California Attorney General Rob Bonta today announced a historic $26 billion settlement that will help bring desperately needed relief to people in California and across the country who are struggling with opioid addiction. The settlement includes Cardinal, McKesson, and AmerisourceBergen – the nation’s three major pharmaceutical distributors – and Johnson & Johnson, a company that manufactured and marketed opioids. If approved, the settlement would resolve investigations and litigation over the companies’ roles in creating and fueling the opioid epidemic. The proposed settlement also requires significant industry changes that will help prevent this type of crisis from ever happening again. State negotiations were led by the attorneys general of North Carolina and Tennessee, along with the attorneys general of California, Colorado, Connecticut, Delaware, Florida, Georgia, Louisiana, Massachusetts, New York, Ohio, Pennsylvania, and Texas.
“Nothing can undo the devastating loss of life caused by the opioid epidemic, or stop the grief it has caused for its victims and their families, but this proposed settlement represents one step in the process of healing our communities,” said Attorney General Bonta. “Along with our coalition partners, our office has worked to hold accountable bad actors who fueled this public health crisis – including those who produced, distributed, and marketed these dangerous drugs. While today’s proposed settlement is a step in the right direction, we’ll continue to work to bring more much-needed relief to families throughout California whose lives have been upended by the opioid crisis.”
The settlement would resolve the claims of both states and local governments across the country, including the nearly 4,000 that have filed lawsuits in federal and state courts. Following today’s announcement of the proposed settlement, states have 30 days to sign onto the deal and local governments in the participating states will have up to 150 days to join. Settlement approval is contingent on a critical mass of states and local governments participating. States and their local governments will receive maximum payments if each state and its local governments join together in support of the agreement. As part of the proposed settlement, California stands to receive a maximum of nearly $2.34 billion if all California local governments sign on.
Under the terms of the settlement:
- The three distributors will collectively pay up to $21 billion over 18 years;
- Johnson & Johnson will pay up to $5 billion over nine years with up to $3.7 billion to be paid during the first three years;
- The total funding distributed will be determined by the overall degree of participation by both litigating and non-litigating state and local governments;
- The substantial majority of the money is to be spent on opioid treatment and prevention; and
- Each state’s share of the funding has been determined by agreement among the states using a formula that considers the impact of the opioid crisis on the state – the number of overdose deaths, the number of residents with substance use disorder, and the number of opioids prescribed – and the population of the state.
The settlement also includes injunctive relief terms to help prevent this type of crisis from reoccurring. It will result in court orders requiring Cardinal, McKesson, and AmerisourceBergen, for a period of 10 years, to:
- Establish a centralized independent clearinghouse to provide all three distributors and state regulators with aggregated data and analytics about where drugs are going and how often, eliminating blind spots in the current systems used by distributors;
- Use data-driven systems to detect suspicious opioid orders from customer pharmacies;
- Terminate customer pharmacies’ ability to receive shipments, and report those companies to state regulators when they show certain signs of drug diversion;
- Report and prohibit shipping of suspicious opioid orders;
- Prohibit sales staff from influencing decisions related to identifying suspicious opioid orders; and
- Require senior corporate officials to engage in regular oversight of anti-diversion efforts.
It will also result in court orders requiring Johnson & Johnson to:
- Stop selling opioids for 10 years;
- Not fund or provide grants to third parties for promoting opioids;
- Not lobby on activities related to opioids; and
- Share clinical trial data under the Yale University Open Data Access Project.
This settlement comes as a result of investigations by state attorneys general into whether the three distributors fulfilled their legal duty to refuse to ship opioids to pharmacies that submitted suspicious drug orders and whether Johnson & Johnson misled patients and doctors about the addictive nature of opioid drugs.
Tragically, just last year, opioid overdose deaths rose nationwide to a record 93,000, a nearly 30 % increase over the prior year. The opioid epidemic has also caused considerable harm to California’s communities. In 2019, the California Department of Public Health reported 3,244 deaths related to an opioid overdose. The epidemic has resulted in considerable costs to the state in the form of healthcare, child welfare, criminal justice, and many other programmatic costs. On the societal level, opioid addiction, abuse, and overdose deaths have torn families apart, damaged relationships, and eroded the social fabric of communities. In addition, the uncertainty and stress caused by the COVID-19 pandemic continues to feed the increase in opioid overdose deaths. The Overdose Detection Mapping Application Program reports that national suspected overdoses in 2020 rose 18 % in March, 29 % in April, and 42 % in May compared to the same months in 2019.
A previous version of this deal in principle was announced in 2019 and included the opioid manufacturer Teva. Negotiations with Teva are ongoing and are no longer part of this agreement. Today’s deal comes on the heels of a previously announced $573 million opioid settlement with McKinsey & Company, which will bring over $59 million to California for opioid abatement.