Opioid Litigation Nears the End of the Road

By Harry Nelson
opioid litigation

As I wrote The United States of Opioids in 2018, I faced a dilemma: how much should I say about the outcome of the opioid litigation? When I wrote my previous book, From ObamaCare to TrumpCare, in late 2016, I took the risk of making predictions about how much of the Affordable Care Act was likely to survive repeal efforts. As that battle continues to wage on, leaving the ACA’s future uncertain even four years later, I was reluctant to venture as far out this time around. 

In comparison to the ACA, making predictions about opioid litigations settlement is getting safer as settlement talks proceed. With so much public awareness of the hundreds of thousands of Americans dead from opioid overdoses and millions more struggling with addiction, the litigation battlefield has taken clear shape. The National Prescription Opiate Litigation multi-district litigation (MDL) began in Cleveland, Ohio in 2017, growing to over 2,600 plaintiffs suing opioid manufacturers, distributors, and other parties, including national pharmacies.

As 2020 brings the third year of massive litigation, settlement talks to date have failed to produce a major settlement. At the same time, the as yet unsuccessful efforts have afforded us more clarity about how the opioid litigation is likely to play out and how much it will take to settle.

No Global Forum

The “opioid litigation” is distinct from other mass tort cases in the absence of a centralized forum. While the National Prescription Opiate Litigation encompasses over 2,600 plaintiffs—mostly cities and counties—all of the states have elected to pursue their lawsuits in their own state courts. In addition, some cities and counties have elected the same strategy of pursuing opioid-related claims in local state courts, closer to where the harm occurred. (For full disclosure purposes, I am designated as an expert witness on behalf of plaintiffs in several such state court actions.)

The lack of a consolidated venue has played a part in the slow path to settlement. State attorneys general have been working unsuccessfully since the early fall of 2019 to persuade the MDL trial judge or the Sixth Circuit Court of Appeals to stay the case in order to facilitate a state-led global settlement. Plaintiff attorneys representing the MDL plaintiff municipalities have continued to press for a seat at the table in negotiating a comprehensive settlement, adding a complicating dimension.

Division Among the Plaintiff States

While the States are united in their desire to negotiate a resolution without offering city and county attorneys a seat at the table, the more immediate obstacle to a global settlement has been a political divide among the states.  A group of predominantly Republican-led states favor acceptance of a settlement with the three largest drug distributors (McKesson, AmerisourceBergen, and Cardinal Health) that, in recent weeks, has been valued at roughly $18 billion (with payment over 18 years a significant component, as well as partial in-kind provision of medications). The $18 billion would settle both and local government claims. 

In recent weeks, this recent effort has stalled because a group of 21 predominantly Democratic-led states believe the settlement is too low. According to the Wall Street Journal, these state attorneys general are looking for a settlement, 30-80% higher (in a higher range of $22 to $32 billion) with an accelerated payout timeline. 

The fault line appears to be between a desire on one side to get funds sooner to deliver needed resources on the grounds, and concerns on the other about money being left on the table for a crisis that shows no signs of slowing. 

While the immediate stalemate relates to a prospective settlement with drug wholesalers, the same lines of division surfaced in late 2019 in the negotiations with Oxycontin manufacturer Purdue Pharma, which filed for bankruptcy in September 2019 after it became clear that Democratic-led states were rejecting a settlement valued at roughly $10 billion that Republican-led states and Purdue had agreed to. The opponents felt the settlement was too low based on profits siphoned out of the company by the Sackler family in recent years, and also wanted acknowledgment of accountability of wrongdoing. New York Attorney General Letitia James, a leader of the opposition to a faster, lower value settlement, filed claims in 2019 seeking to claw back funds distributed in recent years from Purdue Pharma to members of the Sackler family. 

These stalemates reflect the challenge that remains ahead in reaching a global consensus. The divide may be slow to resolve in a time when partisan differences feature so prominently in public policy. Republican states have emphasized the profound need in their states to address the ongoing public health crises presented by overdoses and opioid addiction. Meanwhile, Democratic attorneys general have emphasized the undercurrents of public anger in their states towards opioid makers and distributors and the need to bring home a settlement that sends the right message. In addition, they point to memories of settlements where, in retrospect, states got their pockets picked, such as Purdue Pharma’s $10 million settlement with West Virginia in 2004 and Kentucky’s $23 million settlement with Purdue in 2013. The legacy of these settlements is a sense of pressure not to leave money on the table by allowing the defendant simply to take money already reserved without tapping into their deeper capacity to pay more out of future operations without negatively affecting their long-term profitability.

Looking Ahead

What will it take to break the logjam? The best prospect to increase pressure appears to be state court trial dates coming later this year, including the State of New York’s claims currently scheduled to go to trial in March 2020 and cases later in the year in Ohio, California, and Tennessee. Just as the fall 2019 impending trial date in the first MDL trial (Cuyahoga and Summit Counties) forced settlement to avoid the public release of damning evidence and the risk of a large verdict, pressure is likely to mount on opioid distributors to sweeten their settlement offers sufficiently to satisfy the holdout states. 

So what should we expect as opioid settlements get closer? As the latest settlement efforts reflect, the opioid litigation is unlikely to produce a comprehensive global settlement. Instead, settlements are likely to proceed piecemeal with individual or small groups of defendants rather than globally, giving us even more information.

Perhaps the most surprising development is the likelihood that the total settlement value of the cases will be significantly lower than originally expected—and well below the “Big Tobacco” high water mark which exceeded $200 billion. The three large distributor cases (McKesson, AmerisourceBergen, and Cardinal Health) have a defined settlement range that tops out around $32 billion. While still an open question, the Purdue settlement is not expected to reach $20 billion. Even with other defendants’ contribution uncertain, it appears unlikely that the global value of opioid settlements with all defendants will reach $100 billion, with the best estimates closer to $80 billion or less. 

Among other things, the differential between opioids and tobacco reflects the relatively lower death rate of opioids relative to tobacco. Opioids grabbed headlines for shocking, preventable, and unexpected deaths, but have not touched anywhere close to the same numbers of people in comparison to the massive public health threat of tobacco. The settlement valuation also reflects the finances of the defendants. In contrast to Big Tobacco, where a handful of large companies drew all of their profits from tobacco, opioids were in many cases a small part of the business for their manufacturers and distributors.

2020 is likely to be a decisive year for opioid litigation settlements. As the current gaps are resolved and settlements take shape, these settlements present an important opportunity to invest in addressing one of the central public health challenges of our era, including the pain and suffering borne by so many. The most challenging questions lie ahead, as we shift from determining the size and shape of the settlements to figuring out how to use the resources yielded most effectively.

 

Harry Nelson is the founder and managing partner of Nelson Hardiman, LLP, the largest specialty healthcare and life sciences law firm in Los Angeles, and the author of The United States of Opioids: A Prescription for Liberating a Nation in Pain (ForbesBooks 2019).