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Latest Developments in the Opioid Litigation

September 13, 2019Article

We have all seen or heard the statistics. More than 130 people in the United States die each day after overdosing on opioids. The cost of opioid abuse is estimated to be $78.5 billion a year. According to the U.S. Centers for Disease Control and Prevention, there have been more than 400,000 opioid-related deaths in the U.S. since 2000, including over 47,000 deaths in just 2018 alone. Opioid overdoses have now become the country’s largest cause of accidental deaths - surpassing even automobile accidents. In 2017, the White House Council of Economic Advisers estimated that, as of 2015, the financial cost of the crisis was over $500 billion.

There is no question the opioid crisis is staggering in its size and impact. As a result, forty-eight states plus around 2,000 local and tribal governments have sued companies in the drug industry, claiming that those that manufacture, distribute and sell the drugs are partly responsible for the crisis. They argue that the drugs were improperly marketed and that companies failed to stop suspicious orders from being delivered.

On August 26th, in the first major opioid trial in the nation, Oklahoma state court judge Thad Balkman issued a decision ordering Johnson & Johnson to pay over $572 million for allegedly pushing doctors to prescribe opioids while downplaying the risks of addiction. State prosecutors claimed that J&J thus helped fuel the state's opioid epidemic and led to more than 6,000 deaths over nearly two decades. Notably, while J&J must pay the state more than a half billion dollars, this is only a small fraction of the $17 billion Oklahoma was seeking in damages. Prior to Judge Balkman’s ruling in this case, Oklahoma reached a $270 million deal with Purdue Pharma and an $85 million settlement with Teva Pharmaceuticals.

From a legal perspective, one of the most interesting aspects of this case was the nature of the legal cause of action Oklahoma asserted to recover its damages. Opioid cases are complicated by the fact that there are dozens of defendants and thousands of plaintiffs with different interests, and State and local governments are battling over control of any settlement money. And, while there has been no problem identifying the injuries caused by opioids, there appears to be no clear legal theory for redressing them. Lawyers have been exploring a variety of claims including false advertising, breach of warranty, misrepresentation and consumer fraud.

In the Oklahoma case, however, Judge Balkman relied on what some legal pundits view as one of the least compelling claims: common law "public" nuisance. They believe appellate courts are likely to see the use of nuisance in this case to present its own legal risks. One of which is that it would bypass our existing system for resolving product liability claims. Many also believe that nuisance claims were not designed to be used in product liability cases and could become a substitute for legislation by courts.

A number of legal commentators have suggested the reason Oklahoma turned to nuisance is that it did not have many good options. That is because opioids are not a defective product, and the problem is with the prescription, not the design of the drugs; and doctors, not drug companies, prescribe drugs. There are, however, other potentially viable - and possibly stronger – claims available, such as misrepresentation and consumer fraud, and thus some commentators have suggested that it would be premature to view the Oklahoma case as a “litmus test” for opioid cases.

Looking beyond the Oklahoma case, the first federal trial, involving claims from Ohio's Cuyahoga and Summit counties, is scheduled for October 21, 2019. (In re: National Prescription Opiate Litigation, case number 1:17-md-02804, in the U.S. District Court for the Northern District of Ohio.) The judge in that case, Dan Polster, intends to use the case as a bellwether, providing decisions that could apply to other cases. Judge Polster is overseeing most of the opioid cases and is pushing the parties to settle. Other cases in state and federal courts could be tried as soon as next year.

Most recently, on September 11th, Purdue agreed to settle roughly 2000 opioid suits brought by local governments, states and tribes for $3 billion. As part of what will be the first global settlement in the MDL, Purdue is expected to file for Chapter 11 bankruptcy protection with drug sale profits from its painkiller OxyContin going to states and local governments. While the deal will resolve most of the cases against Purdue, it does not cover suits brought by the states of Connecticut and Massachusetts, and attorneys general for several states (including New York and New Jersey) have vowed to continue to press their claims against Purdue. Other drug companies that have settled out of the MDL include Endo Pharmaceuticals (for $10 million) and Allergan (for $5 million). In addition, on September 6th, Mallinckrodt announced that it would be paying $24 million and donating up to $6 million in generic drugs to exit the MDL.

Interestingly, within hours of the announcement of the Purdue settlement deal, Judge Polster approved a novel “negotiation class” that would allow drug manufacturers, distributors and pharmacies to pursue global settlement deals with more than 30,000 local governments. Under this concept, attorneys for the negotiation class would try to craft nationwide settlements with individual drug companies, which is expected to generate tens of billions of dollars in payments from drug companies to communities. While some state attorneys general oppose the concept, Judge Polster reasoned that it was more likely to promote global settlements than impede them. The judge emphasized that local governments could opt out of the class, and drug companies would not be obligated to engage with the class. Furthermore, any settlement would have to be put to a vote and require approval by 75% of the voting governments.

While the prospect of global settlements generating billions of dollars to be funneled into drug-ravaged communities around the country is certainly a positive development, it will be interesting to see whether all stakeholders in the opioid litigation will accept some form of global resolution or instead choose to opt out and continue to litigate their claims and defenses in the courts.