Opioid Makers Angling to Settle out of Court

03.09.2019 -

After Johnson & Johnson last week was ordered to pay $572 million to the state of Oklahoma, analysts and other observers said the verdict could prompt other opioid makers to think more seriously about settling.

In the highly significant group of federal cases slated to begin in Cleveland, Ohio, in October, Judge Dan Polster has reportedly pushed for settlements as a way to resolve the complex litigation and to address the nationwide opioid crisis.  One analyst estimated the total payout under such a scenario at more than $50 billion.

Since the J&J verdict, Ireland-based, US-managed drugmaker Allergan – which is preparing to merge with AbbVie – has agreed to pay $5 million to settle its part of the federal trial. Another, Endo, has agreed to settle out of court with two Ohio counties, Summit and Cuyahoga, which are regarded as a bellwether for future cases.

Endo’s settlement would exempt it from the Cleveland trials, reports said but Allergan’s settlement covers only branded drugs, not generic painkillers. Allergan, however, maintains that it doesn’t have liability for generic claims, as it sold all of its generic assets to Israel’s Teva in 2016. Teva has already paid $85 million.

According to a filing with the US Securities and Exchange Commission (SEC) Allergan faces about 2,000 opioid lawsuits altogether. In its own SEC filing, Endo said it was facing lawsuits from 18 states and about 2,300 cities, counties, Native American tribes and other government entities

Next to strike a deal in Ohio is expected to be privately owned Oxycontin manufacturer Purdue Pharma, which reportedly has offered $10-12 billion to resolve thousands of the lawsuits bundled in the Cleveland court. The Connecticut-based drugmaker has already paid $270 million to resolve claims in Oklahoma.

Even if the paid and projected settlements look like petty cash in view of the J&J verdict, the interaction will have dramatic repercussions for Purdue. Under a proposed settlement seen as imminent, it would file for Chapter 11 bankruptcy protection and transform itself into a “public benefit trust corporation,” with all profits from drug sales and other proceeds going to the claimants. Additionally, the company would provide more than $4 billion in free drugs, including overdose-reversal medicines.

The arrangement, to stay in place for seven to 10 years, would be overseen by trustees named by the bankruptcy court. As part of the process, the drugmaker’s owner family Sackler would cede control. The family, whose net worth is estimated by the business magazine Forbes at $14 billion – most of it coming from opioid sales – would shoulder $3 billion of the payout.

Purdue has said publicly it is prepared to defend itself “vigorously,” but sees little point of spending years in “wasteful litigation and appeals."

In 2007, the company paid $600 million to resolve opioid claims, and three of its top executives pleaded guilty in federal court to criminal charges that they misled regulators, doctors and patients about the drug’s risk of addiction and its potential to be abused. Despite this, management continued to promote the drug, playing down its risk and overselling its benefits, the lawsuits charge.

More than 2,000 cities, counties and other political units across the US are said to have sued opioid manufacturers, distributors and others, alleging their actions have contributed to a national epidemic. The lawsuits say drugmakers oversold opioid benefits for treating chronic pain and downplayed their risks, and that distributors failed to monitor suspicious orders.

Along with opioid makers, US authorities are now cracking down on illiegal trafficking of the drugs. In a raid encompassing several states, in particular Virginia, authorities broke up a drug cartel, arresting 40 people and seizing 30 kg of fentanyl, a drug said to be capable of killing 14 million people. Over the past five years statistics attribute more than 200,000 US deaths to opioid overdose.