Settling Opioid Suits Probably Won’t End the Crisis

(Bloomberg Opinion) -- Imagine you’re the chief executive officer of a large pharmaceutical corporation with an important drug that’s under attack. More than 2,500 lawsuits have been filed against your company. The plaintiffs aren’t individuals, though, they’re governments — counties, cities and states. And some of the biggest names in the plaintiffs’ bar have agreed to represent these entities, lawyers like Joe Rice, whose firm was said to have earned $1 billion for helping to bring the tobacco companies to heel in the 1990s.

You know you’ve got some incriminating-sounding documents in your corporate files — what company doesn’t? — but you also know that the Food and Drug Administration approved your drug. Patients crushed it and snorted it — something that was never intended. And you’re convinced that the plaintiffs are pushing the envelope with the public nuisance laws they are relying on to bring these cases. Yes, your company will probably lose at trial, but you think you have a good chance to win on appeal.

Then you look at the army arrayed against you, and it hits you: You’re never going to be able to litigate your way out of this. It’s not just that there are 2,500 lawsuits or that they are being brought by governments. It is what that represents. Government exists to serve the interests of the people, and the people are saying that your company participated in something that inflicted tremendous damage on the country. Hundreds of thousands of people have died. And your company needs to be punished.

At this point, you pick up the phone, call your opponents and say, “How much do we need to pay to settle this?”

I am obviously not privy to the thinking of the CEOs of the various companies facing opioid lawsuits. But given the news of the last few days, I imagine that their thought process was not too far from what I just described. On Tuesday, the Wall Street Journal reported that three of the distributors being sued — McKesson Corp., Cardinal Health Inc., and AmerisourceBergen Corp. — have offered to pay $18 billion over 18 years to settle their cases. This news leaked less than a week before the start of a big opioid trial in Cleveland, in which the three companies are among the defendants.

The next day, Bloomberg News reported that Johnson & Johnson was offering $4 billion to end the litigation, and Teva Pharmaceutical Industries Inc. was proposing to give away $15 billion worth of generic drugs to be freed of the lawsuits. On Thursday, the New York Times reported that the five companies and the states had agreed on the outlines of a settlement that would cost the companies $50 billion.

And of course, Purdue Pharma Inc. had already waved the white flag, with a bankruptcy filing last month intended to end the lawsuits by essentially turning the company’s assets over to a trust that would be controlled by the plaintiffs.

It is too early to know whether any of these settlement offers will stick. Although the federal judge presiding over the Cleveland trial, Dan Aaron Polster, has asked the CEOs of the three distributors plus Teva to appear Friday to discuss the settlement talks, I’m told that the trial is still likely to begin on Monday, as scheduled.

Any settlement will also need approval from the cities and counties that have filed suits. They are deeply suspicious of any deal the states might cut because they remember the outcome of the tobacco litigation. In 1998, the tobacco companies agreed to pay $246 billion over 25 years to the states, but little of that money trickled down to cities and counties. Indeed, a minuscule amount went to anti-tobacco efforts; most of the money is now used to fill state budget gaps.

Still, whether it happens next week or next year, the opioid litigation will almost surely end with the companies being sued spending billions to settle it. The stock market practically demands it: Share prices of all the companies that have made settlement offers in recent days have jumped. And continuing litigation drains and distracts a company.

Here’s the problem, though. Whenever plaintiffs’ lawyers argue that companies have done bad things and need to pay up, they justify the demand for money by saying it will be used to solve the problem. But will it? In this case, I have my doubts.

In an opioid case in Oklahoma a few months ago, a judge ruled that Johnson & Johnson should pay $572 million (later reduced by $107 million), which he calculated would cover opioid abatement services in Oklahoma for just one year. So point one: Ending the crisis will require more money than even Big Pharma can provide.

Second, just throwing money at the problem is not going to solve it. States and cities will most likely take different approaches. Some will be better than others. But there is no clear plan coming from the federal government — or anywhere else — about what steps are needed to end the crisis. Until there is, more money is likely to be wasted than not.

Third, chances are good that the settlement money will be used for things that have nothing to do with opioids. Again, tobacco in instructive: Settlement money was supposed to be earmarked for tobacco control programs, but in most states the politicians couldn’t resist grabbing it for other purposes.

Earlier this summer, during a court hearing, Judge Polster said that “developing solutions to combat a social crisis such as the opioid epidemic should not be the task of our judicial branch.” It was the job, he said, of the executive and legislative branches.

He’s right. But that’s just not the American way. In the U.S., when there is a problem with a product, our first instinct is to sue the corporation that made it. When the litigation is settled, money is transferred from shareholders to plaintiffs (and their lawyers). It may be a satisfying resolution, but it rarely solves the problem. To reference tobacco one more time, two decades after the tobacco settlement, 480,000 Americans still die from smoking each year.

I suspect the same will be true of the opioid crisis. The companies will settle, the lawyers will pocket millions and the states will get the rest. And the crisis will continue.

I’ve said it before, and I’ll no doubt say it again: There’s got to be a better way.

To contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."

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