Drugmakers Said to Balk Now at Multibillion Dollar Opioid Accord

(Bloomberg) -- Drug companies are in no rush to finance a solution to the opioid epidemic.

Companies including Johnson & Johnson and McKesson Corp. are preparing to take their chances in court rather than pay billions of dollars to settle lawsuits blaming them for addictions that claim the lives of more than 100 Americans daily, according to six people familiar with settlement talks.

With the first trial just 10 months away, the companies are counting on narrowing or defeating lawsuits by 17 states and hundreds of counties and cities, which would slash or eliminate their settlement costs. But if the defenses fail, the cost of a deal could rise.

Settlement talks sponsored by state attorneys general have been going on since last year, and companies seemed willing to consider a quick global deal to put the litigation behind them without risking bankruptcy. But as negotiations pressed forward in law-firm conference rooms in Dallas and Chicago, the companies lately have shown more confidence in their legal defenses, the people said, speaking on condition of anonymity because the talks are private.

As a result, negotiations with the states have largely stalled, the people said. That comes as talks with local governments have also hit a snag, according to the judge overseeing the separate set of lawsuits.

The companies’ strategy is logical, said Adam Zimmerman, a professor at Loyola Law School in Los Angeles who specializes in mass tort litigation.

“It would make no sense for the companies to start talking about money until the strength of those defenses are tested in court,” said Zimmerman, who isn’t involved in the case.

Hard-hit states including Ohio and Kentucky have accused drugmakers such as J&J and Purdue Pharma Inc., and distributors like McKesson and AmerisourceBergen Corp., of understating the risks of prescription opioids, overstating their benefits, and failing to halt suspiciously large shipments to pharmacies.

“We are committed to being part of the ongoing dialogue and to doing our part to find ways to address this crisis,” Andrew Wheatley, a J&J spokesman, said in a statement.

Other companies didn’t respond to questions about whether money is the sticking point. Tennessee Attorney General Herbert Slatery, who is leading the talks for the states, said through a spokeswoman that the “states are still actively negotiating.”

Companies believe they have potent defenses. Purdue contends in court filings that federal law bars states from holding it liable because the U.S. Food and Drug Administration approved its Oxycontin drug as a painkiller and its warnings about addiction risks.

Drugmakers reject comparisons to the 1990s litigation against cigarette makers, which led to a $246 billion settlement. That’s because opioids are a government-regulated product dispensed only with a doctor’s prescription. (Nicotine, the active ingredient in tobacco, isn’t yet regulated.) As a result, judges must defer to the FDA’s findings that the painkillers are safe and effective when used properly, according to company filings.

Pharma companies say they’re also free from liability because some patients misused their products and because states haven’t found doctors who blame opioid marketing for influencing their prescribing habits.

“I don’t know what the companies’ overall strategy is, but it doesn’t sound like fast resolution is part of it any more,” said Elizabeth Burch, a University of Georgia law professor who teaches about complex litigation. “If the idea was to come up with a quick settlement the companies could afford, time is slipping away and money that could go toward resolving the case is being eaten up by legal costs.”

Education Programs

The companies haven’t ruled out compromise. In the talks, Purdue and other defendants have agreed to consider additional changes to their marketing and handling of painkillers, the people said. That may include doctor-education programs aimed at reducing the numbers of opioid prescriptions and beefed up oversight of shipments, they said.

Purdue, J&J, Endo International Plc and Teva Pharmaceutical Industries Ltd have halted marketing efforts tied to opioids or taken their products off the market. The companies said the changes, along with other cost-cutting moves, aren’t related to the litigation.

Drug companies are confronting two sets of adversaries. They’re negotiating with a coalition of 41 state attorneys general, including some that sued, while defending more than 400 suits by counties and municipalities. The latter have been consolidated before U.S. District Judge Dan Polster in Cleveland, who scheduled the first trial for March after his efforts to strong-arm a quick global settlement stalled.

Efforts to hammer out a deal in the attorneys general talks are hampered by strategy disputes between suing states and those hoping for an out-of-court solution, according to the people familiar.

Ohio Attorney General Michael DeWine, who is suing to recover some of the estimated $8 billion his state spends annually over the opioid crisis, has faced criticism for breaking away from the group talks to focus on the court battle.

“The multistate process was not proceeding fast enough,” said Dan Tierney, a spokesman for DeWine, now a Republican candidate for governor.

The companies aren’t putting money on the table in the cases brought by cities and counties, although settlement talks there are moving ahead, four people said.

The very existence of the city and county suits is also slowing negotiations, the people said. Tennessee’s Slatery sent letters to lawyers for some municipalities, saying their cases are hamstringing his effort to negotiate a global settlement, according to Gerard Stranch, a Nashville lawyer representing some of local governments in Tennessee. Slatery has since backed off his effort to take over those cases, Stranch said.

“The companies want to do one settlement of their opioid liability rather than having to do separate deals with the states and local governments,” said Lauren Rousseau, a Western Michigan law professor. “They want to put an end to all litigation at a price that doesn’t bankrupt them.”

©2018 Bloomberg L.P.