The Opioids Deal

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CLEVELAND — Inside the plaintiffs’ war room, bleary-eyed, caffeinated lawyers worked on what would be one of the most important cases of their careers — the first bellwether trial in the national opioid litigation against the country’s biggest drug companies. Their rented office space across from the federal courthouse was crammed with copy machines, boxes of documents, whiteboards and — to capture the gravity of the work — some World War II-era propaganda posters.

“Careless Talk Costs Lives,” read one.

Someone had stenciled a message on the wall: “If In Doubt Don’t Ship It Out.”

But their first battle, with two Ohio counties as plaintiffs, was called off at the last moment. At 1 a.m. on Oct. 21, hours before opening arguments were to start, four of the drug companies settled with Summit and Cuyahoga counties — with no admission of wrongdoing.

That $260 million deal leaves many of the most vexing questions surrounding the national litigation unresolved — chief among them, whether 12 ordinary people would have held drugmakers and distributors liable for the nation’s catastrophic opioid epidemic. Meanwhile, the crisis continues claiming more than 100 lives a day.

The best-case scenario for cities and counties grappling with this historic public health disaster could be a sweeping settlement among all the parties. That could potentially funnel tens of billions of dollars from the companies to communities desperate for resources.

But such a deal is unlikely in the near term, according to interviews with attorneys involved in the case and a survey of attorneys general in all 50 states and the District of Columbia. A provisional framework for a global settlement, announced by four of those attorneys general on Oct. 21, is supported by only three other states so far.

“Global peace,” as the companies call such a deal, could take months, years, or remain a pipe dream — forcing communities across the country to make their own cases against the drug companies and wind up competing with one another in a protracted legal slog.

Even the most optimistic projection of a long-term settlement — legal experts suggest a range from $50 billion to $100 billion, paid out over many years — will be orders of magnitude smaller than the human cost of the epidemic.

“No matter how much goes in there, it will not be enough,” said Roger Michalski, an associate professor at the University of Oklahoma College of Law who has closely followed the opioid lawsuits. “The scale of the problem is so massive, and it’s much easier to cause harm than to fix harm.”

A recent report from the Society of Actuaries said the crisis cost the nation $631 billion in economic damages in just a four-year period. The extra health care costs among people with opioid addiction reached $56.9 billion in 2018 — a single year. And on Monday, the White House Council of Economic Advisers estimated the cost of the epidemic — including “the value of lives lost” — at $696 billion in 2018, a stunning 3.4 percent of GDP.

Were a deal wrapped up right now, the epidemic’s effects would likely last for years, perhaps even decades, experts say, pointing to a generation of babies suffering from drug withdrawal at birth, or forced into foster care because their parents are locked up or dead.

“Let’s say that a miracle of all miracles occurs, and not a single opioid tablet was sold again, and not another gram of heroin was ever distributed again,” said Steve Williams, mayor of Huntington, W.Va., who traveled to Cleveland to tell federal judge Dan Aaron Polster about his city’s plight. “We’d still be dealing with the fallout of this epidemic for the next four decades.”

A cautionary tale

There are still about 2,400 cities, counties and Native American tribes, not to mention most of the states of the union as well as the District of Columbia, suing a couple dozen major drug companies, and in some cases their owners. It’s a gigantic Gordian knot, involving a tangle of companies and governmental jurisdictions, all represented by combative and rivalrous lawyers.

One model for the litigation is the 1990s’ tobacco case, in which four major tobacco companies agreed to pay out an estimated $240 billion over more than two decades to resolve lawsuits by states contending they had covered up the dire health effects of smoking. But the tobacco companies were Goliaths. The drug industry is smaller, with more modest profit margins.

One of the biggest defendants, McKesson Corp., with annual gross sales of $214 billion last year that made it the seventh-largest U.S. company by that measure, reported in May that its free cash flow at the end of fiscal 2019 was $3.5 billion.

If these drug companies were the size of tobacco industry, “we’d be talking about a $500 billion settlement, or a trillion-dollar settlement, because those are the numbers that reliable public health economists have put out there that it’s going to cost us,” said Paul J. Hanly Jr., one of the co-leads of the municipal plaintiffs in Cleveland. “These companies do not have that kind of money.”

The tobacco case also provides a cautionary tale. Much of the tobacco money went to repair roads, bridges and potholes, rather than toward smoking cessation campaigns or public health programs.

“It got spent on everything other than tobacco,” said Ohio Attorney General Dave Yost (R). “We can’t afford to have that happen in the opioid epidemic.”

Many of the parties in the legal war want to see a global settlement as soon as possible. That includes Polster, who has spent two years trying to get the parties to settle, saying he wants to see communities gain access to the money as quickly as possible.

The companies, though, deny they’re responsible for the epidemic. They argue they made and distributed legal painkillers that were overprescribed by shady doctors or illegally diverted to the street market. They even sought Polster’s recusal from the case, saying his push for a settlement showed bias against them.

But the companies, which have been mostly reluctant to discuss settlement negotiations, face the risks that come with trying to persuade any jury the epidemic is unrelated to their own decisions of the past quarter century.

Before the federal trial, the three major drug distributors offered the two Ohio counties $90 million. The companies more than doubled that offer shortly before opening arguments.

During the pretrial discovery process in Polster’s court, plaintiffs won access to a confidential Drug Enforcement Administration database known as ARCOS that tracked every pill manufactured and distributed in the U.S. The Washington Post and HD Media of West Virginia won a court case gaining access to it. The records showed that from 2006 to 2012, drug companies shipped 76 billion hydrocodone and oxycodone pills across the U.S. Some small-town pharmacies handled millions of pills.

In a trial, billions of dollars in penalties would ride on the way a jury might react to those numbers and internal company emails unsealed in the case.

In the days before the scheduled federal trial in Cleveland, the three major drug distributors initially offered the two Ohio counties $90 million, according to Hanly. The companies more than doubled that offer shortly before opening arguments.

‘Equivalent of a ham sandwich’

Even as the cities and counties brought lawsuits, the states developed their own cases and sought to take the lead in a national settlement. On the afternoon of Oct. 21, hours after the bellwether trial was to have begun in Ohio, attorneys general from North Carolina, Pennsylvania, Tennessee and Texas announced they’d reached a $48 billion “agreement in principle” with giant distributors McKesson, AmerisourceBergen and Cardinal Health, as well as with manufacturers Teva Pharmaceutical Industries and Johnson & Johnson.

The “framework” would deliver $4 billion in cash in the first two to three years, and a billion a year thereafter for 18 years. The remaining $26 billion would come in the form of free anti-addiction medication and treatments to counter drug overdoses. The state officials say the proposal is pragmatic, based on how much the drug companies could actually pay.

But top lawyers for the local jurisdictions chafed at the legal maneuver and have refused to sign on. They say they’ve done the heavy lifting for two years, taking scores of depositions, obtaining the ARCOS data and building cases against the companies.

“They’re attempting to come in and claim credit,” said Paul Farrell Jr., one of the three lead attorneys for the municipal plaintiffs. “I’d prefer if they’d just get out of the way and let us recover the moneys on behalf of those areas that are most affected.”

He and other local attorneys argue that the dollar figure is far too low and the payout too slow.

“It is the equivalent of a ham sandwich,” Hanly said.

The state officials counter that they, too, have worked on the issue for years, and suggest the local attorneys, who are primarily in private practice, are motivated in part by the substantial fees they are likely to receive from a deal.

The officials dismiss concerns about the small number of states on board with their efforts, stressing it’s too early to gauge support for a global deal.

“I’d describe this phase as one in which AGs are kicking the tires,” said Laura Brewer, a spokeswoman for North Carolina Attorney General Josh Stein (D).

Officials from three states — Iowa, Missouri and Nebraska — told The Post they support the deal, while officials from three others — Ohio, West Virginia and Mississippi — said they’re opposed, with most of the rest saying they’re still studying the details.

Yost, the Ohio attorney general, said he’s worried that states most devastated by the epidemic, such as his own, won’t get adequate money out of the proposed deal. He compared the current framework to “a pile of lumber delivered to the construction site.”

With the memory of the tobacco settlement still rankling, states and local governments are also in conflict over who should control the settlement money.

“Local governments like the one I represent in Milwaukee County need control over the money. We can’t rely on the state political legislative budgeting process,” said Margaret Daun, the corporation counsel for Milwaukee County, who appeared before Polster.

Another complicating factor is that the defendants are split among manufacturers of opioids, distributors and pharmacies. They have their own rivalries and legal strategies. Walgreens, for example, was the lone holdout on a settlement with the two Ohio counties. Meanwhile Purdue Pharma, maker of the slow-release opioid OxyContin — the drug that experts say played a major role in the epidemic — has filed for bankruptcy as part of a proposed settlement deal. Purdue has offered to settle for roughly $12 billion in a deal that is politically controversial, in part because the Sackler family, which owns Purdue, would retain most of its wealth.

No company has admitted culpability in the initial two-county settlement, or the proposed global settlement pitched by the state attorneys general.

“The agreement in principle is intended to provide certainty for involved parties and critical assistance for families and communities in need,” Johnson & Johnson said in a statement. “This agreement in principle is not an admission of liability or wrongdoing.”

That refusal to admit wrongdoing angers many people directly affected by the epidemic.

“For us, as families, this doesn’t give us closure. There’s no responsibility taken,” said Greg McNeil, who lost his son, Sam, to heroin in 2015. Sam had first become addicted to prescription pain pills. McNeil, who now runs an opioid education podcast called Cover2 Resources, called the settlement with Cuyahoga and Summit counties a “hollow victory.”

“They deceived the public, and because of that many people perished,” McNeil said. “Four hundred thousand families will have an empty seat around the table at the holidays this year and they need to be held accountable for that.”

Attorneys are also divided over the most equitable way to share money that comes from settlements or court-ordered damages.

Will it be disbursed across the nation relatively evenly, or preferentially directed toward states and communities most severely affected by the epidemic involving prescription painkillers?

Earlier this year, attorneys for the local plaintiffs proposed a distribution formula based on three factors: the number of pills distributed, deaths from opioids and the number of people with opioid use disorder. That formula, if approved, would send more money per capita (if not in total dollars) to rural counties in the eastern U.S. where the opioid epidemic was fueled primarily by pills.

This raises issues of geographic and racial equity. Former Baltimore health commissioner Leana Wen recently argued in an op-ed for The Post that settlement money should be targeted at places with opioid addiction, regardless of the type of drugs involved.

“The addiction is to opioids, whether the opioids are prescription or street opioids,” she said in an interview.

She pointed out that Baltimore, which has a large minority population, has struggled with heroin addiction for decades. Many people there and around the country “are angry that opioid addiction was not deemed an epidemic until decades after it claimed the lives of countless people in minority communities,” she wrote in her op-ed.

At a conference of mostly Democratic attorneys general in Denver in June, more than 20 states signaled support for splitting proceeds using four factors: state population; opioid deaths by state; opioid pills distributed by state, and levels of opioid addiction by state, according to people close to the negotiations.

‘A hell of a lot less’

Beyond the legal battle is a social crisis. Resources from any legal settlement will need to be widely distributed among hospitals, drug treatment centers, children’s and family services, first responders, prosecutors, mental health programs, and so on.

In Akron, Anne Connell-Freund has helped run Oriana House, a network of treatment facilities, drop-in gathering spots and halfway houses, for 30 years, through all three waves of the opioid epidemic: First, prescription pain medications. Then heroin. Now fentanyl.

“It just got worse and worse and worse,” she said.

The biggest need is access to treatment, both outpatient and residential, she said. Typical clients are on Medicaid, and the managed care companies that run the program in Ohio will allow 30 days of treatment. That’s insufficient; most people need 60 to 90 to get sober and perhaps six to eight months in a sober living house before they can reenter the community, get a job and try to reclaim their life, she said.

For clients who aren’t on Medicaid, typically the homeless and mentally ill, treatment is an endless cycle — “a revolving door” — through emergency rooms, said Bernie Rochford, Oriana House’s executive vice president of administrative services and business relations.

The most disappointing thing about the settlements so far is that the drug company executives “are not being held accountable,” Rochford said.

Instead, they’re merely paying a fine, he said.

“We have prisons full of drug dealers who have done a hell of a lot less than what these guys have done,” he said. “A hell of a lot less.”

Kornfield, an IRW intern, reported from Washington. Aaron C. Davis and Christopher Rowland of The Washington Post contributed to this report.

The Opioids Deal