Cardinal Health Inc. and AmerisourceBergen Corp. have each reserved about $6.6 billion to settle claims that drug distributors fueled the U.S. opioid epidemic by flooding communities with the highly addictive painkillers, according to regulatory filings.
The combined $13.2 billion set aside would cover the companies’ share of a roughly $21 billion settlement proposal that includes fellow drug distributor McKesson Corp., which has agreed to pay as much as $8 billion. The deal with a group of state attorneys general calls for payouts over 18 years to resolve more than 3,000 lawsuits filed by state and local governments seeking compensation for the costs of the opioid epidemic.
In a regulatory filing Thursday, Dublin, Ohio-based Cardinal Health said it agreed to the proposal and has set aside $6.65 billion to cover its share. Chesterbrook, Pennsylvania-based AmerisourceBergen said in a separate filing it will take a $6.6 billion charge for the deal.
AmerisourceBergen recorded the charge “now that it has determined that a loss is probable and the amount is reasonably estimable,” the company said as part of its third-quarter earnings release. About $1 billion of the reserve was for taxes, it said.
“We take comfort from our belief that settlement funds will be used in support of initiatives to combat the opioid epidemic including treatment, rehabilitation, mental health and other important efforts,” AmerisourceBergen Chief Executive Officer Steven Collis told analysts Thursday.
McKesson, based in Iriving, Texas, disclosed its share of the tentative deal on Nov. 3. It said settlement talks are ongoing and that the amount paid by the companies will depend on the level of acceptance of the deal by state, city and county officials.
Lawyers for the governments also are pushing to combine the distributors’ settlement with a $5 billion deal to resolve all opioid suits against Johnson & Johnson. J&J — based in New Brunswick, New Jersey — once owned companies that produced opium poppies used to make the painkillers.
Getting the deal finalized “depends on how long it takes to get a critical mass” of local governments to back it, said Paul Hanly, a New York-based lawyer who is helping lead the suits filed by municipalities.
States, cities and counties claim the distributors turned a blind eye to suspiciously large U.S. opioid deliveries, fueling an epidemic that claimed more than 400,000 lives from 1997 to 2018. The governments seek reimbursement for billions in tax dollars spent coping with addiction and overdoses. Most of the cases have been consolidated before a federal judge in Cleveland.
A group of attorneys general, led by Tennessee Attorney General Herbert Slatery, worked out the settlement covering the distributors and J&J after more than a year of talks. Other attorneys general and some lawyers for cities and counties oppose the proposal, saying it doesn’t provide enough funds for treatment.
To sweeten the offer, the distributors and J&J are willing to create a separate fund to pay attorneys’ fees for lawyers representing states, cities and counties, according to a statement issued Thursday by Hanly, Joe Rice and Paul Farrell, two other plaintiffs’ lawyers leading local governments’ efforts to win reimbursement from the companies.
Arbitrators will decide how much attorneys get, they said. Bloomberg News reported in February the fund will cover more than $1 billion in fees that local governments would have otherwise paid their attorneys.
“This fund was negotiated separately to avoid draining resources for abatement of the opioid epidemic,” the plaintiffs’ lawyers said. “The fee fund is intended to replace collection of contingency fees which enables more money to reach our communities faster.”
The companies have about two months to decide whether to press forward with the settlement before trials in West Virginia and Washington are set to begin, Rice said. In the only case to go to trial so far, an Oklahoma judge ordered J&J to pay the state $465 million over its wrongful marketing of opioid painkillers.
The consolidated case is In Re National Prescription Opioid Litigation, 17-md-2804, U.S. District Court, Northern District of Ohio (Cleveland).
–With assistance from Angelica LaVito.
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