Pharmacies Face Peril Without Opioid Settlements, Judge Says

(Bloomberg) -- CVS Health Corp., Walgreens Boots Alliance and other pharmacy chains face mounting pressure to settle thousands of government lawsuits over their role in the U.S. opioid epidemic, after a federal judge warned the companies they risk financial peril.

As drug makers and distributors work to resolve similar complaints, mediation has failed with pharmacies, which are accused of ignoring red flags about suspicious painkiller prescriptions. The first trials are set to start this year, and a judge on Wednesday may expand the number of early cases going before juries to help gauge the potential cost of settling all the cases.

If pharmacy owners, including Walmart Inc. and Rite Aid Corp., “want to hemorrhage money trying cases all over the country, they have a legal right to do it until they drop, go bankrupt or win them all,” U.S. District Judge Dan Polster, who is overseeing all the opioid cases, said at a hearing March 10. “No other defendant is operating that way.”

Polster’s admonishment comes as the rest of the opioid industry seeks to resolve claims filed by local and state governments, including a $26 billion accord by Johnson & Johnson, AmerisourceBergen Corp., Cardinal Health Inc. and McKesson Corp. Purdue Pharma LP proposed a $10 billion settlement as part of its bankruptcy. McKinsey & Co., which advised the industry on ways to boost opioid sales, reached a $641.5 million deal with states last month.

“Everyone knows the dollar amounts the distributors and J&J are paying,” Polster said, according to a transcript of the hearing last month. “It seems to me, that’s the benchmark.”

In court filings, the pharmacy chains said they did nothing wrong in honoring opioid prescriptions from licensed doctors and are confident juries will back them. They also said adding more trials to the schedule isn’t necessary and that Polster was overreacting.

Representatives for Walgreens and Walmart declined further comment on the judge’s statements. RiteAid and CVS didn’t respond to emails and phone calls seeking comment.

Settlement Possible

While pharmacies may be more eager than drug makers and distributors to allow some trials to occur, they still may reach a settlement, Bloomberg Intelligence analyst Holly Froum said. “If distributors can seal a deal for $21 billion, pharmacies could end paying slightly less,” she said.

Failing to seek an out-of-court resolution means pharmacies may face a tsunami of opioid trials over the next few years for lawsuits filed by governments seeking to recover expenditures on police and drug treatment, the judge said.

The first trial against four pharmacies -- along with other defendants -- is scheduled for June in state court in Suffolk County, New York. Others involving some or all of the pharmacies are set to start over the next year or so in state courts in West Virginia, Florida, Nevada, Alabama, Missouri, Massachusetts, New Mexico and Michigan.

Polster, who in November will preside at a trial over claims by two Ohio counties, said he wants to add even more trials in federal courts to the schedule to measure the strength of claims against the pharmacies and what it might cost to settle all the cases. He may decide at a hearing Wednesday where and when those additional trials will start.

Mediation Failed

“I can’t imagine the defendant’s strategy is to try hundreds” of cases all over the country, Polster said last month.

The pharmacy owners said they hired a private mediator to work with plaintiffs’ lawyers in hopes of resolving the cases, but it ended without a deal. They urged Polster not to set any more test cases until the Cleveland jury rules in November. “At this point in time, we don’t need additional” test cases, Eric Delinsky, a CVS lawyer, said at the March hearing.

In a joint court filing, lawyers for the pharmacy owners said the “plethora of upcoming trials” will provide them with “ample information regarding the strengths and weaknesses of the cases against them.”

The consolidated case is In Re National Prescription Opioid Litigation, 17-md-2804, U.S. District Court, Northern District of Ohio (Cleveland).

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