By Jared S. Hopkins
An $18 billion settlement offer from three major drug
wholesalers aimed at resolving litigation over their alleged role
in the opioid crisis appears to have fallen apart, after more than
20 state attorneys general rejected it in a letter sent to the
companies' law firms this week.
The letter, reviewed by The Wall Street Journal, shows that the
drug industry hasn't won enough support from states to begin moving
the sprawling litigation to a global resolution.
States regardless of whether they support the offer, and
distributors continue to hold negotiations. States said they hope
to strike an agreement that achieves wide resolution.
The dissenting states want a larger total amount, or for the sum
to be paid out sooner than the proposed 18 years, according to
people familiar with the matter. Some states are targeting between
$22 billion and $32 billion over fewer than 18 years, according to
a person familiar with the matter.
The rejection is the latest setback in negotiations to resolve
the nation's complex opioid-crisis litigation, which began several
years ago. The majority of the lawsuits have been consolidated in
federal court in Cleveland, though state attorneys general have
largely pursued cases in their own state courts.
The parties have been holding talks since at least October, when
The Wall Street Journal reported that the three distributors --
McKesson Corp., AmerisourceBergen Corp., and Cardinal Health Inc.
-- were in talks to collectively pay $18 billion over 18 years.
Johnson & Johnson was also involved in the discussions to
contribute additional money, the Journal reported.
The letter was signed by attorneys general for 21 states as well
as Puerto Rico and the District of Columbia and include some of the
hardest hit by the opioid crisis, including Ohio and West Virginia.
It was signed mostly by Democratic attorneys general, although
there are some Republicans, including West Virginia's Patrick
Morrisey and Florida's Ashley Moody.
"Each of you has expressed that your clients seek a settlement
that is global," the letter reads. "It is our collective view that
the most recently communicated offer is unlikely to achieve that
goal. We invite you to discuss our specific issues more fully so
that a global settlement may be reached."
Some states remain supportive of the $18 billion offer, which
grew out of talks with wholesalers that were led by a bipartisan
group of the attorneys general from North Carolina, Texas,
Pennsylvania and Tennessee. Those attorneys general didn't sign the
letter.
"This is a complicated set of cases and negotiations continue,"
Tennessee Attorney General Herbert H. Slatery III said in a
statement. "States have taken different positions for different
reasons, and the ups and downs are expected."
Ohio Attorney General Dave Yost said in an interview the letter
shows the states "who are not willing to sign on" to the offer. He
said the wholesalers should either pay $18 billion in a shorter
time period, or provide more funding. Ohio hired a firm that
analyzed the wholesalers' ability to pay damages and found an $18
billion settlement would have limited or no impact on the
companies' finances.
States don't want to drive the companies into bankruptcy but
believe the wholesalers can provide additional funds, according to
people familiar with the matter.
AmeriSourceBergen said it remains committed to a "fair
negotiated resolution" but will continue to defend itself in court
and is preparing for upcoming trials. It said in a statement it was
"disappointed to hear that some states do not currently understand
the merits of the global settlement framework that the distributors
have been discussing with the attorneys' general over the past many
months."
McKesson said it is focused on "finalizing a global settlement
structure that would serve as the best path forward to provide
billions of dollars in immediate funding and relief to states and
local communities." The company said it is committed to be part of
a solution but is prepared to defend itself in litigation.
Cardinal Health didn't respond to a request for comment.
Some dissenting states were frustrated by comments that
AmerisourceBergen Chief Executive Steve Collis made last month on
an earnings call, according to people familiar with the matter. Mr.
Collis said the company didn't need to save up cash for an opioid
litigation settlement.
"It is a lot of cash in absolute terms," Mr. Collis said. "In
relative terms, it's relative too, a couple of hundred million
dollars a day in sales, it's not that much. And some of it is out
of the country."
The state attorneys general who signed the letter don't include
New York's Attorney General Letitia James, who has a March trial
scheduled against several drug companies including wholesalers. A
spokesman for Ms. James said negotiations with wholesalers are
ongoing.
Drugmakers, distributors and retail pharmacies are facing
lawsuits from virtually every state and thousands of city and
county governments. More than 2,000 lawsuits allege the industry's
overly aggressive marketing of prescription painkillers and lax
oversight of drug distribution contributed to widespread opioid
addiction.
At least 400,000 people have died in the U.S. from overdoses of
legal and illegal opioids since 1999, according to federal data.
The lawsuits are seeking to recoup the costs borne by communities
grappling with widespread addiction, including burdens on emergency
services, medical care and foster services for children born to
addicted parents.
The wholesalers' proposal was viewed by the industry and others
as a first step to achieve a broad resolution, outside bankruptcy,
of the sprawling opioid litigation. In September, OxyContin-maker
Purdue Pharma LP filed for bankruptcy to help implement a
settlement the company's owners, the Sackler family, estimate to be
worth at least $10 billion.
Teva Pharmaceuticals Industries Ltd. said in October it had
agreed in principle with several states to resolve all its legal
claims by donating addiction-treatment drugs, in a deal the
Israel-based company valued at $23 billion, as well as a cash
payment of $250 million. Johnson & Johnson has said it would
put forward $4 billion toward a global settlement.
A Teva spokeswoman said its agreement in principle remains
intact.
A J&J spokesman said in a statement its "agreement in
principle is intended to provide certainty for involved parties and
critical assistance for families and communities in need," and it
will continue working with states to finalize it.
Reaching a global resolution has proven difficult for lawyers
representing the various parts of the pharmaceutical industry,
thousands of municipalities and the states, which often have
differing interests.
A trial in Cleveland was avoided in October at the last minute
after four drug companies, including the three wholesalers, secured
a settlement with two Ohio counties. The trial would have been the
first time documents were presented and witnesses questioned in
open court about how drug distributors allegedly contributed to the
opioid crisis.
Write to Jared S. Hopkins at jared.hopkins@wsj.com
(END) Dow Jones Newswires
February 14, 2020 12:36 ET (17:36 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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