U.S. state officials urge support for landmark $26 bln opioid settlement

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July 21 (Reuters) – A group of attorneys general on Wednesday unveiled a groundbreaking $ 26 billion deal with major pharmaceutical companies alleged to have fueled the deadly nationwide opioid epidemic, but the deal still requires the support of thousands of local governments.

According to the settlement proposal, the three largest U.S. drug distributors – McKesson Corp (MCK.N), Cardinal Health Inc (CAH.N), and AmerisourceBergen Corp (ABC.N) – will collectively pay $ 21 billion, while drug maker Johnson & Johnson (JNJ.N) would pay $ 5 billion.

The money is to be used for addiction treatment, family support, education and other social programs.

“Frankly, there isn’t enough money in the world to alleviate the pain and suffering,” said Connecticut Attorney General William Tong, but added that the money “will help where it is needed.”

The deal represents the second largest cash settlement ever, after the $ 246 billion tobacco deal in 1998. Attorneys-general from 15 states were involved in the negotiations, as were senior lawyers for local governments.

McKesson will pay up to $ 7.9 billion while AmerisourceBergen and Cardinal lent up to $ 6.4 billion each. Payments are made over 18 years.

J&J will pay over nine years, with up to $ 3.7 billion being paid in the first three years.

About $ 2.2 billion of the total would cover legal fees.

“This settlement will directly support state and local efforts to make significant progress in addressing the opioid crisis,” said Michael Ullmann, general counsel of Johnson & Johnson.

To receive the full payout, the agreement requires the support of at least 48 states, 98% of the contending local governments, and 97% of the jurisdictions that have yet to sue.

Distributors were accused of lax controls that made it possible to divert huge amounts of addictive pain relievers into illegal channels and devastate communities, while J&J was accused of downplaying addiction risk in its opioid marketing.

The companies reject the allegations.

The deal also calls for the creation of an independent clearinghouse that will provide traffickers and state regulators with aggregated data on drug shipments that negotiators hope will help prevent abuse.

In a joint statement, the distributors called the deal an important step “in achieving a comprehensive settlement of state opioid claims and providing meaningful aid to communities across the United States.”

More than 3,000 health crisis-related lawsuits have been filed, mostly from state and local governments, and the final settlement payout will depend on the number of places willing to drop their lawsuits.

The Johnson & Johnson logo will appear on a screen on the floor of the New York Stock Exchange (NYSE) in New York, United States on May 29, 2019. REUTERS / Brendan McDermid

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Other settlements are also being negotiated, with opioid makers Purdue Pharma and Mallinckrodt Plc (MCDG.MU) working through bankruptcy courts to secure support for settlements valued at more than $ 10 billion and $ 1.6 billion, respectively .

States have 30 days to evaluate Wednesday’s agreement. North Carolina attorney general Josh Stein said the expectation was “north of 40 will sign up”.

The opioid crisis has been blamed for hundreds of thousands of overdose deaths in the US since 1999, but has hit some regions much harder than others, creating divisions between governments on comparison.

“States that do not enroll are irresponsible,” said Louisiana Attorney General Jeff Landry. “We don’t want the perfect to be the enemy of the good.”

Distributor shares rose about 1.5% each, while J&J, which also released quarterly results on Wednesday, gained about 0.6%. The company’s shares rose Tuesday in anticipation of the announcement.

“NOT GOOD ENOUGH”

Washington State Attorney General Bob Ferguson said he would not join the deal. “The deal is, to be honest, nowhere near good enough for Washington,” he said.

To receive the full payout, the agreement requires the support of at least 48 states, 98% of the contending local governments, and 97% of the jurisdictions that have yet to sue.

The choice to participate guarantees a state only part of the money. The settlement calls for a base payout of up to $ 12.12 billion if all states approve the deal, and an additional $ 10.7 billion tied to locations that join the deal.

“Everyone has a common interest in getting maximum stake in order to get a maximum amount nationally for the cut,” said Joe Rice, a senior lawyer for local governments.

Once a state approves the agreement, its local governments have up to 120 days to enter. You can only join if a state does. Paul Geller, a senior negotiator for the plaintiffs, said if a state is unsure about joining, “subdivisions should let the state know they want the money”.

According to Christine Minhee, who leads an opioid trial oversight project supported by a Soros Justice Fellowship from the Open Society Foundations, about half of the states have passed laws or signed agreements with their communities pending settlement pending settlement.

The legislature does not guarantee success. In Indiana, cities and counties that represent more than half the state’s population have a law capping their cuts to 15%.

Indiana Attorney General Todd Rokita said if these local governments don’t choose the deal again, the state could lose up to $ 237.9 million of the $ 507 million it would receive.

Communities in hard-hit West Virginia went out of business after being offered less than 1% of the money, said Paul Farrell, an attorney for the West Virginia plaintiffs. Local governments in the state are pursuing a case against traders.

The agreement comes even though the crisis has not abated. The U.S. Centers for Disease Control and Prevention announced last week that preliminary data showed 2020 was a record year for total drug overdose deaths of 93,331, 29% more than a year earlier.

Reporting by Nate Raymond in Boston; Additional reporting from Brendan Pierson and Tom Hals; Editing by Bill Berkrot and Leslie Adler

Nate Raymond

Nate Raymond is the newsletter editor and lead author of the Daily Docket newsletter and also handles litigation. He can be reached at nate.raymond@thomsonreuters.com.