hunter Chasen, a spokeswoman for San Francisco-based McKesson, said the deal calls for $14.5 million paid to West Virginia this year, with $4.5 million installments over the next five years. The funds will be used to “combat the opioid epidemic, including rehabilitation, job training and mental health,” the company said in a statement.

News of the settlement helped boost McKesson shares $2.59, or 2.6 percent, to $121.42 as of 1:32 p.m., heading for their biggest gain in more than a week. McKesson generated about $208 billion in sales last year, making it the the seventh-largest publicly traded U.S. company, according to data compiled by Bloomberg.

With more than 120 Americans dying every day from opioid-related overdoses, communities across the country are seeking compensation from opioid manufacturers including Purdue Pharma LP and Johnson & Johnson, along with distributors such as McKesson and Cardinal Health Inc. Prosecutors have also charged some executives with crimes, including Insys Therapeutics Inc. founder John Kapoor, who a jury found guilty of racketeering on Thursday.

The McKesson settlement comes more than a month after Purdue agreed to pay $270 million to resolve the Oklahoma attorney general’s lawsuit alleging the drug maker of fueling the opioid crisis in the state, which earmarked the money for research and treatment. Oklahoma is pushing ahead with a May trial against Johnson & Johnson and Teva Pharmaceutical Industries Ltd., which are accused of fueling a wave of overdoses tied to opioid painkillers.

Litigation Risks in Opioid Suits

According to the Centers for Disease Control and Prevention, the rate of opioid-overdose deaths in West Virginia was 57.8 per 100,000 people, more than any other state, followed by Ohio, Pennsylvania, the District of Columbia and Kentucky.

Cities, counties and states have filed more than 1,600 lawsuits. Many want to consolidate their claims to force one big settlement — the same strategy that led to a $246 billion deal with Big Tobacco in 1998. Drug makers may have to spend as much as $50 billion to resolve all the opioid suits, according to Holly Froum, a litigation analyst at Bloomberg Intelligence.

Critics were quick to disparage the McKesson settlement, saying it didn’t come close to holding the company accountable for the flood of pills in the state. McKesson was accused of shipping more than 100 million prescription opioid painkillers to West Virginia between 2007 and 2012. The company generated more than $208 billion in revenue for fiscal 2018.

Some towns were overwhelmed by painkillers, according to data released by the U.S. House Energy and Commerce committee. Between 2005 and 2006, the pharmacy in Kermit, West Virginia, population 400, received nearly 5 million doses from McKesson. Between 2006 and 2014, it shipped more than 5.8 million opioid painkillers to a pharmacy in Mount Gay, population 1,800. The company provided another 2.3 million doses to a pharmacy three miles away.

Breaking Away

U.S. Senator Joe Manchin, who successfully foiled Morrisey’s bid to unseat him in November, said in a statement Thursday that the state attorney general, a former drug-company lobbyist, had signed a “sweetheart deal” for McKesson that deprives West Virginia of “billions of dollars in damages that our state and our people have endured.” He cited the $270 million deal signed by Oklahoma with Purdue.

Morrisey, in his statement, said he had recused himself from the McKesson talks.

In cutting a separate deal with West Virginia, McKesson is the first company to break away from opioid settlement talks sponsored by a group of U.S. attorneys general. Endo International Plc, a Dublin-based opioid maker, also is seeking its own global accord over its liability.

The West Virginia accord also is separate from settlement talks sponsored by a federal judge in Cleveland who is overseeing more than 1,600 suits filed by cities and counties. U.S. District Judge Dan Polster unsuccessfully pushed the companies to settle the cases and has set the first test-trials in the litigation for October.

“We believe this settlement is a recognition by McKesson of the devastation caused by its criminal conduct and is a measured first step toward accountability,” opioid-plaintiffs lawyers Joe Rice, Paul Farrell and Paul Hanly said in a statement. The trio is overseeing cities’ and counties’ cases against opioid makers and distributors that have been consolidated in federal court in Cleveland.

Morrisey acknowledged in his statement that the settlement does not “resolve any allegations brought by counties, municipalities or other political subdivisions within West Virginia.”

More Cases

That prompts questions about what McKesson is getting out of the deal, said Elizabeth Burch, a University of Georgia law professor who follows opioid litigation. “One would have expected McKesson to try to negotiate a settlement that covered the larger group of cases in that state,” she said.

The McKesson deal isn’t Morrisey’s first resolution on the cheap of opioid claims against drug distributors, Ausness noted. Last year, the attorney general settled a separate suit against AmerisourceBergen Corp., Cardinal Health and McKesson, which were all accused of supplying “pill mills” across the state. In that case, McKesson paid $35 million, Cardinal Health $20 million and AmerisourceBergen $16 million.

That accord drew criticism from union officials who said Morrisey was resolving claims for “pennies on the dollar” because of his ties to Big Pharma. Public records show Morrisey’s wife, Denise Henry Morrisey, also has lobbied Congress on opioid-related issues on behalf of Cardinal Health.

The consolidated case is In Re: National Prescription Opiate Litigation, 17-cv-2804, U.S. District Court, Northern District of Ohio (Cleveland).

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