Three Major Drug Distributors Reach $19.5-Bn Opioid Settlement; Purdue Pharma in New $6-Bn Settlement

Cardinal Health, McKesson, and AmeriSourceBergen, three major drug distributors, have agreed to a nationwide settlement of $19.5 billion to resolve opioid-related claims and litigation for the vast majority of opioid lawsuits filed by US state and local governments. In addition, Johnson & Johnson has agreed to contribute $5 billion to the national settlement to bring the total settlement value to $24.5 billion. Also, Purdue Pharma, a former manufacturer of the opioid, Oxycontin (oxycodone), and the Sackler family, owners of Purdue Pharma, reached a new $6-billion settlement to resolve opioid-related claims and litigation.

Settlement with major drug distributors
Under a national settlement, Cardinal Health, McKesson, and AmeriSourceBergen will pay up to $19.5 billion over 18 years at the following amounts: (1) AmerisourceBergen: $6.1 billion; (2) Cardinal Health: $6.0 billion; and McKesson: $7.4 billion. The three distributors will also implement injunctive relief terms, including establishing a clearinghouse that consolidates data from all three distributors. This data will be available to all settling states and territories to use as part of their anti-diversion programs.

The three drug distributors report that 46 of 49 eligible states, as well as the District of Columbia and all eligible territories, have agreed to join the settlement. As of February 25, 2022, more than 90% of eligible political subdivisions that have brought opioid-related suits against the companies have agreed to participate in the settlement or have had their claims addressed by state legislation. The states of Alabama, Oklahoma and Washington chose not to participate in the settlement. The state of West Virginia previously settled with the companies, and its subdivisions are not part of this settlement. The companies also previously settled with the Cherokee Nation and have reached a separate agreement in principle to settle the claims of the remaining federally recognized Native American tribes.

The effective date of the agreement is April 2, 2022. The final step before the effective date is for the participating states and territories, together with the distributors, to seek court-ordered consent judgments embodying the terms of the settlement. The distributors’ first annual payment, which is currently in escrow, will be released to the participating states on the effective date or as soon thereafter as all conditions under the settlement have been met.

Settlement by J&J
As previously announced in July 2021, J&J will contribute up to $5 billion to the nationwide settlement. This national settlement agreement is designed to resolve the majority of litigation-based claims regarding the past sales of the company’s prescription opioid medications. The company no longer sells prescription opioid medications in the US.

J&J had previously announced separate settlement agreements with the following states: New York in June 2021, Texas in October 2021, and Nevada and New Mexico in January 2022. The company also announced a settlement agreement with federally recognized tribes in February 2022. The dollar amounts to be received in these settlement agreements are the pro-rated shares that would have been received under the nationwide settlement agreement and will be deducted from the $5-billion all-in settlement amount.

New settlement with Purdue Pharma and Sackler family
Last week (March 3, 2022), Purdue Pharma and the Sackler family reached a new $6-billion settlement to resolve opioid-related claims and litigation.

The $6-billion settlement is $1.675 billion more than a prior $4.3-billion settlement under the company’s bankruptcy plan that was approved by a US bankruptcy court last year (September 2021). However, several states (California, Connecticut, Delaware, Maryland, Oregon, Rhode Island, Vermont, Washington) and the District of Columbia objected to the plan and appealed on the grounds the bankruptcy court lacked authority to force states to release their claims against the Sackler family.

The new $6-billion settlement, which is subject to approval by a US bankruptcy court, followed a ruling by a federal district court in December 2021 that agreed with the non-consenting states and vacated the Purdue bankruptcy order. The new $6-billion settlement keeps intact the initial provisions of the Purdue bankruptcy plan under which the company is to be dissolved or sold by 2024 and bans the Sacklers from the opioid business in the US and globally.

Under the new settlement, the Sackler family must pay $6 billion to states over 18 years, with larger payments frontloaded, so states will receive more money, sooner as compared to the previous bankruptcy plan. The settlement, if approved by a US bankruptcy court, would resolve current and future civil claims, but the liability protection does not extend to criminal prosecutions. Full highlights of the new settlement can be found here.

Source: Johnson & Johnson, Cardinal Health, McKesson, AmeriSourceBergen, and Attorneys General of Connecticut, California, Delaware, Maryland, Oregon, Rhode Island, Vermont, Washington, and District of Columbia