J & J Agrees to Pay New York $230 Million to Settle Opioids Lawsuit; Global Settlement Soon?

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

New York State Attorney General (AG) Letitia James yesterday announced a $230 million settlement agreement with Johnson & Johnson (J & J) of opioids claims, shortly before a trial was scheduled to begin on Tuesday in Long Island.

From the press release issued by James

Today’s agreement also makes enforceable a bar stopping J&J and all of its subsidiaries, predecessors, and successors from manufacturing or selling opioids anywhere in New York, and acknowledges Johnson & Johnson’s exit from the opioid business nationally.

The opioids industry faces more than 3,000 lawsuits throughout the country for its role in fomenting prescription and street opioids use, according to the NYT.  These include actions by the Department of Justice; numerous state AGs, cities, and counties; and a plethora of private lawsuits. A bench trial in Oklahoma concluded with a $572 verdict against J & J in August 2019, as I wrote in Judge Issues $572 Million Verdict Against J & J in Oklahoma Opioids Trial: Settlements to Follow? Four companies settled with two Ohio counties on the very day a bellwether trial was to have begun in October 2019, as I wrote in Four Companies Settle Just Before Bellwether Opioids Trial Was to Begin Today in Ohio. Opioids litigation stalled during the pandemic, as was the case with most legal proceedings across the United States, with courts closed and trials delayed. Opioids trials are now in progress in California, where four drugmakers are the defendants, and in West Virginia, where drug distributors are the targets.

Long Island Trial Targets the Entire Opioids Supply Chain

J & J opted to settle just days before a key trial is scheduled to begin on Tuesday on Long Island. The New York trial targets multiple defendants, along the entire opioids supply chain and the trial will now go forward without the participation of J & J. It will also be the first opioids case to be heard by a jury.

According to the James press release:

In March 2019, Attorney General James filed the nation’s most extensive lawsuit to hold accountable the various manufacturers and distributors responsible for the opioid epidemic. In addition to J&J, the manufacturers named in the complaint included Purdue Pharma and its affiliates, as well as members of the Sackler Family (owners of Purdue) and trusts they control; Mallinckrodt LLC and its affiliates; Endo Health Solutions and its affiliates; Teva Pharmaceuticals USA, Inc. and its affiliates; and Allergan Finance, LLC and its affiliates. The distributors named in the complaint were McKesson Corporation, Cardinal Health Inc., Amerisource Bergen Drug Corporation, and Rochester Drug Cooperative Inc.

The cases against Purdue Pharma (and subsequently the Sackler family), Mallinckrodt, and Rochester Drug Cooperative are all now moving separately through U.S. Bankruptcy Court. The trial against all other defendants is currently slated to begin this coming week.

The $230 million settlement is the largest James has secured during her tenure as NY state AG since she took office on the 1st of January 2019. The other terms of the settlement bind the company in what might appear to be significant ways. Per her press release:

In addition to negotiating the largest monetary settlement since she took office, Attorney General James negotiated substantial injunctive relief securing the end of J&J’s manufacturing of opioids and their distribution across New York and the rest of the nation. J&J has committed to ending the manufacture and sale of all opioids and opioid products for distribution in the state of New York, as well as to no longer ship these products anywhere within the United States. The company will also provide the Office of the Attorney General with details of when the last of the inventory of opioids it has already shipped expires.

Additionally, J&J will be prohibited from promoting opioids or opioid products through sales representatives, sponsorships, financial support, or any other means; will not be allowed to provide financial incentives to its sales and marketing employees for the sale of these products; and will not, directly or indirectly, provide financial support or in-kind support to any third party that primarily engages in conduct that promotes opioids, opioid products, or products for the treatment of opioid-induced side effects.

J&J will additionally be forbidden from disciplining its sales and marketing employees for not hitting opioids sales quotas — one of the key motivators J&J and other companies had in marketing opioids so heavily to the American public — and will not be allowed to use, assist, or employ any third party to engage in any activity that J&J itself would be prohibited from engaging in pursuant to today’s agreement.

J&J will also be prohibited from lobbying federal, state, or local legislative or regulatory authorities about opioids or opioid products.

As for J & J, the company hasn’t admitted culpability and issued its own press release, as reported by the NYT:

In a statement, Johnson & Johnson said that the settlement was not an admission of liability or wrongdoing and that “the company’s actions relating to the marketing and promotion of important prescription pain medications were appropriate and responsible.”

This is no doubt a prudent stance on J & J’s part, as Saturday’s settlement is with the state of New York only and the company still faces considerable liability in other lawsuits in other states.

The settlement’s apparent sweeping ban barring J & J from manufacture, distribution or sale  of opioids in New York or throughout the United States is less significant than it appears on its face – as J & J has already stopped producing and selling opioids, as of last year. In addition, while at one time, J & J supplied 60 percent of the ingredients used to make opioids to other companies that in turn manufactured drugs like Oxycodone, yet J & J sold that business in 2016, according to the NYT.

Status of Global Settlement Negotiations

The clock is now ticking, loudly, for Tuesday’s NY trial. During the earlier stage of the pandemic, many trials were postponed, and those delays reduced the urgency for settlement. As the WSJ reports, J & J’s settlement with the state of New York will intensify negotiations “with the company and three drug distributors to clinch a $26 billion settlement of thousands of other lawsuits blaming the pharmaceutical industry for the opioid crisis.”

Per the WSJ:

Johnson & Johnson’s New York deal removes it from a coming trial on Long Island but not from the rest of the cases it faces nationwide, including a continuing trial in California. The New York settlement includes an additional $33 million in attorney fees and costs and calls for the drugmaker to no longer sell opioids nationwide, something Johnson & Johnson said it already stopped doing.

States have been trying to re-create with the opioid litigation what they accomplished with tobacco companies in the 1990s, when $206 billion in settlements flowed into state coffers. More than 3,000 counties, cities and other local governments have also pursued lawsuits over the opioid crisis, complicating talks that have dragged on since late 2019 and that have been slowed down by the Covid-19 pandemic.

Johnson & Johnson, along with the nation’s largest drug distributors, AmerisourceBergenCorp. , Cardinal Health Inc. and McKesson Corp. , have been in talks with state attorneys general and plaintiffs’ lawyers for local governments to resolve the cases for $26 billion.

The company said Saturday there continues to be progress on the nationwide deal and that it “remains committed to providing certainty for involved parties and critical assistance for communities in need.”

Jerri-Lynn here. So, don’t touch that dial. The upcoming couple of days look to be busy ones for the lawyers involved in these lawsuits. According to the WSJ:

A core team of attorneys general have had regular settlement conferences by phone and “have engaged in in-person negotiations in New York on a near-daily basis over the course of the last few weeks,” according to a disclosure made in mid-June in an opioid case in San Francisco.

The trials and settlement talks come after more than four years of litigation pursued by states, cities and counties to recover some of the costs of an opioid epidemic that has killed half a million people in the U.S. since 1999.

This outcome would come not a moment too soon for cities, states, counties, and other communities battling the opioids crisis. Over to the WSJ:

In a statement, Ms. James said the state’s focus remains “getting funds into communities devastated by opioids as quickly as possible.” Hunter Shkolnik, an attorney for the counties, said that after several delays, “Judgment day is here.”

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  1. TimH

    “In March 2019, Attorney General James filed the nation’s most extensive lawsuit to hold accountable the various manufacturers and distributors responsible for the opioid epidemic.”

    “Johnson & Johnson said that the settlement was not an admission of liability or wrongdoing”

    So, not held accountable, and of no help to any civil lawsuits. You folded, AG James.

    1. timbers

      So, JJ stock holders pay the fine, while JJ upper management make off with the bonus $$$ from selling opioids, and pay nothing for their actions…but they probably learned they make more money if they do something like it, again.

      JJ has a much vaunted “Credo” that they constantly brag about as the the moest-est best-est ever-est. It is what they claim as their moral beacon guiding all their actions, and they have meetings teaching (maybe brainwashing is a better term?) their employees regarding it.

      I guess they don’t really believe or follow it, then. Just corporate propaganda, brainwashing.

      I noticed hypocrisy in their Credo while working their, when for example they froze pay while fully funding their (if memory serves) ginormous $3 billion/year stock buy back program to enrich highest management. Even wrote an email to them regarding the fantastical money they spend on buy backs, in response to the email informing us of no pay raise.

      1. Otis B Driftwood

        Same goes for McKesson. John Hammergren, now former CEO, was once the highest paid executive in the world. He was at the helm for this. Not sure who his lieutenant was running the drug distribution business, but I will bet he or she will also avoid accountability.

  2. Kris Alman

    Purdue/Sackler pled guilty to 3 criminal charges, though family members and other executives were spared.

    Two years ago, the US Attorney’s Office in the Southern District of New York trumpeted a first of its kind prosecution: executives of Rochester Drug Co-Operative, a wholesale pharmaceutical distributor based in New York, and the distributor itself were charged with drug trafficking opioids.

    The former CEO, Laurence Doud III, 76 has pled not guilty to both counts, with his legal team filed a motion to dismiss the count of conspiracy to illegally distribute controlled substances on the grounds that “the law was not intended to cover the CEO of a pharmaceutical company.” https://www.cnn.com/2020/01/14/us/pharmaceutical-company-stops-selling-opioid-medications/index.html

    Why would pharmaceutical executives be immune to criminal charges?

    Why aren’t there more criminal prosecutions of pharmaceutical companies for the opioid crisis?

    1. Paul P

      The forfeiture statures don’t apply to drug dealing by companies and executives? El Chapo
      got robbed.

  3. John Siman

    Good thing we can trust J&J with mandatory, for-profit vaccines for everyone in the world though!

  4. lincoln

    Johnson & Johnson probably got off easy.

    Until 2016 they owned Tasmanian Alkaloids, which is the world’s largest farmer of an extremely high yielding genetically modified opium poppy. At the same time they also owned its sister company Noramco, which then refined these poppies into opioid active pharmaceutical ingredients (oxycodone, hydrocodone, hydromorphone, oxymorphone, ect). Noramco was the largest producer of opioid active pharmaceutical ingredients in the U.S., supplying drug companies like Purdue Pharma, Teva Pharmaceuticals, Mallinckrodt, Endo International and Allergan. And the opium poppy that Tasmanian Alkaloids modified was able to evade rules limiting how much opioid raw material could be imported into the U.S. The results of this combination were disastrous. According to a very interesting article about one part of the opioid supply chain:

    “In 1994, chemists tweaked the opium poppy so that the plant produced higher yields of thebaine, a chemical precursor for making oxycodone. More importantly, this transformation enabled United States manufacturers to evade a long-standing regulatory cap. Historian William B. McAllister, author of Drug Diplomacy in the Twentieth Century, suggests that thebaine may be a case of “regulatory entrepreneurship,” where pharmaceutical companies attempt to figure out ways of getting around international drug controls to gain market share. Tasmanian Alkaloids, a pharmaceutical company based in Australia, followed by other firms, was able to ship thebaine despite the formal agreements because Drug Enforcement Administration rules governed the importation of morphine but, by 2000, clearly did not apply to thebaine. This regulatory regime was an unheralded but necessary precondition for the explosive growth of opioid production and oversupply in the last 25 years.”

  5. timbers

    “The settlement’s apparent SWEEPING ban barring J & J from manufacture, distribution or sale of opioids in New York or throughout the United States…”

    Yah, SWEEPING.

    Like, one time a got a traffic ticket and appealed. The judge/magistrate told me in this case I was right but going forward I must comply with all traffic laws all the time.

    That was a SWEEPING.decision, telling me I had to follow traffic rules and obey law.

  6. Nikkikat

    I would have rather seen some people frog marched to life in prison. My family lost a friend to opioid addiction. Bob injured his knee requiring a couple of surgeries and painful rehab.
    He was dispensed huge bottles of opioids like OxyContin. He got hooked almost immediately, he went to rehab tried hard but only managed a few months at a time of sobriety. His family also tried to help him. He eventually overdosed and died. These drugs were intended to addict people. The social cost in abandoned children, foster care, homelessness, destruction of families, crime, can’t be paid for with what amounts to a small dent in their cash flow. This was one of the legacies of Eric holder no criminal charges just a nice little fine that I believe they can write off their taxes.

  7. Gareth

    I wonder if Attorney General James or anyone in her office thought to consult actual doctors before forcing J&J to cease manufacture of all opiate drugs. They make tramadol, which is one of the more effective opiate-based medications that doesn’t seem to engender widespread abuse. It’s commonly used for arthritis pain management, and you can’t just replace it with aspirin or acetaminophen, especially in elderly populations with kidney or liver disease.

    1. Yves Smith

      First. if you had read the article, J&J already exited the business.

      Second, tramadol is not “opiate based”. It’s a synthetic opioid. It is still generally put in the category of opiates but as you pointed out is less addictive than its poppy-based competitors.

      1. Gareth

        My apologies, Yves. I knew J&J was still selling it, and doctors in this area call it an opiate-based drug. I am not a doctor or a pharmacist; I do, however, question the wisdom of letting lawyers make medical decisions for the entire nation.

        1. Yves Smith

          Sorry to have sounded snippy. I am dealing with my mother’s horrible hospital and am letting my frustration spill over.

          There is a distressing amount of nomenclature sloppiness among MDs and it bothers me. I don’t know if they are sloppy when speaking to other clinicians or this is how they talk to laypeople.

          The only reason I am aware of the difference is that despite being generally robust, a lot of medications make me feel like crap. Not an allergic reaction but tired, difficulty concentrating, digestion out of sorts. I tried Vicodin after getting a lost clot (super painful possible outcome of an extraction) and it barely blunted the pain while making me feel generally bad in other ways. Had a later serious pain incident and Tramodol did me no better. I had been hopeful that the “synthetic” part might lead to less obnoxious side effects.

  8. Tom Stone

    I do wonder how this will work at the patient level.
    I was hit head on by a drunk driver 30 years ago and went to the wrong chiropractor two years later.
    It still hurts.
    I flat out needed heavy duty painkillers,muscle relaxants and anti inflammatories for three years before giving them up entirely after 5 years.
    I’m very likely to need opioids again within a year or two to function at all and wonder if it will be
    “Take two Percodans and call me in the morning” or ” Yes, I know he’s terminal, but we can’t give him a painkiller because it’s too addictive”

  9. orlbucfan

    I’ll believe actual justice was done when quite a few of these gilded white collar crooks get sentenced and marched into a genuine prison. Confiscate all their assets and give them to the families of the victims. Start with the Sacklers and leave them penniless. One can dream.

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