The three giant drug distributors are negotiating a deal with the states to end thousands of opioid lawsuits nationwide, in which they would pay $19.2 billion over 18 years and immediately submit to stringent monitoring requirements to assure that suspicious orders for prescription opioids would be halted.
But although pressure is building to settle the costly, protracted litigation and bring relief to communities hit hard by addiction and overdose deaths, another group of plaintiffs is objecting strongly to the terms of the deal. Cities and counties, which have brought far more cases than state governments, say they are being blindsided by state attorneys general because the proposed agreement would give states control over the money that would trickle down to them.
So far, 31 states plus the District of Columbia have tentatively agreed to the deal, while 19 states, including Florida, Connecticut and West Virginia, have not.
According to a confidential 21-page outline of the deal obtained by The New York Times, the companies would pay in full only when all plaintiffs — including the cities and counties — have withdrawn their lawsuits. Even after a majority of states sign up, the companies would guarantee payment of just 55 percent of the money and would release the remaining 45 percent only when each state can confirm that its cities and counties are on board.
Although the companies would prefer that the municipalities sign on of their own accord, the proposal stipulates that states could compel them to comply through legislation or their courts.
In lawyers’ parlance, this type of deal is known as a “cramdown.” The perception is that it is being crammed down from the most powerful plaintiffs to those on a lower rung.
“The focus on the ability of the states to somehow drag the counties along or eliminate their rights by legislation or court rulings seems completely unbalanced,” said Paul J. Hanly Jr., a lawyer on the negotiating committee for the municipalities. He noted that the municipalities have not even been shown the most recent proposal.
The contentiousness between two muscular groups of plaintiffs has long been building. Years before the states had even begun to sue, Mr. Hanly noted, lawyers for the cities and counties had already spent millions of dollars and hours in opioid litigation. Moreover, many states have not even yet sued the distributors in their opioid lawsuits; most target manufacturers.
Mr. Hanly also took issue with the 18-year payment period. The amount of money proposed would be acceptable, he said, “if it were paid over one, two or three years. But over a generation is too little, too long.”
But state attorneys general who favor the proposal say it offers immediate relief to the public.
“The costs of litigation, both financial and personal — like overdose deaths — only multiply with time,” the Tennessee attorney general, Herbert H. Slatery III, a Republican, said in a statement. “The current framework gets funds to communities in 2020.”
Laura Brewer, a spokeswoman for the North Carolina attorney general, Josh Stein, a Democrat, said in a statement: “It will also put strict new rules in place to help make sure that a crisis like this doesn’t happen again.”
On Wednesday, Ohio, ravaged by the opioid epidemic, became the first state to announce that its attorney general, Dave Yost, and most of its communities would cooperate when opioid settlement offers are finalized. For now, Mr. Yost opposes the distributors’ proposal.
Between 2006 and 2014, the distributors — McKesson, AmerisourceBergen and Cardinal Health — shipped more than 60 billion opioid pills nationwide. The states and the cities allege that the companies turned a blind eye to outsized orders and even encouraged them. For years, the distributors, routinely appearing on lists of the wealthiest American corporations, have characterized themselves as mere middlemen between pharmacies and manufacturers.
Their proposed $19.2 billion total payout designates $1.2 billion for private lawyers who represent municipalities and even some states in the opioid cases.
Some states have asked that perhaps $500 million of that amount cover the states’ legal costs.
The contours of the deal, absent the new leverage controls and extra money for lawyers’ fees, were proposed in October. At that time, four attorneys general announced that Johnson & Johnson, the health care giant that manufactures opioids through its pharmaceutical division, would contribute $4 billion in the first three years — an offer that still stands.
If this proposal does go forward, the entire package would come to $23.2 billion, including lawyers’ fees.
After the October announcement, most states were dismissive. In recent weeks, however, with legal fees tacked on, states have begun to sign up.
Another pressure to settle was a looming March 20 trial brought by the State of New York and Suffolk and Nassau Counties against the distributors as well as some opioid manufacturers. Earlier this week, the trial date was delayed over concerns about coronavirus.
Letitia James, the New York attorney general, a tentative supporter, said in a statement: “As we continue negotiations, a majority of states have signaled their support for a framework that ensures funds move to affected communities as quickly as possible. While no amount of relief will ever make whole the millions of families and communities devastated by the opioid crisis, there is an immediate need to fund prevention, rehabilitation and recovery programs in our state.”
Although their revenues are soaring, the distributors say that because their profits are scarcely one percent, they have limited cash on hand.
At a January earnings call to investors, Steven H. Collis, chairman of the board of AmerisourceBergen, was asked whether the company needed to accumulate a war chest to bear the brunt of the opioid settlement.
Mr. Collis responded: “We don’t feel the need at all,” explaining that although the aggregate amount seemed hefty, it was divided among three distributors and spread over 18 years, and so would not have a big impact on his company.
Financial reports commissioned by cities and counties contend that the distributors could afford to pay between $35 billion and $50 billion over eight years.
At a recent closed-door session in federal court in Cleveland, where more than 3,500 opioid lawsuits have been consolidated, some states urged distributors to raise their offer by about $4 billion, according to lawyers who requested anonymity because the negotiations are confidential.
AmerisourceBergen declined to comment. Cardinal Health and McKesson each reiterated that they were committed to finding a global settlement structure that would ensure relief to stricken communities as swiftly as possible.
The issue of legal fees continues to be a source of considerable rancor. The states are represented in the litigation by public officials — attorneys general, with salaried staff lawyers. Cities and counties are represented by private lawyers, who work on contingency fees.
And the appearance of possible conflicting interests raises eyebrows. Many states have also retained private counsel, some of whom simultaneously represent cities and counties. A few firms represent states that support the deal, as well as states and municipalities that oppose it.
Most states that oppose the deal happen to work with private counsel.
According to lawyers familiar with talks, some attorneys general want about $500 million from the $1.2 billion legal fund diverted to reimburse their staffs.
Lawyers for cities and counties have alternatively proposed establishing a fund of 7 percent of all settlement money, including any forthcoming from manufacturers and pharmacy chains that have also been sued.
The money, called a common benefit fund, would be allocated to lawyers according to a formula that would consider how much work their firms contributed to the litigation.
Some lawyers predict that amount could be as much as $3.3 billion, or even higher. Last month, 37 attorneys general signed a letter criticizing that amount, which, they said, siphoned off dollars that should go toward the public benefit.
The cities’ and counties’ distrust of the states dates back at least to the tobacco litigation in 1998, when funds from that settlement went into the coffers of state legislatures to address budget shortfalls instead of helping localities with smoking-related medical costs.
