More than two decades and 500,000 overdose deaths after the U.S. opioid epidemic began, the biggest penalty for drug companies’ role in the crisis was announced Tuesday, when lawyers for states, cities and counties detailed a tentative settlement worth $26 billion.
Johnson & Johnson, which once supplied much of the raw material for opioids and sold some painkillers but no longer does either in the United States, would pay $5 billion over nine years.
The deal, still several important steps from completion, would settle more than 3,000 lawsuits brought by states, cities, counties and other jurisdictions that were consolidated into one of the largest and most complex civil litigation battles in U.S. legal history.
But other lawsuits will continue, as will the drug epidemic at the center of the conflict. Just last week, the government announced that an estimated 69,710 people had died of overdoses involving opioids in 2020 — a record 191 every day. Now the main culprit is illicit fentanyl manufactured in labs abroad, not the legal medicine distributed here. Opioid prescriptions have plummeted from a peak of 255.2 million 2012 to 153.2 million in 2019, according to the Centers for Disease Control and Prevention.
The settlement money will be spent on treatment, prevention, education and other costs of the epidemic. Private attorneys will recoup nearly $2 billion. But none of the families that have lost loved ones, or the estimated 1.6 million people with a substance-use disorder, will receive any cash.
“We look forward to bringing much-needed dollars home to our states to help people recover from opioid addiction and to fundamentally change the opioid manufacturing and distributing industries so this never happens again,” a group of 10 state attorneys general involved in the negotiations said Tuesday. Some money could be set aside in an escrow fund as soon as September.
The financial and social harms of the epidemic far outweigh the proposed total settlement, said Gary Mendell, whose son Brian died in 2011 after battling addiction. But the agreement is a step toward remediating the crisis, he said.
“There could have been a holdout and [we would] end up with more money in three to five years from now, but think about how many people would have died in the meantime,” Mendell said in an interview Tuesday. “Getting this deal struck now and getting this money distributed fairly quickly, this is going to start to save people’s lives right away.”
Mendell, founder of Shatterproof, a nonprofit working to curb the addiction crisis, said a critical part of the deal is guaranteeing the funds will be used for evidence-based treatment and prevention programs. The huge 1998 settlement with tobacco companies has been criticized because it did not prevent states from using the money for other purposes.
Courtney Allen, policy director for the Maine Recovery Advocacy Project, said $26 billion is a “drop in the bucket” compared with the pain endured by victims, including her friend Tim Bellavance, who died of an overdose in August.
“No amount of money will ever bring back of our loved ones,” she said. “Regardless of how much or how little it is, it doesn’t change the fact that I don’t have Tim at the kitchen table eating chocolate pie.”
More unusual than the cash is the enforcement mechanism that would be established by the settlement. Under the deal, the three distributors, which control 85 to 90 percent of the market, are required to establish and fund a “clearinghouse” that shows where every opioid dose is headed.
They must check the database before sending out each shipment of pills and hold theirs back if it appears that the recipient — a drugstore or other facility — is asking for an extraordinary amount of drugs, a typical sign that some are being diverted and sold on the street. The company must notify state and federal authorities and hold back its shipment, even if that cuts into its revenue, according to attorneys who briefed reporters on the deal Tuesday.
That means the three companies, which have historically competed in the opioid distribution market, will know where their rivals are sending pills. And the system may replace, or supplement, a similar database currently operated by the Drug Enforcement Administration. The DEA did not return an email seeking comment on the agreement.
“This is a big deal,” said Paul Geller, one of the lead attorneys in the negotiations. “They not only see what their competitors are shipping and where, but they are required to use that data to determine what may be a suspicious order.”
The settlement would “begin the work of changing the [companies’] conduct that in turn will save lives, as well as providing an infusion of dollars to assist local governments and the states in fighting the opioid crisis,” Elizabeth Cabraser, one of the attorneys involved with the negotiations, said in a briefing for the media Tuesday.
Agreements to monitor companies accused of violations have been imposed before; McKesson agreed to one in 2017, while admitting no wrongdoing. But this one may push the boundaries a bit, one expert said.
“I would say it definitely is unusual as a business arrangement,” said Sam Buffone, an attorney who represents corporate whistleblowers. “You’re doing government regulation through a settlement, rather than through the regulatory process. It’s a unique solution to a unique problem.”
Brandon Garrett, a Duke University law professor who co-founded the Corporate Prosecution Registry, said the clearinghouse may be a more efficient way to proceed, but government oversight is usually more effective.
“Regulations take time. However, the long term public interest may be far better served by lasting regulations. After all, corporations can be expected to adopt sound compliance, but asking them to regulate themselves may be a taller order,” Garrett said in an email.
Allen, the Maine activist, said she hopes the clearinghouse can effectively curb harmful industry practices. She said a history of profiteering during the opioid epidemic has left her mistrustful of the drug companies.
“To me, they killed my friends,” she said. “I hold them accountable and systems accountable that have failed to respond to overdoses as a public health crisis and not a criminal justice one.”
From 2006 to 2014, more than 100 billion prescription hydrocodone and oxycodone pills were distributed in the United States.
Progress toward an agreement in the years-long legal battle has been announced before, but this time, Joseph F. Rice, the lead attorney for the plaintiffs, said a settlement could be reached “within days.” Then each state must decide whether to sign on; if enough do, cities and counties within each state must decide whether to accept the deal. There are incentives built in to encourage participation by the large majority of jurisdictions needed to make the agreement official.
At least 44 states, 95 percent of cities, counties and others suing the companies and 90 percent of non-litigating jurisdictions must sign on to the deal to receive a portion of the money, said people familiar with the agreement.
The companies were more circumspect. In a statement, the three distributors announced a deal to pay more than $1.1 billion to the state of New York and two Long Island counties that removes them from that ongoing trial. They said it is part of a larger national plan that is still under negotiation.
“While the companies strongly dispute the allegations at issue in the trial, they believe this resolution will allow the companies to focus their attention and resources on the safe and secure delivery of medications and therapies while delivering meaningful relief to affected communities,” the said.
Johnson & Johnson on Wednesday announced the finalized settlement to resolve litigation. The company would contribute up to $5 billion depending on the number of governments that opt into the agreement.
“We recognize the opioid crisis is a tremendously complex public health issue, and we have deep sympathy for everyone affected,” said Michael Ullmann, the company’s executive vice president of general counsel. “This settlement will directly support state and local efforts to make meaningful progress in addressing the opioid crisis in the United States.”
Litigation over the damage of the drug epidemic has been going on for years and continues in courts across the country. In the first state trial, the state of Oklahoma won $465 million from Johnson & Johnson after a verdict reached by a judge in August 2019. A last-minute deal with two Ohio counties before what would have been the first federal trial in 2019 cost the distributors $215 million. Trials with Cabell County and the city of Huntington in West Virginia, as well as the New York trial, are continuing.
States that decline to participate in the agreement may continue their legal battles against the companies, as West Virginia Attorney General Patrick Morrisey promised after the agreement was announced. Morrisey called how money would be divvied among states — 85 percent based on population size and 15 percent for the severity of the crisis — “unfair,” saying the allocation disadvantages smaller states that are considered among the hardest hit like his.
“West Virginia is a resounding no on these agreements and will continue to litigate and negotiate outside the framework of today’s announcement,” Morrisey said in a statement Wednesday.
Another major target for states, cities and counties are large drugstore chains, which are not part of the tentative deal announced Tuesday.
Another large source of funds may become available from Purdue Pharma, the manufacturer of OxyContin, and its longtime owners, the Sackler family. Purdue has been accused in numerous lawsuits of having helped ignite the opioid crisis by introducing and heavily promoting OxyContin. The company and family have denied wrongdoing.
In bankruptcy proceedings, Purdue has offered a plan to resolve claims and turn itself into a public benefit company. Purdue and Sackler family members, who would contribute about $4.5 billion, would be released from civil litigation if the company’s proposal is approved by creditors in early August.
Purdue also pleaded guilty to three federal felony charges of deceptive marketing in October 2020 and agreed to an $8 billion settlement with the Justice Department.
The company and family have denied wrongdoing.