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.”