Opioid Settlements Spark Debate on How to Spend the Money

This article originally appeared on Stateline, an initiative of the Pew Charitable Trusts.

In the first trial aimed at holding drug companies accountable for the opioid crisis, Oklahoma earlier this year reeled in more than $350 million in settlement payments from drugmakers Purdue Pharma and Teva.

But skirmishes between the attorney general and a group including the governor, lawmakers and local governments over who gets to spend the money threaten to bog down efforts to use it for much-needed prevention, treatment and recovery services.

Nationwide, similar struggles loom in opioid cases brought by attorneys general in nearly every state and in a consolidated class action lawsuit involving nearly 2,000 plaintiffs, including local, county and tribal governments, as well as some insurers and medical groups.

That case, known as the National Prescription Opiate Litigation, is set for trial this fall in a federal court in Cleveland.

Closing arguments in Oklahoma’s case against Johnson & Johnson were held Monday. Cleveland County District Judge Thad Balkman said he would make a decision by Aug. 31.

Overdose deaths from opioids, including prescription painkillers, heroin and fentanyl, have increased nearly sixfold since 1999. Every day, more than 130 people in the United States die after overdosing on opioids, according to the National Institute on Drug Abuse.

In the cases, plaintiffs want a quick resolution so that urgently needed cash can be used to repair the public health crisis they allege was created by drug companies that fraudulently marketed addictive pain medicines as safe and effective, and by distributors and drug stores they claim knowingly flooded local markets with the dangerous medications.

But here are some of the dilemmas: What percentage of any settlement money should go to state versus local governments? Should state spending decisions be made by the attorney general or the legislature and governor? Should local and state governments be required to use the money for opioid treatment and prevention?

Advocates for people with addiction and their families fear a repeat of the outcome from similar settlements with tobacco companies two decades ago, in which only a fraction of the behemoth settlement funds went to anti-smoking efforts.

“The lesson from the tobacco settlements is that unless the state attorneys general structure the settlements in a way that mandates the money be spent to address the opioid problem, it won’t happen,” said Matthew Myers, president of Campaign for Tobacco-Free Kids, a national organization that advocates for smoking prevention.

Under a 1998 master settlement between four tobacco companies and 46 states and the District of Columbia, states are receiving an estimated $246 billion over the 25 years of the settlement. The settlement stipulated that the money be used to prevent people from smoking and to help those already addicted to cigarettes quit.

Nineteen years later, states had spent only 2.6% of their total tobacco-generated revenue on smoking prevention and cessation programs, according to a Campaign for Tobacco-Free Kids report last year, which concluded that most states failed to use the money as promised.

With dozens of state and local opioid lawsuits, as well as the consolidated case, wending their way through courts, billions of dollars in drug company settlements or legal judgements are expected in the next two years.

In Oklahoma alone, the ongoing lawsuit seeks $17.5 billion over 30 years from drug and consumer products maker Johnson & Johnson to abate the state’s opioid crisis.

“The reality is that you have two competing interests. Legislatures don’t want anyone to tell them how to spend money,” Myers said. “Yet attorneys general brought these cases for the explicit purpose of recovering money to address the opioid problem, not just punishing the companies.”

A Settlement Blueprint

In Ohio, a proposal for settling the county and local lawsuits within the consolidated federal case was sharply attacked this month by state attorneys general in a letter to U.S. District Judge Dan Polster of the Northern District of Ohio, who is expected to decide in August whether to accept the so-called class negotiation plan.

The 27 attorneys general who signed the letter said a local and county class negotiation could undermine state efforts to hold drug companies accountable for the opioid epidemic.

Under the plan proposed by plaintiffs’ attorneys, the nation’s roughly 30,000 municipalities and 3,000 counties, including those not involved in the consolidated litigation, would have a vote on any settlement proposal involving local governments.

Once approved by the group, any settlement would be allocated to local and county governments based on three factors: the volume of opioid painkillers sold in the state, the number of people who died from an overdose and the number of people who reported they had an addiction to the pills, according to a blog post by Joe Rice, a lead attorney for plaintiffs in the consolidated case.

But the proposal does not stipulate how local governments would spend the money. “Unfortunately,” Tobacco-Free Kids’ Myers said, “no strong citizen group is serving as a watchdog to ensure the settlement money isn’t used to fill potholes, lower taxes, build golf courses — you name it.

“If that money goes into the general coffers, Politics 101 guarantees that at some point — probably quickly — that money will be diverted,” Myers said. “Sadly, if the money doesn’t get used to address the problem, it lets the wrongdoers off the hook. People will keep using these pills and keep getting addicted, and it will be business as usual for the drug companies.”

Gary Mendell, founder and CEO of Shatterproof, a national nonprofit that advocates for better access to addiction treatment and prevention, said he was not opposed to opioid settlement money going into states’ general revenue if it is used “to reverse the course of this national tragedy and to help families who have been affected by it.”

But a top priority, Mendell said, should be providing addiction treatment for everyone who needs it, regardless of their ability to pay. And funding should go only to treatment that is evidence-based.

Research shows that treatment regimens that include one of three anti-addiction medications approved by the U.S. Food and Drug Administration are at least twice as effective as nonmedical therapies at allowing people to maintain recovery.

Whether a legislature or an attorney general decides how to use the money doesn’t matter, Mendell said. “What matters is the result.”

Mike Moore, a former Mississippi attorney general who was a leader in the tobacco litigation, now represents Mississippi, Ohio and two other states pursuing lawsuits against opioid companies.

A recent profile by Bloomberg Businessweek said Moore regretted that much of the money from the tobacco settlement wasn’t used as intended. In the opioid litigation, the article said, Moore “wants a comprehensive, company-funded national program that would make treatment more widely available.”

Only about 10% of the more than 2 million Americans with a substance use disorder receive treatment, according to the U.S. Substance Abuse and Mental Health Services Administration.

And of those who do receive treatment, the majority do not receive evidence-based protocols that include an addiction treatment medication. Nearly 60% of U.S. treatment providers do not offer any addiction medicines and fewer than 3% offer all three medications, according to a survey by the agency.

Former West Virginia Attorney General Darrell McGraw, the Democrat who negotiated the nation’s first state settlement with Purdue in 2004 for $10 million, said in an interview with Stateline that a bias against drug users among the general public can get in the way of spending opioid settlement dollars to help people with an addiction.

Lawmakers tend to listen to their constituents, who often argue that any windfall from such a class action lawsuit should go to improve the community that suffered, McGraw said. “That, of course, opens the door for the legislature appropriating the money for a Fourth of July celebration or something.”

Oklahoma Battle

If the Oklahoma opioid trial is any indicator of what’s to come, debates over which levels of government should be repaid for past and future damages from the opioid epidemic can be expected.

After the Purdue settlement in March — in which $200 million went to create a National Center for Addiction Studies and Treatment at Oklahoma State University in Tulsa, $60 million went for attorneys’ fees and $12.5 million went to local governments — Oklahoma counties and cities complained that their share should have been larger, arguing that they bore the brunt of the epidemic.

A group of cities, including Oklahoma City, petitioned to intervene in the state’s trial against the remaining drug companies to protect their interests. Their request was denied.

The disagreement over the Purdue settlement resulted in the state’s second settlement — with generic drugmaker Teva for $85 million — going into the state’s general fund. The legislature will decide how to use it.

Even the federal government wants a share of Oklahoma’s settlement proceeds, arguing that much of the money used to pay for addiction treatment came from Medicaid, the federal-state health program for the poor.

In a June letter, the Centers for Medicare and Medicaid Services asked Oklahoma for detailed information on its Medicaid expenditures for opioid painkillers, addiction treatment and any other expenses associated with the epidemic. The state has until Oct. 12 to respond.

How Much Is Needed?

Rifts also are developing over whether individual state settlements with drug companies are adequate to abate the public health crisis that plaintiffs argue they created.

In May, West Virginia entered a $37 million settlement with gigantic drug distributor McKesson Corporation after the state alleged the company oversupplied small communities with highly addictive painkillers, causing a devastating addiction and overdose epidemic.

U.S. Sen. Joe Manchin, a West Virginia Democrat, called the settlement “disgraceful,” and accused Attorney General Patrick Morrisey and Gov. Jim Justice, both Republicans, of cutting “a sweetheart deal with McKesson that sells out West Virginia.”

Oklahoma’s recent settlement, on the other hand, was widely praised as a major victory. In a state with only 1.2% of the nation’s population, Oklahoma’s $270 million settlement with Purdue would translate to $22 billion nationally, based on population alone.

The Council of Economic Advisers, a federal agency, estimated the economic cost of the opioid crisis to be $504 billion, or 2.8% of GDP, in 2015. The U.S. Centers for Disease Control and Prevention estimates the cost of prescription opioid misuse in the United States is $78.5 billion a year, including health care, lost productivity, addiction treatment and criminal justice.

For treatment alone, Andrew Kolodny, an addiction scientist at Brandeis University who testified in the Oklahoma trial, estimates that $6 billion a year for at least a decade would be needed to set up enough evidence-based treatment to serve everyone who needs it on a walk-in basis in every county in the United States.

The CDC has estimated the cost of addiction treatment and related health care at $29 billion a year.