Some plaintiffs are asking if $26B opioid settlement is enough

With a $26 billion nationwide opioid settlement hanging in the balance, cities and counties engaged in litigation are questioning whether the deal adequately compensates them for the costs they incurred suing drug companies for allegedly fueling the opioid crisis.

The deal would have Johnson & Johnson pay $5 billion and three major drug distributors pay $21 billion over the next 18 years to settle allegations they contributed to the crisis.

The settlement being discussed with J&J is separate from a $4.3 billion deal a New York Bankruptcy judge approved Wednesday, releasing the members of the Sackler family and founders of Purdue Pharma from all liability relating to alleged harms caused by OxyContin and other opioids. In addition to paying $4.3 billion, the Sacklers will also forfeit ownership of Purdue Pharma.

The concern some local municipalities have in California regarding the J&J settlement is that the intrastate allocation plans that would distribute funds among the subdivisions -- litigating and non-litigating municipalities alike -- won't adequately reimburse them for their litigating efforts. These efforts, they argue, was the impetus for the companies to enter settlement discussions in the first place.

Roman M. Silberfeld of Robins Kaplan LLP, who represents Kern and Alameda counties and 17 cities, said there are three distinct subdivisions discussed in the settlement: non-litigating municipalities that have never filed lawsuits; a large group of cities and counties that have filed suits and are engaged in different phases of litigation; and municipalities that have gone to trial.

"The treatment of those disparate groups have to be fair because the non-litigating entities haven't incurred any expenses," Silberfeld said. "My crowd, the litigating crowd, have incurred expenses. Some clients have incurred more than others."

"Figuring out how to take care of those interests is a very important part of the conversation," he continued. "If it isn't fair, we're not going to get the participation we need. I think everybody across the state is going to evaluate the terms of the deal through the lens of their own city and county and their own experience."

South Carolina attorney Joseph F. Rice of Motley Rice LLP, along with members of a Plaintiffs' Executive Committee negotiating the settlement terms on behalf of 3,000 communities, said in a statement last week, that they were encouraged to see momentum building in favor of the proposed global settlement after 44 states opted in.

"The overwhelming support for the deal among states moves us one step closer to finalizing the settlement," the statement read. "We hope the defendants consider this state participation rate sufficient to continue on for adoption by communities. The alternative is years of more litigation and the potential for additional bankruptcy filings. Intrastate allocation agreements have been reached in many states and others are actively pursuing resolution."

Attorneys would receive $1.95 billion from the distributors and $307 million from J&J, according to Rice.

J&J, along with the pharmaceutical distributors, will have until Sept. 4 to decide whether enough plaintiff states have opted in for the settlement to go through as is. However, the size of the settlement is dependent on plaintiff participation and could be reduced, Rice said in July.

Assuming the drug companies are on board by Sept. 4, the subdivision will have another 120 days to opt in to the deal and work out an intrastate allocation plan with the state or continue litigating in court. Thirteen states have already crafted allocation plans with subdivisions but most, including California have yet to do so. San Francisco attorney Anne Marie Murphy of Cotchett Pitre & McCarthy LLP, who represents San Mateo County, said states must be receptive to the needs of the local entities when the plans are negotiated.

"We wouldn't have a 26 billion settlement without the thousands of local entities that filed suit and have been prosecuting the cases for the last several years," Murphy said. "It is very important that states listened to those local entities when crafting those interstate allocation agreements. It's the counties that have been directly dealing with the opioids epidemics and incurring costs."

While the overall settlement is highly complex and the terms of each intrastate allocation plan will be negotiated individually among states and subdivisions, an allocation flowchart provided by the plaintiff committee shows that $150 million is expected to be set aside for a "Litigation Subdivision Cost Fund."

The next phase of the proposed settlement will call on cities and counties to analyze if it will meet the unique needs of their communities, a plaintiff committee statement read last week.

"We recognize the valid questions about the settlement, and the challenge of achieving complete sign-on," the statement reads. "However, as the opioid epidemic continues to take hundreds of thousands of lives and drain billions from local economies, the time for local municipalities to align on the settlement is now so that relief comes as soon as possible to taxpayers and communities that were forced to and continue to bear the costs of the crisis."

The first government-filed lawsuit to go to trial against J&J and other opioid manufacturers wrapped up in Orange County last month. The plaintiff jurisdictions of Los Angeles, Orange, and Santa Clara counties, along with the city of Oakland, seek $50 billion in damages. Superior Court Judge Peter Wilson said he would issue his ruling in October. People v. Purdue Pharma et al., 14-00725287 (Orange Super. Ct, filed May 21, 2014).

More than 14,000 people died from overdoses involving prescription opioids nationwide in 2019, according to the Centers for Disease Control and Prevention. Between 1999 and 2019, nearly 247,000 people died in the U.S. from overdoses involving prescription opioids and the total economic burden of prescription opioid misuse in the nation is $78.5 billion a year, including the costs of health care, lost productivity, addiction treatment and criminal justice involvement, the agency said.