CLEVELAND — The three major drug distributors and an opioid manufacturer have reached a $260 million settlement with two Ohio counties to avoid the landmark first federal opioid trial that was set to begin here Monday.
The deal, which is a combination of cash payouts and donations of addiction treatments, could become a model for settlement of thousands of similar cases brought in an attempt to hold the pharmaceutical industry accountable for an epidemic of addiction that has killed hundreds of thousands of Americans.
Judge Dan A. Polster of the Northern District of Ohio announced from the bench Monday morning that the deal was struck around 1 a.m.
In the settlement, the drug distributors — McKesson, Cardinal Health and AmerisourceBergen, which distribute about 90 percent of all the medicines to pharmacies, hospitals and clinics in the United States — agreed to pay $215 million to the two Ohio counties that brought the lawsuit. Teva, the Israel-based manufacturer of generic drugs, agreed to pay $20 million in cash over three years and donate $25 million worth of addiction treatment drugs such as a generic Suboxone, which blunts cravings for opioids.
“We hope it provides a benchmark for a national resolution for other communities to have the resources to do what is necessary to abate the epidemic,” said Peter H. Weinberger, a Cleveland lawyer who represents some Ohio counties.
Even as the two-county settlement was being announced, the drug distributors and other corporate defendants in the trial were pursuing a global deal, worth $48 billion in cash and donated addiction treatments, to resolve all opioid lawsuits against them.
On Monday afternoon, four state attorneys general — from North Carolina, Pennsylvania, Texas and Tennessee — announced a step toward that much more ambitious goal, saying they had reached a tentative agreement to settle the cases against the three distributors, Teva, and Johnson & Johnson. But they not only have to sell the deal to the rest of the states, but also to the cities and counties, who have been pushing for more money paid out in a shorter time frame.
In a telephone news briefing, the attorneys general laid out the basics of their agreement: that the three distributors and Johnson & Johnson would give $22 billion in cash over 18 years; and that, over the next decade, Teva would give $250 million as well as addiction treatment drugs it values at $23 billion. In addition, the distributors would provide about $3 billion in distribution services for a decade.
Although the states acknowledged that the cities and counties were not on board, they said that their arrangement could cover the entire country immediately.
“This is a national crisis that demands a national solution,” said Josh Stein, the attorney general of North Carolina.
But minutes after the states’ announcement, Paul J. Hanly, Jr., a lead lawyer for the cities and counties, scorned the agreement. “The proposed deal put forth is nothing more than wishful thinking on the part of the A.G.s, who are 20 months too late to this party,” he said.
The states began filing their opioid lawsuits only relatively recently, but those by local governments were first filed years ago. The lawsuits from the two Ohio counties settled Monday are among more than 2,300 such cases that Judge Polster has been overseeing for nearly two years.
Monday’s settlement is the latest in a flurry of deals reached by drug companies to avoid that landmark federal trial, which was to serve as a test case for legal arguments and evidence.
Other companies that already reached a settlement to avoid the opening trial include Johnson & Johnson; Mallinckrodt Pharmaceuticals, one of the biggest manufacturers of generic opioids; and Purdue Pharma, which has been widely blamed for igniting the opioids crisis with misleading marketing of its drug OxyContin.
The ultimate goal of all companies is to reach a so-called global settlement to resolve the cases still on the runway in federal and state courts. Purdue reached a tentative settlement to do just that in September — a deal that involves a cash payment of up to $4.5 billion from its owners, members of the Sackler family, and a restructuring of the company into a public entity that would donate all profits to cities, counties and states to compensate for costs associated with the epidemic. But that deal is mired in a long bankruptcy court process.
With today’s agreements, the combined total so far for the two Ohio counties alone — Cuyahoga, which includes Cleveland, and Summit, which includes Akron — comes to roughly $320 million. Cuyahoga will receive 62 percent of the money, and Summit will receive 38 percent. Recently, executives from both counties announced plans to abate the local crisis, and the money has already begun to be distributed.
In a joint statement, the three distributors, which are among the richest companies in the United States, disputed the counties’ allegations that the companies had delivered highly suspicious quantities of opioids without reporting them to the authorities.
The distributors added that they expected “settlement funds to be used in support of initiatives to combat the opioid epidemic, including treatment, rehabilitation, mental health and other important efforts.”
Ilene Shapiro, the Summit County executive, said in a statement, “These settlement agreements give us the ability to help people now.”
Walgreens, the giant pharmacy chain, was also a defendant in this trial and is the only company that has not settled. It had been sued as a distributor that supplied opioids to its own pharmacies. Now Walgreens will face a separate trial that would focus on its role as a dispenser, Judge Polster announced on Monday morning.
“We never prescribed any opioid medication, and never sold opioid medications to pain clinics, internet pharmacies or the ‘pill mills’ that fueled the national opioid crisis,” Phil Caruso, a spokesman for Walgreens, said in a statement. “Our pharmacists have always been committed to serving patients in the communities where they live and work.”
The big pharmacy chains, including Rite Aid, CVS and Walmart, generally have undergone less scrutiny so far than the drug manufacturers and distributors. That may soon change.
“We have powerful evidence that pharmacies were also implicated in this epidemic,” said Mr. Hanly, a lead lawyer for local governments. “Those folks now have targets on their backs. Even so, we’re very interested in a global settlement, and we believe those companies are too — or they ought to be. ”
There are many more pharmaceutical industry defendants that were not in the first trial, including generic drug manufacturers, smaller drug distributors and the other big pharmacy chains. But lawyers expressed hopes that Monday’s settlement could push other defendants to settle their cases as well, even on a broader, comprehensive basis.
One signature dispute between the state attorneys general and plaintiffs for cities, counties and tribes is about how settlement money will be disbursed and who will control the purse strings. One of the biggest criticisms of the Big Tobacco settlement some 20 years ago, which was brokered in large measure by state attorneys general, was that most of the money wound up in legislative funds to balance budgets and even fix potholes. That is why local governments involved in the opioid litigation want to ensure they have better access to settlement money.
People close to the talks said that a model being discussed was to apportion the money into three buckets: one for the states, a second for the cities and counties, and the third and largest for an opioid remediation fund for the general public, supervised by a monitor who would possibly be appointed by the court.
On Monday morning, when expectations were high that a trial would indeed begin, a line to get into the courthouse began forming before 7 a.m. Many people said they were fans of the plaintiffs’ trial lawyer, Mark Lanier — known for his dramatic, even impish opening statements, replete with slides and props — and hoped to see his performance.
In the scrum following Judge Polster’s announcement that the trial would not go forward, Mr. Lanier was offering samples of the opening argument he would not be able to give, a thundering indictment of the opioid industry that he had spent months preparing. The warm-up alone included a 3,000-year-old Sumerian poppy jar; a first edition of Thomas De Quincey’s “Confessions of an English Opium-Eater”; and a reading from “The Wonderful Wizard of Oz.” (As Dorothy falls asleep in the poppy fields: “If we leave her here she will die,” said the Lion. “The smell of the flowers is killing us all.”)
A defense lawyer walking by overheard him, gave an eye roll and said: “You ought to hear my opening. I throw glitter.”
