The three largest pharmaceutical distributors and Johnson & Johnson are on the verge of a $26 billion deal with states and municipalities that would settle thousands of lawsuits over their role in the opioid epidemic and pay for addiction and prevention services nationwide.
An agreement could be announced later this week, although several people with direct knowledge of the talks cautioned that there were still details being negotiated.
The settlement would not conclude all the multifaceted nationwide opioid litigation but would end legal action against some of the companies with the deepest pockets in the pharmaceutical supply chain: the country’s major medical distributors, Cardinal Health, McKesson and AmerisourceBergen, along with the pharmaceutical giant Johnson & Johnson.
The distributors, which by law are supposed to monitor quantities of prescription drug shipments, have been accused of turning a blind eye for two decades while pharmacies across the country ordered millions of pills for their communities. Plaintiffs also allege that Johnson & Johnson, which used to contract with poppy growers in Tasmania to supply opioid materials to manufacturers and made its own fentanyl patches for pain patients, downplayed addictive properties to doctors as well as patients.
Negotiations, which began more than two years ago, intensified this summer as trials opened in several states and overdose rates reached record levels.
Unlike earlier settlement proposals, this one appears to have the critical backing of more than 40 states and a sweetener of $2 billion for plaintiffs’ attorneys. In recent weeks, many terms were nailed down and the fees for private lawyers in the cases — a previous sticking point — bumped up, prompting enthusiasm that an announcement was imminent, lawyers involved in the talks said.
In a briefing with several reporters Tuesday morning, lawyers for thousands of cities and counties were careful to use words like “optimistic” to describe the talks, saying that states had to agree first before local governments could even vote on the settlement. A statement from attorneys general of 10 states, including Pennsylvania, North Carolina and Tennessee, said the negotiations were “progressing well and potentially nearing their completion.”
Cardinal Health declined to discuss the negotiations. The other distributors did not reply to requests for comment.
Johnson & Johnson said in a statement, “There continues to be progress toward finalizing this agreement and we remain committed to providing certainty for involved parties and critical assistance for families and communities in need.”
The company said the agreement would not be an admission of liability or wrongdoing and that it would continue to defend in cases brought by plaintiffs who were not part of the settlement.
In court proceedings, the distributors have repeatedly argued that they were participants in the supply chain for drugs that were federally approved.
A separate agreement between Native American tribes and the companies is still being negotiated.
Even if the negotiators reach a deal, numerous steps are required before formal agreement, including voting by all of the thousands of plaintiffs. It includes carrot-stick incentives to induce more parties to come on board.
The deal is contingent on agreement by a large majority of states. People involved in the talks say that eight or so states are still not on board, because they believe the amount of money the companies would pay is insufficient.
“Their proposal can be described in three words — not good enough,” said Bob Ferguson, the attorney general of Washington, which has a September trial scheduled against the distributors. “It does not represent real accountability, and will not provide a transformative amount of money to help communities respond to the crisis they helped cause.”
Another contentious issue in the proposed deal is what is known as “global peace” — the companies want assurance that a settlement would mean that plaintiffs would put down their litigating swords for good. They are asking that states ensure that local governments that have not brought cases against the companies, as well as those that have cases pending, refrain from future legal action against the companies over opioids.
Once a state agrees to the deal, it would ask all its local governments — even municipalities that have not filed lawsuits — to back it. Reimbursement would work on a tier: full payment is conditional on a state’s local governments signing on.
For example, said Ferguson, most of the money that would be apportioned to his state would be contingent on Washington’s 39 counties and 281 cities signing on — a very high bar.
Many major players in the prescription opioid industry have yet to settle cases against them. Some manufacturers, like Purdue Pharma and Mallinckrodt, have sought bankruptcy protection. Teva, Allergan and Endo are on trial. Cases against pharmaceutical chains, such as CVS Health, Walgreens and Walmart, are even further from resolution.
According to lawyers familiar with negotiations, Johnson & Johnson, which ended its relationship with poppy growers and stopped making its fentanyl patch and other opioids, would pay $3.7 billion in the first three years and $1.3 billion over the next six years.
Collectively the distributors would pay $21 billion over 17 years. The fees of lawyers, who pursued and financed the costly litigation for years, would be deducted from the total figure and are expected to be paid more quickly than some funds for addiction treatment.
The distributors would establish a third-party monitor to track their own and their competitors’ drug shipments, intended to quickly alert red-flag pill sales.
“It will provide an entirely new method of tracking narcotic drugs at a national level and will make data instantaneously available,” said Joe Rice, a lawyer for many local governments who is on the negotiating team.
The negotiations for the states have been led by New York, North Carolina, Pennsylvania, Tennessee, Florida, Texas and California, among others.
The negotiations were stalled for months over attorneys’ fees. Innumerable lawyers have contributed different amounts of work and have fought over who should get paid how much. Now, about $1.6 billion in fees and costs would be paid to private lawyers representing thousands of counties and municipalities, $50 million in costs and about $350 million to private lawyers who worked for states. (Many states are represented by their own salaried, government lawyers.)
Another critical lever in advancing settlement terms has been the high-stakes gamble of a trial. The distributors have been locked in trial in a West Virginia federal court and in a New York state court. The West Virginia case is ongoing but on Tuesday, Letitia James, the attorney general for New York, announced a $1.179 billion settlement with the distributors that releases them from the case. That money would be deducted from the overall $26 billion settlement. Payments to New York could begin in two months, James said.
A persistent tension in the talks has been over the division of funds among states and small governments, including cities and counties.
The new settlement envisions a national formula for disbursing money to states and flexibility within each state to broker a deal with localities, so that the bulk of the funds is aimed at alleviating the opioid epidemic and preventing its recurrence.
For months, states and counties elbowed one another, even as they fought with defendants. The distribution to each state now relies on extensive federal data and includes metrics like a state’s population, overdose deaths, opioid pill sales and disorders related to pain pill abuse.
Most states will most likely work up their own disbursement plans. Ohio, North Carolina, Arizona, Texas, Florida and others have already brokered internal, state-specific formulas. Last month, the New York legislature passed bills that would ensure that all funds from the opioid litigation settlement would go into a “locked box,” to be used only to address the crisis.
Johnson & Johnson is widely known as a company willing to try cases rather than settle, but it has faced rivers of adverse publicity recently: litigation over asbestos deaths related to its talcum powder, a recall of some sunscreens, and reports of rare adverse neurological events associated with its single-dose COVID vaccine. The company remains on trial in California state court but settled with the state of New York and two New York counties last month, on the eve of trial.
The money for the New York settlement, $230 million, will be paid over nine years with an additional $33 million for lawyers’ costs and fees, and will be deducted from the national amount.
This article originally appeared in The New York Times.