© Reuters. FILE PHOTO: The Johnson & Johnson logo is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, US, May 29, 2019. REUTERS/Brendan McDermid
Written by Nate Raymond
(Reuters) – A group of state attorneys general on Wednesday unveiled a historic $26 billion settlement with major drug companies allegedly fueling the deadly opioid epidemic nationwide, but the deal still requires support from thousands of local governments.
Under the settlement proposal, the three largest drug distributors in the United States, McKesson Corp (NYSE:), Cardinal’s health Inc. (NYSE:) and AmerisourceBergen (NYSE:): Corp. are expected to pay a combined $21 billion, while pharmaceutical company Johnson & Johnson (NYSE: NYSE) will pay $5 billion.
“There isn’t enough money in the world, frankly, to address pain and suffering,” Connecticut Attorney General William Tong said, adding that the money “will help when help is needed.”
The deal was the second largest cash settlement ever, trailing only the $246 billion tobacco agreement in 1998. Prosecutors from 15 states were involved in negotiating the deal, as were lead attorneys for local governments.
McKesson will pay up to $7.9 billion, while AmerisourceBergen and Cardinal have each agreed to provide up to $6.4 billion. Payments will be made over 18 years.
J&J will pay over nine years, with up to $3.7 billion paid out over the first three years.
The money is expected to be used for addiction treatment, family support, education and other social programs.
“This settlement will directly support state and local efforts to make tangible progress in addressing the opioid crisis,” said Michael Ullman, general counsel for Johnson & Johnson.
Distributors have been accused of lax controls that have allowed massive amounts of addictive painkillers to be diverted into illegal channels, destroying communities, while J&J has been accused of downplaying addiction risks in its marketing of opioids.
The companies denied the allegations.
The settlement also calls for the creation of an independent clearinghouse to provide distributors and government regulators with aggregated data on drug shipments, which negotiators hope will help prevent abuse.
In a joint statement, the distributors described the settlement as an important step “towards achieving broad resolution of government opioid claims and providing meaningful relief to communities across the United States.”
More than 3,000 lawsuits related to the health crisis have been filed, mostly by state and local governments, and the final payment for a settlement depends on how many localities agree to drop their lawsuits.
Countries will have 30 days to evaluate the agreement.
“The forecast is north of 40 and it will sign on north of 40,” North Carolina Attorney General Josh Stein said.
The opioid crisis has been blamed for hundreds of thousands of overdose deaths in the United States since 1999, but it has hit some regions harder than others, creating divisions between governments when it comes to contemplating a settlement.
“States that have not signed become irresponsible,” said Louisiana Attorney General Jeff Landry. “We don’t want perfection to be the enemy of the good.”
Shares of distributors rose about 1.5%, while shares of J&J, which also reported quarterly results on Wednesday, rose about 0.6%. Shares in companies rose on Tuesday in anticipation of the announcement.
‘Not good enough’
About $2.1 billion will be deducted from the settlement of attorney’s fees and legal costs.
Washington State Attorney General Bob Ferguson said he would not join the agreement. “The settlement, frankly, is not good enough for Washington.”
That state’s trial against drug distributors begins Sept. 7 and takes place in January against J&J.
To receive full compensation, the agreement needs support from at least 48 states, 98% of litigating local governments and 97% of jurisdictions that have not yet sued.
Election to participate only guarantees the state some funds.
The settlement provides base payments of up to $12.12 billion if all countries agree to the deal, and another $10.7 billion tied to sites joining the deal.
“Everyone has a common interest in getting the most involvement to get the most money for national relief,” said Joe Rice, lead attorney for local governments.
Once a country approves the deal, its local governments have up to 120 days to join.
Kristen Minhee, who directs the Opioid Litigation Monitoring Project backed by the Open Society Foundations Soros Justice Fellowship, said about half of the states have an expectation to settle legislation or sign agreements with their local districts that govern how settlement money is distributed.
Legislation does not guarantee success. In Indiana, cities and counties representing more than half of the state’s population chose not to participate after a law set it down to 15%.
Hard-hit West Virginia had already indicated that it would not participate in the settlement. State local governments are pursuing a case that is being prosecuted against the distributors.
“As of now, West Virginia will likely reject these agreements,” said state Attorney Patrick Morrissey.
Meanwhile, the crisis showed no signs of abating. The US Centers for Disease Control and Prevention said last week that provisional data showed 2020 was a record year for overall drug overdose deaths with 93,331, up 29% from the previous year.