States Announce $26 Billion Settlement to Resolve Opioid Lawsuits

An opioid crisis that has claimed half a million lives in the U.S. has triggered more than 3,000 lawsuits filed by states, local governments, Native American tribes, hospital groups and others against players in the pharmaceutical industry. The lawsuits allege drugmakers pushed their painkillers for uses far beyond what was medically necessary and that distributors and pharmacies didn’t do enough to halt masses of pills from flowing into communities.

Drug addiction got worse during the pandemic, with opioid overdose deaths up about 37% in 2020 from the prior year, according to government data.

The companies pushed back, saying they made and distributed a medically necessary and federally regulated product. But at the same time, the burdens of litigation—like turning over millions of internal documents, making employees available for depositions, and preparing for complex trials that could air embarrassing details—has sent many of the companies to the negotiating table.

The attorneys general from Tennessee, North Carolina, Pennsylvania, New York, Louisiana, Delaware and Connecticut jointly announced the completed deal Wednesday, which had been rumored earlier this week.

“There’s not enough money in the world frankly to address the pain and the suffering and the tragedy of the families all of us know in our states,” Connecticut Attorney General

William Tong

said.

The broad terms call for the three distributors to pay up to $21 billion collectively over a period of 18 years, and for Johnson & Johnson to contribute $5 billion over nine years. The amounts could decrease if not enough states sign on, and the companies can still walk away if they decide the level of participation doesn’t buy them the global peace they are seeking to put the lawsuits behind them.

McKesson, AmerisourceBergen and Cardinal said in a joint statement that they dispute the allegations against them but believe the deal is an important step toward resolving the claims and “delivering meaningful relief to communities across the United States.”

Johnson & Johnson’s general counsel,

Michael Ullmann,

said, “We recognize the opioid crisis is a tremendously complex public health issue,” adding that the funds will help address the problem.

Completing the deal took thousands of hours of negotiations between private plaintiffs’ lawyers representing communities, state attorneys general, and lawyers for the four companies. Frequent in-person meetings gave way to nightly Zoom calls held for months during the pandemic.

The final details came together as opioid lawsuits went to trial in three states, putting pressure on both sides. Jurors in New York saw joking emails that employees at one distributor sent about addicts, including one that circulated a song about “Pillbillies” set to the theme of “The Beverly Hillbillies.”

The settlements, if completed, would resolve the opioid lawsuits for these four companies, but several other targets remain. Trials are under way in California and New York against drugmakers

Teva Pharmaceutical Ltd.

,

AbbVie Inc.’s

Allergan, and

Endo International

PLC. National pharmacy chains have also been named in hundreds of suits and are scheduled to go to trial in October. Two other companies that were targets of the suits, including OxyContin-maker Purdue Pharma LP, filed for bankruptcy to handle the liability and are negotiating their own settlements with states.

The deal terms give states 30 days to join or reject the settlement. If the companies decide enough states are participating, local governments will have another few months to lend support. The amount a state ultimately receives hinges largely on recruiting its municipalities to join.

If a state government opts out, then its counties or cities won’t be able to access the money.

Attorney General

Bob Ferguson

of Washington state said he is rejecting the settlement because the $30 million a year that could flow to the state isn’t the “transformative amount of money” needed to deal with the devastation from the opioid crisis. The state has upcoming trial dates against the four companies, and Mr. Ferguson said he plans to go forward.

The percentage of the $26 billion allocated to each state is based on the population and the impact of opioid addiction in each region.

Beyond the money involved, the distributors have agreed to create a clearinghouse intended to help the companies better spot suspicious drug orders. For the first time, AmerisourceBergen, Cardinal and McKesson would be able to see where their competitors are sending pills, which the architects of the deal say would better enable them to spot pharmacies from which drugs are being diverted for illegal uses.

“This settlement … puts in place controls that will go a long way to making sure this never happens again,” Pennsylvania Attorney General Josh Shapiro said.

Johnson & Johnson, which used to provide a raw ingredient used in painkillers to other companies and stopped selling its own handful of opioid painkillers in the U.S. last year, agreed to stay out of the opioid business for the next decade.

Under the deal, any money that does eventually make it to states must be primarily used for social services meant to help address the harm of opioid addiction, such as treatment programs and first responders. Individuals and families who have been affected by opioid abuse won’t receive any money directly.

Just over $2 billion of the overall amount will go toward attorney fees and expenses, the majority of that to private plaintiffs’ lawyers who represented thousands of cities and counties and some states.

Gary Wellendorf of Youngstown, Ohio, who spent three decades addicted to prescription painkillers and heroin and lost his wife to an overdose, said he hopes some of the money can be spent on making treatment programs available for those who can’t afford it.

“It’s a split-second decision to get help,” said Mr. Wellendorf, who is 63 years old, adding that few options are available without insurance or funding.

If veterans’ benefits hadn’t picked up the cost of his addiction treatment a few years ago, he said, “I’d probably be dead.”

Write to Sara Randazzo at sara.randazzo@wsj.com