After Ohio Opioid Settlement, Local Governments Could Be Skeptical of State AG Agreement

Summit county executive Ilene Shapiro speaks to the media outside the U.S. Federal courthouse, Monday, Oct. 21, 2019, in Cleveland about a $260 million settlement agreement with drug companies.

Summit county executive Ilene Shapiro speaks to the media outside the U.S. Federal courthouse, Monday, Oct. 21, 2019, in Cleveland about a $260 million settlement agreement with drug companies. AP Photo/David Dermer

 

Connecting state and local government leaders

Attorneys for cities and counties that brought litigation against drug companies say the size of a settlement brokered this week for two Ohio counties could encourage others to opt out of a broader agreement touted by state attorneys general.

In Ohio, two counties seeking to reclaim millions spent responding to the opioid epidemic this week announced that they had reached a $260 million settlement with four drug companies. Hours later, a coalition of state attorneys general announced their own proposed $48 billion framework agreement with drug companies, which all states and local governments could tap into to help deal with the crisis in their communities.

But despite these two big developments, it remains unclear what path states, municipalities and counties will choose. Could the agreement between the companies and Ohio’s Summit and Cuyahoga counties create a roadmap to settle the thousands of lawsuits against the industry? Or will governments seek to become part of the broader agreement pulled together by a coalition of state attorneys general from North Carolina, Tennessee, Texas and Pennsylvania? Is it possible that some governments will end up forging ahead with trials, figuring they can win even bigger payouts?

Several attorneys representing municipalities and counties said the large sum that the two Ohio counties were able to negotiate underscores the benefit of not agreeing to a broader settlement.

“There is no doubt that the two counties got more in settlements in the trial setting than they would have in the global settlement being contemplated,” said T.J. Mayes, a partner with the law firm Phipps Deacon Purnell, which is representing about a dozen Texas counties in opioid-related litigation. “A lot of counties have decisions to make as far as how they want to proceed.”

Under the tentative $260 million deal in Ohio, which came together on the eve of trial, drug distributors AmerisourceBergen, Cardinal, and McKesson would pay $215 million and manufacturer Teva Pharmaceuticals would pay $20 million in cash and provide another $25 million in addiction and overdose treatment drugs.

On the other hand, the attorney generals' proposal—which includes agreements with AmerisourceBergen, Cardinal, McKesson, Teva and Johnson & Johnson—calls on the companies to pay $22 billion in cash and provide $26 billion worth of drugs used in medication assisted treatment.

An attorney representing cities and towns in the consolidated federal case told the Washington Post that the AG proposal was too small and the payout period too long to be amenable.

Under the proposal, each state would receive a share of the settlement. Approximately 15% of the money would go to the state’s treasury, 15% to the treasury of cities and counties, and the remainder would go toward treatment and support services, said Pennsylvania Attorney General Josh Shapiro, explaining the breakdown in a call with reporters. About $500 million would be used to set up and oversee a data clearinghouse that would enable drug distributors to see the amount of prescription opioids sold to each individual pharmacy. The same data is already provided by all drug distributors to the Drug Enforcement Administration, but distributors are not able to see the sales made by other companies to their pharmacy customers.

Shapiro has been a strong advocate of pushing forward with a comprehensive settlement, warning that settling individual lawsuits or taking companies to trial runs the risk of bankrupting the drug companies before they could compensate all affected municipalities.

“Litigating this across the country will be random, it will be haphazard, it will take decades or more for resources to make their way to the communities,” Shapiro said. “It will result in an unfair distribution and likely the bankruptcy of these companies before they can help meet the needs of those struggling communities across America today.”

But the agreement between the two Ohio counties and drug companies came out of much larger litigation that could also be a venue for creating a bigger settlement. The case overseen by U.S. District Judge Daniel Polster, who is based in Cleveland, Ohio, at this point involves more than 2,500 jurisdictions and 13 defendants, including drug manufacturers, distributors and pharmacy companies. Polster has been actively working to broker a comprehensive settlement agreement and earlier this year ruled that every city and county in the United States would be able to participate in any global settlement agreement he signs off on.

The three drug distributors are hopeful the Ohio counties’ settlement will move them closer to a broader resolution.

“While the companies strongly dispute the allegations made by the two counties, they believe settling the bellwether trial is an important stepping stone to achieving a global resolution and delivering meaningful relief,” said AmerisourceBergen, Cardinal, and McKesson in a joint statement.

Mark Tate, of Tate Law Group, which represents approximately 80 local jurisdictions spanning from Georgia to New York, said his clients may not want to be part of a state-brokered agreement.

“The counties and the cities I represent have a wholly different cost burden than the state,” Tate said.

Counties and cities may want to recoup opioid-related costs related to prisons and first responders that were borne by taxpayers as they struggled to respond to the opioid crisis, Tate said. He believes some of his municipal clients stand to win far larger jury verdicts than the Ohio counties if they go to trial.

“It’s important for them to stand on their own feet and not rely on the state to disperse any monies to them,” he said.

Mayes said the cash payouts and the sum the drug companies will provide to fund treatment are two different considerations for local governments.

About 40 Texas counties have pursued litigation in state rather than federal court and would not be subject to any global settlement in federal court. But Mayes said the proportion of the attorney general-backed proposal dedicates a larger share toward medication assisted treatment than he is recommending to the Texas counties his firm is representing.

“Our view is that any acceptable deal would have more of an impetus on counties than I think is being contemplated right now, given the amount that counties are having to use to address these problems on the ground,” he said.

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