Distributors accused of fueling the opioid epidemic consider a
deal to pay $18 billion
By Sara Randazzo
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 16, 2019).
Three major drug distributors are in talks to pay $18 billion to
settle sweeping litigation brought by state and local governments
blaming them for fueling the opioid crisis, people familiar with
the discussions said, paving the way for a broad resolution to
lawsuits that have shaken the pharmaceutical industry.
The three distributors -- McKesson Corp., AmerisourceBergen
Corp., and Cardinal Health Inc. -- would collectively pay $18
billion over 18 years under the deal currently on the table, the
people said. Johnson & Johnson is also involved in the
discussions to contribute additional money, some of the people
said.
Players up and down the pharmaceutical supply chain, including
drugmakers, distributors and pharmacies, have been sued by
virtually every state and thousands of city and county governments.
Over 2,000 lawsuits allege the industry's overly aggressive
marketing of prescription painkillers and lax oversight over drug
distribution contributed to widespread opioid addiction.
If finalized, the settlement would be the first to achieve a
broad resolution of the opioid lawsuits outside of bankruptcy.
OxyContin maker Purdue Pharma LP filed for bankruptcy last month to
try to implement a settlement valued at around $10 billion to $12
billion but faces opposition from some states that say its owners
-- members of the Sackler family -- should contribute more to the
deal.
At least 400,000 people have died in the U.S. from overdoses of
legal and illegal opioids since 1999, according to federal data.
The lawsuits are seeking to recoup the costs borne by communities
grappling with widespread addiction, including burdens on emergency
services, medical care and foster services for children born to
addicted parents.
Pressure has mounted on pharmaceutical companies to settle the
opioid lawsuits and cap the liability. McKesson, AmerisourceBergen
and Cardinal Health are among companies slated to go to trial
Monday in federal court in Cleveland in the cases of two Ohio
counties that have been chosen to serve as a bellwether for the
broader litigation.
Any final deal could include other companies. The talks have
raised the idea that the settlement would include the donation of
opioid-addiction treatment drugs.
Johnson & Johnson reiterated on Tuesday a prior statement
that "we remain open to viable options to resolve these cases,
including through settlement."
A spokeswoman for Cardinal declined to comment.
AmerisourceBergen also declined to comment, and McKesson didn't
respond to requests for comment.
The agreement still needs to garner support from factions of
plaintiffs' lawyers and government entities with differing
interests.
A bipartisan coalition of the attorneys general in Texas,
Tennessee, Pennsylvania and North Carolina have been leading the
discussions that generated the current proposal, the people said.
State attorneys general were scheduled to have a call Tuesday
evening to hear more about the potential deal.
The opioid litigation has been likened to lawsuits against the
tobacco industry in the 1990s. Those suits led to a $206 billion
settlement in 1998 that has trickled down to the states in
installments ever since.
Local governments unhappy with how the tobacco money largely
stayed at the state level didn't want to wait on the sidelines this
time around, so cities and counties have pursued their own opioid
lawsuits in addition to state attorneys general actions.
U.S. District Judge Dan Polster in Cleveland, who is overseeing
the consolidation of thousands of the opioid cases filed in federal
court, has strongly pushed settlement talks since early 2018.
The looming deadline of the trial slated to begin Monday before
Judge Polster, in the cases of Ohio's Cuyahoga and Summit counties,
has hastened the discussions.
Several drugmakers have reached settlements with the two
counties to avoid going to trial, but those deals haven't gotten
them out of the broader litigation.
Any global resolution by the distributors could affect or delay
the trial, though jury selection was still set to begin Wednesday,
and opening statements were on track for Monday.
Plaintiffs' lawyers have been seeking a large payday from
McKesson, AmerisourceBergen and Cardinal, which collectively
controlled 95% of the U.S. drug distribution market in 2018,
according to Drug Channels Institute, which provides research on
the drug-supply chain.
A smaller distributor, Henry Schein Inc., is also a defendant in
the Cleveland trial, along with Walgreens Boots Alliance Inc. and
drugmaker Teva Pharmaceutical Industries Ltd. All of the companies
were in court Tuesday before Judge Polster to hash out final
details around how the two-month trial will look.
Plaintiffs have alleged that the drug distributors failed to
implement adequate systems to halt suspicious drug orders as the
opioid epidemic came into focus.
The companies counter that they served as middlemen that
followed federal regulations and have long had robust systems in
place to monitor suspicious orders.
Potentially bolstering the distributors' case is a recent report
from the U.S. Justice Department criticizing the U.S. Drug
Enforcement Administration for allowing drug manufacturers to
increase significantly the production of powerful painkillers as
overdose-death rates soared.
The Ohio counties and other plaintiffs have laid out plans to
spend billions of dollars from potential settlements to help
communities recover from widespread opioid addiction.
Those plans include reducing the supply of opioids, coming up
with new ways to care for patients in pain and treating those
already addicted through programs and drugs like naloxone.
The first opioid case to go to trial, in Oklahoma, ended in a
$572 million verdict against Johnson & Johnson that Oklahoma
state court Judge Thad Balkman said should go toward addiction
treatment, overdose prevention services and other resources.
Johnson & Johnson was in court Tuesday arguing that the
verdict should be reduced. Judge Balkman said at the hearing he
agreed with the company that he made a math error that will reduce
the verdict by more than $100 million, and that he would take other
arguments under consideration before issuing a final judgment.
Write to Sara Randazzo at sara.randazzo@wsj.com
(END) Dow Jones Newswires
October 16, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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