The long legal fight between several state and local governments in the United States and drug manufacturers and distributors related to opioid drug abuse seems to be nearing its end. In a landmark settlement deal, drug maker
Johnson & Johnson ( JNJ Quick Quote JNJ - Free Report) and three opioid distributors — McKesson Corp ( MCK Quick Quote MCK - Free Report) , Cardinal Health ( CAH Quick Quote CAH - Free Report) and AmerisourceBergen ( ABC Quick Quote ABC - Free Report) — have agreed to pay $26 billion over a period of up to 18 years to resolve thousands of pending lawsuits in several states related to handling of addictive painkillers, which led to a public health crisis in the United States.
Per the deal, J&J will pay an aggregate of $5 billion, of which $3.7 billion is to be paid in the first three years and the balance amount over the next six years, for settling claims alleging that it illegally marketed opioids. The company stopped manufacturing opioid drugs last year.
AmerisourceBergen and Cardinal Health will pay up to $6.4 billion each, while McKesson will pay up to $7.9 billion over the next 18 years to resolve allegations of lax controls over opioid drug distribution.
The settlement deal was awarded as part of complex, multistate negotiations, which included attorney generals from 14 U.S. states including New York, Florida and Connecticut among others. The settlement will help resolve nearly 4,000 lawsuits in federal and state courts.
Apart from monetary compensation, the agreements also outlined other terms and conditions for the companies. The drug distribution companies will need to monitor, report and prohibit suspicious opioid orders. Moreover, a centralized independent clearinghouse will be established to remove blind spots in the current systems used by distributors. J&J will have to stop selling opioids and disengage from any activities related to opioids and their promotion.
The U.S. Opioid Epidemic
Opioid drugs are used as painkillers and have high abuse potential. The FDA controls the use of opioid-based drugs like morphine, codeine, oxycodone and fentanyl.
However, the marketing practices of pharma companies since late 1990s increased prescribing of opioid-based drugs as painkillers. These pharma giants sold these drugs by assuring that patients will not get addicted to opioid pain relievers. It is rumored that biggest beneficiary of this crisis is Purdue Pharma as it aggressively marketed its opioid analgesic, OxyContin. The company made huge profits from the sale of the drug, used either as a medicine or for addiction.
Per the National Institute of Drug Abuse, opioid overdose claimed lives of nearly 50,000 Americans in 2019. About 1.7 million people in the United States, taking prescription opioid pain relievers, suffered from substance use disorders in 2017. Per the Centers for Disease Control and Prevention’s estimate, prescription opioid misuse alone creates a total economic burden of $78.5 billion every year. In the past two decades, nearly 841,000 deaths have occurred due to any kind of drug overdose, with opioids leading the pack.
Future of the Settlement Deal
The amount of money available to different states and local governments per the settlement deal will likely be directed for treating opioid addiction; family support, education and other social programs. The Opioid Recovery & Remediation Fund Advisory Council will distribute the funds. Each state will receive a share of the deal based on the impact of the crisis on the state and its population.
However, the deal needs the support of the majority of states and local governments or it will fall apart. Per a Reuters
article, at least 48 states in the United States need to support the deal. States that were not part of the negotiation can sign the deal in 30 days, followed by another 120 days for bringing local governments on board.
The attorney general of North Carolina believes that more than 40 states will sign the deal per the same article. The involved companies also believe that the accord will resolve majority of their pending opioid-based lawsuits. However, Washington’s attorney general believes that the settlement is not good enough for the state. Moreover, some local governments and communities in Indiana and West Virginia are opting out of the deal as it fails to meet their expectations.
A clear picture of the settlement deal is likely to emerge over the course of the next 30 days. A successful completion of the deal will remove a major overhang for the four companies involved in the deal.
While J&J, McKesson and AmerisourceBergen carry a Zacks Rank #3 (Hold), Cardinal Health carries a Zacks Rank #4 (Sell).
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