The three largest U.S. drug distributors and a major generic-drug manufacturer have agreed to pay $260 million to settle the first federal trial over the companies’ role in fueling the U.S. opioid epidemic.
Drug distributors McKesson Corp., Cardinal Health Inc. and AmerisourceBergen Corp., plus drugmaker Teva Pharmaceutical Industries Ltd., entered into the agreement with two Ohio counties just before the start of the trial Monday in Cleveland.
The agreement will buy more time for a wider industry settlement in other opioid cases. McKesson, Cardinal and AmerisourceBergen, which together control 90% of the U.S. drug-distribution market, have proposed an $18 billion settlement for more than 2,000 other lawsuits filed by states, counties and cities, according to people familiar with those negotiations. No deal has been reached on that offer.
The settlement was announced in court on Monday morning. Walgreens Boots Alliance Inc., the last remaining defendant, hasn’t yet reached a deal and will face a trial at a later point with other companies. A separate trial, involving claims by West Virginia municipalities, is scheduled for next year.
“The allegations against Walgreens are very different, and Walgreens is completely unlike the wholesalers involved in the national opioid litigation,” company spokesman 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 fueled the national opioid crisis.”
Joe Rice, one of the lead lawyers for the plaintiffs, said after court the distributors will pay $215 million and Teva will contribute $20 million in cash and $25 million of Suboxone, an anti-addiction treatment.
“This incremental step will change a small corner of the globe ravaged by opioids,” Mark Lanier, who was slated to be the lead trial lawyer, said after court. “We need to make this a step ladder to a larger resolution.”
Shares of the companies fell in New York. McKesson dropped 4.0% at 11:09 a.m., AmerisourceBergen was down 4.0%, Cardinal lost 2.9% and Teva declined 2.8%.
“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 & Co analyst David Amsellem said in an interview. “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.”
Representatives for McKesson, AmerisourceBergen, Cardinal and Teva couldn’t immediately be reached for comment.
The deal involving Summit and Cuyahoga counties was reached at midnight after weekend-long talks in Cleveland. Other defendants in the case had already settled.
On Monday, a small distributor, Henry Schein Inc., said it will pay $250,000 of Summit County’s expenses and will make a $1 million donation for a pain-management education foundation.
Last week, drugmaker Johnson & Johnson agreed to settle the Ohio counties’ case for $20.4 million. J&J has separately offered $4 billion to settle all the opioid lawsuits against it, though no deal has been reached.
The other defendants settled last month. Generic-opioid manufacturer Mallinckrodt Plc settled for $30 million. A unit of Endo International Plc offered to pay $10 million and donate $1 million worth of drugs to avoid the trial, and Allergan Plc agreed to pay $5 million.
More than 400,000 Americans have died of opioid overdoses over two decades as U.S. addiction rates surged, and local communities have sued to recover expenses on more drug treatment and police services.
Drugmakers and distributors have been accused in thousands of lawsuits of turning a blind eye to red flags about unusually large opioid shipments and employing lax compliance standards to rake in billions in profits. The lawsuits are being overseen by U.S. District Judge Dan Polster.
The companies have been in talks with states, cities and counties in hopes of reaching an overarching agreement to resolve all the litigation.
For the companies, “there’s a lot to loose if you’re not a part of that ultimate settlement agreement,” Morningstar analyst Soo Romanoff said.
The case is In Re National Prescription Opioid Litigation, 17-md-2804, U.S. District Court, Northern District of Ohio (Cleveland).
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