About $50 billion in settlement offers by drugmakers and distributors have sparked a fight between state attorneys general and thousands of local governments over how much the pharmaceutical industry should pay for its role in creating the U.S. opioid epidemic.
Drugmaker Teva Pharmaceutical Industries Ltd. said Monday it offered $23 billion in treatment medications and $250 million toward a settlement of more than 2,700 lawsuits by states and municipalities. That follows a proposal by Johnson & Johnson for $4 billion and another for $18 billion by opioid distributors McKesson Corp., Cardinal Health Inc. and AmerisourceBergen Corp., along with $2.5 billion in distribution services.
While many attorneys general are backing the offers, lawyers for local governments have rejected them. Municipalities fear they wouldn’t 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.”
Still, 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 U.S. trading on Monday. Teva’s 1.5 billion euros ($1.7 billion) of bonds due October 2024 rose 3 cents on the euro to 83.5 cents, 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 & Co. 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.”
Teva publicly disclosed its offer hours after the company, along with McKesson, Cardinal Health and AmerisourceBergen, agreed to pay a combined $260 million to resolve lawsuits over opioids, according to Joe Rice, one of the lead lawyers for the plaintiffs. The distributors will pay $215 million, while Teva will contribute $20 million in cash and $25 million of anti-addiction and overdose treatments generic suboxone, buprenorphine and naloxone over a three-year period.
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,” McKesson, Cardinal and AmerisourceBergen, which together control 90% of the U.S. drug-distribution market, said in a statement.
Drugmakers are accused of pushing opioid prescriptions on doctors across the U.S. 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 U.S. 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 cities and counties should each state’s top lawyer should be responsible for the litigation, not municipalities and their attorneys.
“We believe this is going to bring a national solution,” Josh Shapiro, Pennsylvania’s attorney general, said on a conference call 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.
“$18 billion from the distributors over 18 years simply won’t cut it,” said Paul Hanly, who is representing U.S. cities and counties in their lawsuits.
Walgreens Boots Alliance Inc., the last remaining defendant in the Ohio counties’ case, hasn’t yet reached a deal and are 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 Inc. and CVS Health Corp. face claims they failed to properly handle suspicious orders for the addictive painkillers in another 2020 trial.
“The allegations against Walgreens are very different,” 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.”
U.S. District Judge Dan Polster, overseeing the cities and counties cases consolidated in federal court in Cleveland, said he’d seen the Ohio counties’ plan for using the settlement proceeds. Polster said he’s 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 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.
J&J agreed to resolve the Ohio counties’ case for $20.4 million. 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.
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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