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The Opioid Settlement Is Good for Big Pharma. It May Not Be Good for Us.

The pharmaceutical companies that fueled the opioid crisis must be held legally accountable. But to confront the social problems at the root of the addiction crisis, we’ll need political victories, not just courtroom ones.

Under a new settlement, Johnson & Johnson, along with three opioid wholesalers, would pay $26 billion over the next twenty years. (Niels Wenstedt / BSR Agency via Getty Images)

In July, the attorneys general of Connecticut, Delaware, Louisiana, North Carolina, New York, and Pennsylvania announced a tentative settlement with one opioid manufacturer and three distributors, inviting other states to sign on. The agreement is shaping up to be the largest and most unique civil settlement since the tobacco Master Settlement Agreement of 1998.

Under the terms of the deal, manufacturer Johnson & Johnson (which owns Janssen Pharmaceuticals) and wholesalers McKesson, Cardinal Health, and AmerisourceBergen would pay $26 billion over twenty years to compensate states and municipalities for the cost of implementing drug-abuse treatment and prevention programs. But the companies would not be required to admit wrongdoing, and would also be shielded from further civil action in jurisdictions where the settlement applies. (In an official press release distributed after the AGs’ announcement, Johnson & Johnson asserted that all the company’s actions were “appropriate and responsible,” and the wholesalers said in a joint statement that, while they accept the settlement, they still “strongly dispute the allegations made in these lawsuits.”)

In recent years, nearly every state in the country, as well as a slew of local municipalities and Indigenous nations, have sued these companies and others for allegedly misleading the public about the risks of commercial opioid painkillers. State AGs and other plaintiff attorneys now must choose whether to drop pending lawsuits of their own in favor of the national settlement.

For the corporate defendants, the settlement seems to offer the chance to supersede the estimated four thousand outstanding state and municipal civil suits before they generate additional steam. It’s clear that these suits, litigated one by one, could become extremely costly for the drug companies. One such suit in Oklahoma, in 2019, resulted in a $573 million penalty for Johnson & Johnson alone. Subsequent court decisions in two Ohio counties yielded a $260 million fine for four drug wholesalers. The nationwide settlement agreement could save the drug companies hundreds of millions or even billions of dollars.

For the plaintiffs, on the other hand, the settlement seems to rationalize what could otherwise be a chaotic and time-consuming process by establishing a standard framework for channeling penalty payments to affected jurisdictions. But already, the group of attorneys general who negotiated the deal are facing resistance from other state actors around the country, who worry that the nationwide settlement doesn’t go far enough.

The attorney general of Washington State recently told the New York Times, “The settlement is, to be blunt, not nearly good enough for Washington.” The district attorneys of Philadelphia and Pittsburgh, the two largest municipalities in Pennsylvania, have openly defied the deal, even suing the state’s attorney general in an attempt to maintain the local suits they already have against the same corporate defendants.

Outside of attorneys’ offices, some parents and community members affected by the opioid epidemic have expressed disbelief at the settlement.

“You can’t bring people back that are gone,” the mother of an overdose victim in northeastern Pennsylvania told local reporters when asked about the deal. The chair of FED UP! — a national coalition of families affected by overdose and opioid dependence — told the Guardian that she’d like to see steeper civil penalties and even criminal prosecutions of some corporate executives. “This should not be ‘the cost of doing business,’ another tax write-off,” she said. “I don’t think we would let a cartel get away with this. So why is it different for a corporation?”

A Get Out of Jail Free Card?

An estimated five hundred thousand people have died of opiate overdoses in the United States since 1999. The role of corporate actors in causing and prolonging that public-health crisis has been well understood since at least 2007. Predictably, then, this is not the first attempt to hold drug companies accountable in civil court.

Public-health experts typically identify three waves of opioid-related litigation in the United States: in the first wave, individual patients pursued personal injury suits without success; in the second wave, also largely unsuccessful, individuals joined together in class action cases; and in the third wave, state and local governments advanced collective claims based on legal theories such as public nuisance and unjust enrichment.

The third wave, which only picked up momentum in the past five years or so, has easily been the most successful. After largely dodging accountability for the better part of two decades, the drug companies suffered major losses in Oklahoma, Ohio, and other jurisdictions. And until the AGs’ announcement last month, thousands of other suits around the country threatened to compound those defeats by potentially stacking up tens of billions of dollars in penalties.

With the emerging settlement, this third wave of litigation may be reaching its climax and conclusion. According to reports in Bloomberg, the New York Times, and elsewhere, about forty states are expected to sign on to the deal — which could be bad news for some communities affected by the crisis.

For a state to sign on to the agreement requires nullifying ongoing litigation, which would leave hard-hit municipalities in the uncertain position of soliciting payments from state disbursement programs rather than negotiating them directly from the defendants. And while the $26 billion sum appears substantial on its face, it likely represents a significant bargain for the drug companies — and a deep compromise for some states and municipalities.

Investors certainly seem to think the deal is a win for the drug companies. According to Bloomberg, the corporate defendants revealed the $26 billion penalty price tag in securities filings well ahead of the AGs’ announcement, and stock prices for all four companies trended up. One investment consultancy firm even wrote in a message to its clients that the settlement was a “positive development” that would “remove the overhang on shares.”

One company is also conspicuously absent from the settlement: Purdue Pharma, which originated commercial oxycodone (OxyContin) and is arguably the entity most responsible for the opioid epidemic. The billionaire Sackler family recently offered to pay out about $4 billion from their personal fortunes in exchange for protection in perpetuity from further legal action stemming from the company’s actions. The US Department of Justice slammed the proposal as “unconstitutional and illegal.”

The Tobacco Fiasco

A master settlement agreement through which hundreds of government plaintiffs withdraw their individual lawsuits and submit to a national disbursement framework is an unusual outcome for civil litigation. But it is not entirely unprecedented. In fact, it has one huge precedent: the tobacco Master Settlement Agreement of 1998 (MSA), the largest civil settlement in US history.

The MSA compelled the four largest tobacco companies (Philip Morris, R. J. Reynolds, Brown & Williamson, and Lorillard) to halt deceptive advertising practices (including all advertising to minors); dissolve the tobacco industry front groups that had previously muddied the waters of tobacco-related cancer research; and, most importantly, make annual payments to all party states in perpetuity, including a minimum of $206 billion in the first twenty-five years after the agreement.

The intent of these payments was to offset the social cost of addressing smoking-related illnesses, including by fortifying public health-provision systems like Medicaid. But the use of the perpetual payments, which were deposited into a central escrow account and then dispersed to state executives at levels calculated according to domestic cigarette sales, was generally not disciplined by legislation. As a result, the payments tended to be subsumed into general state budgets, often to cover shortfalls entirely unrelated to public health or cancer mitigation.

As time went on, states began issuing bonds against future settlement revenues, raising capital based on the promise of payments that were already pegged to the local rate of tobacco consumption. Consequently, as a 2018 paper in the journal Public Health Reports notes, “the MSA [master settlement agreement] actually created a perverse incentive for states to protect the sale of cigarettes.” In one case, state attorneys general even “helped Phillip Morris fight a court judgment with the potential to bankrupt the company in part to ensure that the MSA payments would continue.”

The braiding together of public finance and private enterprise in the Tobacco Master Settlement Agreement has been well documented and widely criticized by lawmakers and jurists on both sides of the aisle. So it makes sense that many are concerned a similar fate might befall the (much smaller) payments promised by the nationwide opioid settlement.

Republican state legislators in Connecticut recently sent a letter to that state’s Democratic governor and attorney general, saying “We must not repeat the infamous misuse of the state’s tobacco settlement funds,” which they said had come to be relied upon as “a budgetary escape hatch.” (The attorney general answered that the AGs involved in the multiparty settlement were all committed to “‘abatement,’ i.e., strategies, initiatives and programs that help our states, victims and their families confront and overcome the crisis.”)

Several attorneys general, including Connecticut’s, have called on state legislatures and governors to establish firm “guide rails” to ensure opioid settlement money is not siphoned off into other budgetary areas. But it is far from clear whether the funds currently promised to state governments are enough to combat the morbidity and mortality of the opioid crisis.

Connecticut, for example, stands to receive about $300 million over twenty years from the four corporate defendants (in 2019, Oklahoma was able to receive almost twice that from Johnson & Johnson alone). That would be enough money to provide desperately needed support to existing harm reduction organizations, and perhaps to shore up the state’s access to drugs like naloxone and methadone — but hardly enough to establish something like a single-payer system for inpatient drug rehabilitation, which may be closer to what the state actually needs.

The Legal and the Political

Four years ago, after my Pennsylvania hometown experienced more than fifty opiate overdoses in forty-eight hours, I wrote that the most dangerous response to the opioid crisis was one that rejected collective political action. “Even as drug addiction continues to tear a hot, bleeding swath through so many American communities, political intervention is still possible. More than that, it’s vital.”

Litigated settlements are a strange thing. Jurists say they crystallize social sentiment, delivering collective justice through mediated mechanisms that provide measurable results. But I think many of us feel, on a visceral if not an intellectual level, that a decision rendered in a courtroom is something altogether different than a political victory won through community struggle.

Soon we will know whether the settlement can actually mitigate the harms of mass opioid dependence. But confronting the social problems at the root of the addiction crisis will require a social movement that extends well beyond the courtroom. Whether this settlement contributes to building that project, or demobilizing it, is perhaps the most important unanswered question of all.