Guiding industry settlements of opioid litigation

ABSTRACT

Background: The recent $270 million settlement of Purdue Pharmaceuticals and the State of Oklahoma on March 26, 2019 concerning the state’s opioid litigation is a harbinger of industry settlements to come. Thousands of opioid-related cases with impending trial dates may stimulate opioid manufacturers, distributors, and retailers to seek new deals to escape historic liability.

Objectives: Against a backdrop of massive damage potential of a two decade opioid epidemic, reaching appropriate settlements is key. Parties to opioid lawsuits must balance an array of factors to assure industry accountability while preserving access to opioids among legitimate patients seeking palliative care.

Methods: We examined major bases for opioid litigation across the U.S. Thousands of cases have been filed against opioid manufacturers, distributors, pharmacies, pharmacy benefit managers, and others. Hundreds of these cases are consolidated in a federal district court in Cleveland, Ohio where trials are scheduled as early as October 2019. Grounds for litigation are highly varied.

Results: Multiple factors underlying responsible settlements include (1) a primary focus on contemporary treatment and prevention strategies supplemented by research innovations; (2) primary access to life-saving treatments for at-risk individuals; (3) fair and equitable allocation of settlement resources; (4) dedication to lawful, efficacious interventions; (5) cross-sharing of industry data and practices to promote good faith compliance; and (6) continued assurance of access to palliative care for deserving patients.

Conclusions: Negotiated settlements must align with highly effective public health priorities. Crafting wise settlement agreements is necessary to assign responsibility for huge public harms and ensure future treatments that are prudent and efficacious.

KEYWORDS:

• Opioids
• litigation
• settlement
• liability
• risks
• lawsuits

On March 26, 2019, Sackler family-owned Purdue Pharmaceuticals (“Purdue”) publicly announced its intent to settle its portion of a case brought by Oklahoma to recover billions related to the opioid epidemic(1). Two months prior to the scheduled trial start date on May 28, Purdue agreed to distribute $270 million to multiple enterprises in Oklahoma to treat drug use and addiction. This settlement far outstrips deals Purdue struck in prior cases in West Virginia ($10 million in 2004)(2) and Kentucky ($24 million in 2015)(3).

Payment of large sums by industry giants in pharmaceuticals, distributing, and retailing of prescription opioids could be forthcoming, potentially risking the fiscal vitality of some industry players in the epidemic. Hundreds of state, tribal, and local jurisdictions have filed cases in addition to thousands of private lawsuits. All seek compensation for an epidemic tied to aggressive marketing of these drugs fueled by enormous profits from mass sales and misinformation. The volume, breadth, and diversity of opioid-related claims reveal the potential for historic liability unseen since 1990s tobacco settlements.

What constitutes successful litigation settlements of this magnitude? There is no “gold standard” for recovery of funds from industries whose products can effectively treat pain but also wreak havoc on the public’s health. Purdue’s OxyContin®, introduced in 1996, has helped millions of Americans reduce acute pain and temper chronic pain. Yet, over 500,000 have perished from misuse of addictive prescription medications or illicit alternatives (e.g., heroin, fentanyl)(4). Negotiating settlements that balance patient access to pain alleviation with public health entails complex trade-offs.

Purdue’s settlement in Oklahoma

Oklahoma Attorney General Mike Hunter launched litigation on June 30, 2017, with Purdue’s settlement coming nearly two years later. The Attorney General alleges Purdue and three other opioid manufacturers engaged in an “unprecedented” marketing campaign centered on “prescription opioid disinformation” that generated billions in profits while fueling an opioid crisis(5). In 2018, 80% of the hospitalizations of Oklahomans for non-fatal drug overdoses were attributable to prescription opioids(6). Purdue’s settlement decree signed on March 26 includes distributions of $270 million over 6 years as follows(6):

• $102.5 million for a new Center for Addiction Studies and Treatment at Oklahoma State University;

• $75 million over 5 years to the Center by the Sackler family;

• $60 million to offset litigation costs (with the balance to the Center);

• $20 million over 5 years for addiction treatments; and

• $12.5 million to “abate and address” the epidemic in Oklahoma’s localities(1).

Purdue also agrees to not promote its opioids in Oklahoma, including employing or contracting with sales representatives to pitch products to health-care providers.

The company’s settlement may be motivated by more than financial risks even as it reportedly considers bankruptcy. Purdue’s reputation is clearly at stake. A federal criminal investigation of the company in 2007 resulted in nearly $635 million in fines and costs. Three of its executives pled guilty to misleading the public about addiction risks of OxyContin®(7). Oklahoma’s Attorney General released documents on February 14, 2019, showing that Purdue hired a public relations firm to discredit and monitor ongoing litigation. Among other objectives, the firm was instructed to “pitch [legal experts] to media to demonstrate how [the opioid] lawsuit is different from the tobacco lawsuits.(8)”

The gamut of opioid litigation

Large states like California, Florida, Illinois, New York, Ohio, Texas, and 29 other jurisdictions have also sued(9). Thousands of additional cases have been filed against opioid manufacturers (e.g., Johnson & Johnson, Teva Pharmaceuticals), distributors (e.g., McKesson, Cardinal Health), pharmacies (Walmart, Walgreens, CVS), pharmacy benefit managers, and others(10). Hundreds of these cases are consolidated in a federal district court in Cleveland, Ohio where presiding Judge Dan Aaron Polster has scheduled trial as early as October 21, 2019(11).

The grounds for litigation include (1) gross negligence and malpractice (12); (2) fraudulent claims and misleading marketing practices, obfuscating or minimizing risks; (3) unwarranted distribution of millions of doses of opioids to patients contrary to the federal Controlled Substances Act (13); (4) public nuisance violations (14); (5) conspiracy and federal racketeering (14); (6) defiance of state consumer protection laws (15); (7) breaches of implied warranties (16); and (8) unlawful promotion of palliative treatments. The latter claim was raised by West Virginia counties against the Joint Commission, which oversees hospitals nationally(17).

Claims for actual damages range in types and amounts. They include direct compensation for naloxone or other life-saving medications, patient treatment costs for opioid addiction, and health-care expenses for infants physically addicted to opioids(18). Litigants also seek costs related to economic impacts via unemployment and lost productivity. Some states want reimbursements for their expenditures through their Medicaid or emergency services, law enforcement, medical examiners, and foster care. Florida asks for lost tax revenues and punitive damages(19).

Damage amounts are difficult to calculate. Litigants have not made specific requests, reserving opportunities to calculate damages as findings surface. However, even conservative assessments expose the enormous risks facing opioid manufacturers, distributors, and retailers. New Jersey officials have tallied up nearly $300 million in damages since 2008 through Medicaid, workers’ compensation, and health plan payouts(20). California wants repayment of public tax dollars spent by counties responding to opioid addiction, including for hospital and jail beds(21).In its lawsuit against Endo Pharmaceuticals, Kentucky alleges tens of thousands of violations carrying penalties of $2,000 – $10,000 each for misleading practices under its Consumer Protections Act(22). Fines for violations of similar laws by drug sales representatives in Massachusetts could exceed $1.5 billion(18).

Whether these claims lead to lucrative jury awards is undetermined. Prior to Purdue’s settlement, industry leaders struck relatively small deals. In 2017, for example, Mallinckrodt Plc agreed to pay $35 million to resolve federal investigations of its opioid orders. Costco Wholesale settled for $11.75 million over allegations that its pharmacies improperly filled opioid prescriptions. Distributor Cardinal Health paid West Virginia $20 million regarding opioid distributions from 2007 to 2012(23). Santa Clara County (CA) brokered a $1.6 million settlement with Cephalon, Inc. and Teva over deceptive marketing practices(24). More recently, on August 8, 2018, INSYS Therapeutics, Inc. settled with the federal Department of Justice for at least $150 million over five years for its marketing of the fentanyl spray Subsys®(25). In May 2019, multiple INSYS executives, including founder Dr. John Kapoor, were convicted of racketeering charges for their efforts to bribe doctors to prescribe Subsys® and misinform insurers of patients’ underlying medical conditions(26).

Actual societal costs of the opioid epidemic

Industry liability risks are palpable given broader societal costs of the opioid epidemic. Metrics used to calculate liability are highly varied in part on the scope of their assessments. As the epidemic initially triggered by mass consumption of prescription opioids shifts to illicit opioids (e.g., heroin, fentanyl) a higher magnitude of societal costs are implicated.

Based on limited assessments of 2013 data, the Centers for Disease Control and Prevention (CDC) estimates total economic burdens of the epidemic at $78.5 billion(27). Taking a broader view, researchers at the nonprofit, Altarum, estimate >$1 trillion costs (between 2001 and 2017)(28), of which only $216 billion accounts for direct health-care expenditures(28). Most of the remaining costs relate to lost productivity. Up to 70% of employers experienced workforce problems associated with prescription drug misuse in 2017(29). Altarum projects future costs to grow exponentially, reaching $200 billion annually in 2020(28).

The President’s Council of Economic Advisors went further, estimating a cost of $504 billion in 2015 alone(30). Prior studies, suggested the Council, underestimated the number of opioid-related deaths and inaccurately measured the statistical value of lives lost(27). Neither the Council’s nor Altarum’s estimates include expenditures for funerals, lost productivity of family members, and mental health impacts on individuals and their care givers. Mental health costs, notes Altarum, are so extensive as to defy accurate measurement(28).

Responsible settlements in the interests of public health

Recouping monetary damages cannot bring back lives lost to opioid misuse. It cannot restitute countless lost hours of productivity, reinstate once promising futures of opioid abusers, or repair families torn apart by addiction. From a public health perspective, settlement funds may help replenish budgets among health, emergency management, and law enforcement agencies. Yet these funds will not fully compensate for decades of documented public health harms or rebuild communities. Total damages are too massive or simply beyond calculation.

Settlement resources can, however, be used to effectuate sustainable changes in laws, policies, programs, and initiatives geared toward public health prevention. Given finite industry resources, parties settling opioids cases should consider a series of key objectives:

Focus on addiction prevention

Resources cannot erase prior harms but can ameliorate future injuries. In their recent settlement, Oklahoma and Purdue devote substantial sums to the study and implementation of addiction treatment and prevention. Additional research may help identify specific interventions to treat current addictions, as well as prevent others. Prevention strategies worthy of greater research may include (1) improved assessments of patient risks of opioid addiction, (2) greater oversight mechanisms for prescribing practices, (3) considerable provider education, and (4) opioid awareness and prevention education for those at risks in schools or other locales. Some of these innovative approaches are already underway in select jurisdictions.

Advancing strategies to tamp down morbidity and mortality is only possible through legal and policy reforms that support effective interventions or reject ill-advised approaches. Repeated calls by some politicians for death penalties for opioid drug dealers grabs attention, but lacks utility. Some states prosecute victims of opioid addiction for mere possession crimes without linking them to remedial addiction treatments. It is unconscionable to criminally charge individuals for addiction illnesses brought on in large part by 1990s policies promoting opioids as safe and effective for pain relief. Federal and state laws that impede highly effective harm reduction programs such as needle exchanges and supervised injection facilities are highly counterproductive(31).

Access to life-saving treatments

Long-term research is needed but saving lives now is well within reach. State, tribal, and local governments absorb huge costs responding in real-time through life-saving naloxone or other interventions, which are only partially federally subsidized. Emergency response coffers are diminished or near empty. As former Mississippi Attorney General Mike Moore noted in December 2018, states like Ohio are spending “$4 billion or $5 billion a year from the opioid epidemic. And they are losing 5,000 or 6,000 people a year from overdose deaths.”(32)Replenishing and sustaining life-saving treatments through settlement proceeds are desperately needed, as well as access to long-term maintenance medications (e.g., methadone, buprenorphine, naltrexone).

Fair and equitable distributions

The opioid epidemic affects all Americans, but it particularly impacts at-risk populations. Rural and tribal populations bear disproportionate burdens. CDC estimates that rural populations are addicted to opioids at a rate 45% higher than urban populations(33). Yet access to effective addiction treatments or palliative care in rural environments is considerably lower than in larger cities. Settlement proceeds must be fairly and equitably distributed to assure assistance reaches those at heightened risk.

This entails more than government receipts of checks from deep-pocket industries. It requires advance, informed determinations of how best to devote current and future expenditures to assist victims of opioid addiction. States and localities may differ in their allocation decisions based on their unique assessments of population harms and risks. However, they must commit to allocating settlement resources based on actual risks especially among vulnerable groups.

Commitment to efficacious opioid responses

The 1998 Tobacco Master Settlement had a major flaw, failing to assure funds would be directed toward tobacco prevention and cessation. States like California used these funds primarily for tobacco control, but many states like Mississippi allocated tobacco settlement funds into general revenues(34). Applying opioid settlement resources toward prevention and treatment is just and necessary, especially as primary sources of continued mortality shift from prescription to illicit opioids. Governments and private sector payers negotiating settlements have the same objective: assuring industry resources are devoted to mitigating horrific public health impacts of opioids in all forms. Settlement terms must bind each side of the deal to this goal, disallowing use of resources for other areas.

Sharing industry data and practices

The opioid industry bears considerable responsibility for massive personal and societal harms. Yet often they refuse to admit culpability as in the Purdue settlement. A common tactic in major settlements is to disallow sharing industry data or practices that may adversely affect corporate interests. Public health litigants must resist these terms. Over the long term, access to industry data and strategies is essential to generate new evidence and guide future cases or regulations. The public, moreover, has the right to know of industry deceit or other misbehavior, as occurred with the Tobacco Papers(35). Settlements in active cases forthcoming must expose industry culpability as a tool for good faith compliance over the long term.

Assuring continued access to pain relief and palliative care

An epidemic that began with a national commitment to treat pain as the “5^th vital sign”(36) should not abandon patient needs for pain relief and palliation. Patients need and will continued to demand relief from acute or chronic pain. Widespread access to cheap, addictive opioids is not the answer, but neither is highly restricting nor banning access for deserving patients.

Unscrupulous industry practices can be eliminated while assuring access to pain relief and palliative treatment for those in real need. Government-imposed restrictions on specific industry detailing on the use of prescription opioids may implicate commercial speech protections. Industry agreements to alter their messaging as part of their settlement terms, however, are lawful and potentially effective in controlling unwarranted future claims.

Negotiated settlements must align with highly effective public health priorities. The goal of litigation is not to bankrupt industries that could promote the public’s welfare, but rather to motivate and lock-in changes among manufacturers, distributors, and retailers of opioids. Opioid-related treatments can be safe and effective by eliminating aggressive industry marketing, appropriate physician prescribing, and closer patient supervision. Industries play critical roles in medical care and public health, but must be held accountable for good faith efforts to assure patient and community safety. Crafting wise settlement agreements is necessary to assign responsibility for huge public harms and ensure future treatments that are prudent and efficacious.

Financial Disclosure

The authors do not have any financial disclosures or funding conflicts to report.

Acknowledgments

The authors would like to thank Haley R. Augur, Ashley Cheff, and Katelyn Hilde at the Center for Public Health Law and Policy, Sandra Day O’Connor College of Law, Arizona State University, Phoenix, AZ for their research and editing contributions.