(Bloomberg Opinion) — Well, that didn’t take long.
Hours after a handful of state attorneys general announced they had reached a $26 billion settlement with four companies over their role in the continuing opioid crisis — Johnson & Johnson, McKesson Corp., Cardinal Health Inc. and AmerisourceBergen Corp. — Bob Ferguson, the attorney general of Washington State, issued a news release summarily rejecting it.
“The settlement is, to be blunt, not nearly good enough for Washington,” he said. “It stretches woefully insufficient funds into small payments over nearly 20 years, to be shared among more than 300 Washington jurisdictions.”
The math certainly bears him out. The settlement would give the state $527 million to be spread over 18 years. That amounts to $29.3 million a year— or less than $100,000 annually for each municipality.
Ferguson pointed out two other things. First, under the terms of the deal, if too many of Washington’s municipalities opt out of the settlement, the state would lose up to 50% of the money. And second, two years ago, Oklahoma won a $465 million verdict after a trial against J&J alone. (J&J also settled a suit brought by New York State for $230 million.) In other words, you might well get more money for your state if you go to trial instead of accepting this settlement. And, indeed, Washington State has a trial against the three big distributors scheduled for September. It also has J&J trial in January. Ferguson is licking his chops.
“Washington families devastated by the opioid crisis deserve their day in court,” he said. “We intend to give it to them.”
Twenty-three years ago, 46 of the 50 states extracted a $206 billion settlement from the top tobacco companies after years of contentious, complex and difficult negotiations. But the tobacco deal was like a game of checkers compared with the three-dimensional chess that is the opioid litigation. There are some 3,000 lawsuits, brought not only by states but big cities and rural counties and everything in between. They all want money for opioid treatment and prevention programs — and to help end the scourge — and who can blame them? There is no question that the companies fattened their bottom line by pushing a legal, but potentially lethal, drug that they had to know was causing addiction and death.
If too many of the litigants take the same path as Bob Ferguson, however, the companies will undoubtedly file for bankruptcy. That will make extracting money from them much more difficult. After all, the developer of OxyContin, Purdue Pharma, was deluged by opioid lawsuits and filed for bankruptcy in the fall of 2019. It has been there ever since as it battles its opponents over what a bankruptcy plan should look like.
Then again, part of the purpose of these lawsuits is to punish the companies — to inflict some real pain on them so they will behave better in the future. This settlement doesn’t require them to do much more than reach into petty cash. They didn’t even have to say they were sorry — indeed, in a joint statement, the three distributors said they “strongly dispute the allegations made in the lawsuits.”
The proponents of the settlement say that this is the best they could negotiate and that it will get financial relief to municipalities relatively quickly. “We don’t want the perfect to be the enemy of the good,” Attorney General Jeff Landry of Louisiana said. His counterpart in North Carolina, Josh Stein, predicted that “well north of 40 [states] will sign on.”
The settlement does include some important reforms. The distributors will set up a clearinghouse so that they can track the amount of opioids being sold to a particular location and spot red flags. It also requires that the money be spent on opioid treatment and not be put in a municipality’s general fund. (Most of the money from the tobacco settlement was ultimately diverted from anti-tobacco programs to states’ budgets.) But the $26 billion in all the headlines is deceptive — the money is unlikely to be a big difference maker for communities trying to end the opioid crisis.
Like the tobacco negotiations, the opioid settlement was largely negotiated by plaintiffs’ lawyers like Joe Rice, who were deputized by states and municipalities to bring the lawsuits. As the New York Times notes, the settlement includes $2 billion for these outside lawyers. Elizabeth Burch, a University of Georgia law professor, told the Times, “The lawyers will do a lot of the strong-arming of their clients, the localities, into agreeing to the settlements, because if the deal doesn’t go through, the lawyers won’t get paid.”
If this underwhelming deal is ultimately approved by most of the states, now you know why.
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.”