Industryweek 34834 Opiods 1

McKesson's West Virginia Opioid Deal May Spur More Accords

May 2, 2019
West Virginia agreed to accept $37 million from McKesson to settle claims of improper distribution of the painkillers to pharmacies, though the company admitted no wrongdoing.

McKesson Corp.’s settlement of an opioid lawsuit with West Virginia -- the state with the highest U.S. rate of overdose deaths from prescription painkillers -- may encourage other states to seek quick cash to cope with the rising societal costs of addiction.

West Virginia agreed to accept $37 million from McKesson to settle claims of improper distribution of the painkillers to pharmacies, though the company admitted no wrongdoing, Attorney General Patrick Morrisey said on May 2. The money will help defray some of the $8.8 billion in costs to the state’s economy associated with the opioid crisis. Morrisey, a former drug-company lobbyist, said he recused himself from settlement talks.

States hard hit by the epidemic, including West Virginia, Ohio and Kentucky, have accused drug makers and distributors of understating the risks of prescription opioids, overstating their benefits, and failing to halt suspiciously large shipments to pharmacies. With more than 120 Americans dying every day from opioid-related overdoses, communities sued opioid manufacturers including Purdue Pharma LP and Johnson & Johnson, along with distributors such as McKesson and Cardinal Health Inc.

The McKesson settlement comes more than a month after Purdue agreed to pay $270 million to settle the Oklahoma attorney general’s lawsuit alleging the drug maker of fueling the opioid crisis in the state. The West Virginia accord is the first by a distributor, which may set an industry-favoring benchmark for other claims.

“There’s no question the damage done by McKesson’s actions is considerably more than the $37 million it paid,” said Richard Ausness, a University of Kentucky law professor who has been following opioid lawsuits nationwide. “It may be Mr. Morrisey is looking for money now, rather than waiting to take a share of a larger recovery five years from now.”

Kristin Hunter Chasen, a spokeswoman for San Francisco-based McKesson, said the deal calls for $14.5 million paid to West Virginia this year, with $4.5 million installments over the next five years. The funds will be used to “combat the opioid epidemic, including rehabilitation, job training and mental health,” the company said in a statement.

The West Virginia settlement is similar to Purdue’s March deal to resolve its opioid liability in Oklahoma, with money earmarked for research and treatment. Oklahoma is pushing ahead with a May trial against Johnson & Johnson and Teva Pharmaceutical Industries Ltd., which are accused of fueling a wave of overdoses tied to opioid painkillers.

Litigation Risks in Opioid Suits

According to the Centers for Disease Control and Prevention, the rate of opioid-overdose deaths in West Virginia was 57.8 per 100,000 people, more than any other state, followed by Ohio, Pennsylvania, the District of Columbia and Kentucky.

Cities, counties and states have filed more than 1,600 lawsuits. Many want to consolidate their claims to force one big settlement -- the same strategy that led to a $246 billion deal with Big Tobacco in 1998. Drug makers may have to spend as much as $50 billion to resolve all the opioid suits, according to Holly Froum, a litigation analyst at Bloomberg Intelligence.

Critics were quick to disparage the McKesson settlement, saying it didn’t come close to holding the company accountable for the flood of pills in the state. McKesson was accused of shipping more than 100 million prescription opioid painkillers to West Virginia between 2007 and 2012. The company generated more than $208 billion in revenue for fiscal 2018.

Some towns were overwhelmed by painkillers, according to data released by the U.S. House Energy and Commerce committee. Between 2005 and 2006, the pharmacy in Kermit, West Virginia, population 400, received nearly 5 million doses from McKesson. Between 2006 and 2014, it shipped more than 5.8 million opioid painkillers to a pharmacy in Mount Gay, population 1,800. The company provided another 2.3 million doses to a pharmacy three miles away.

Breaking Away

In cutting a separate deal with West Virginia, McKesson is the first company to break away from opioid settlement talks sponsored by a group of U.S. attorneys general. Endo International Plc, a Dublin-based opioid maker, also is seeking its own global accord over its liability.

Late last year, Morrisey, a Republican, lost a bid to unseat U.S. Senator Joe Manchin. During the campaign, Manchin, a Democrat, accused Morrisey of rushing to a “sweetheart settlement” with McKesson because of his close ties to the industry. “This is a horrible deal anytime,” Manchin said at a press conference on Oct. 23, before the settlement was announced, according to the Charleston West Virginia Post-Gazette.

The West Virginia deal also is separate from settlement talks sponsored by a federal judge in Cleveland who is overseeing more than 1,600 suits filed by cities and counties. U.S. District Judge Dan Polster unsuccessfully pushed the companies to settle the cases and has set the first test-trials in the litigation for October.

By Jef Feeley

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