Opioid Deal-Makers Cleared to Represent Cities Across U.S.

Jef Feeley

(Bloomberg) -- A judge approved a bid by U.S. cities and counties suing opioid makers such as Johnson & Johnson and Teva Pharmaceutical Industries Ltd. to negotiate a settlement as a group, in an effort to resolve the sweeping litigation over the addictive painkillers.

U.S. District Judge Dan Polster in Cleveland, overseeing more than 2,000 lawsuits by municipalities, concluded that the negotiation class was necessary to reach a resolution acceptable to plaintiffs and opioid makers and distributors. The class is meant to bring together more than 30,000 U.S. municipalities, most of which haven’t yet filed suit.

In a 40-page ruling, Polster said he was willing to back the “novel” idea of establishing a class before a negotiating framework is in place in order to speed a settlement that expedites “relief to communities so they can better address this devastating national health crisis.”

The ruling comes as Purdue Pharma LP is nearing a $12 billion deal to settle claims it illegally marketed opioid painkillers, according to people familiar with the talks. Twenty-three states and three territories told the court Wednesday they’d support a plan under which the billionaire Sackler family, which owns Purdue, would file for bankruptcy protection and hand over the drugmaker to a trust controlled by the states, cities and counties that have sued.

The $12 billion deal would cover only Purdue. But the two, parallel sets of talks going on -- one set including 48 states and the other the municipalities -- are global, including opioid distributors such as McKesson Corp. and Cardinal Health Inc. as well as manufacturers.

Read More: Purdue Nears Deal Over Opioids as 23 States Agree to Pact

More than 30 states opposed the local governments’ push to set up the negotiating class, saying it was too early for such a move and would interfere with their efforts to reach an overarching resolution of all suits. The class is a “novel procedure that could result in a grave miscarriage of justice and do significant harm to the ability of states to protect their own people,” Attorney General Ken Paxton of Texas said in a letter to Polster.

The judge tapped plaintiffs’ lawyers including Jayne Conroy and Christopher Seeger as the class’s lead attorneys for the negotiations. Joe Rice, Paul Hanly and Paul Farrell are overseeing the cities and counties’ case as a whole.

The approval of the class will let plaintiffs “use their joint bargaining power to secure the resources they need to fund addiction, recovery, and prevention efforts in their own neighborhoods,” Conroy and Seeger said in a statement. They said it would empower the plaintiffs “without inhibiting other ongoing litigation and settlements at the state, county, or local levels.”

McKesson and Teva representatives declined to comment on the class’s approval. Jessica Castles-Smith, a J&J spokeswoman, didn’t immediately respond to phone and email messages seeking comment. Brandi Martin, a Cardinal Health spokeswoman, didn’t immediately respond to emails seeking comment.

Read More: Sacklers to Remain Billionaire Family If Deal Is Reached

The class, which cities and counties can escape only by filing an opt-out notice, will negotiate with more than a dozen opioid distributors and makers, along with some pharmacy chains, Polster said.

The plaintiffs accuse the industry of conducting illegal marketing campaigns, failing to adequately oversee orders and ignoring red flags about unusually frequent retail sales. Almost 400,000 people died from opioid overdoses in the U.S. from 1999 to 2017, according to the U.S. Centers for Disease Control and Prevention.

Some defendants involved in the talks have already agreed to settle claims rather than face a Cleveland jury next month in the first federal trial over responsibility for the U.S. opioid epidemic.

Mallinckrodt Plc, a generic-opioid maker, agreed this month to pay $30 million to settle allegations it helped fuel the opioid epidemic and to resolve claims it faced in the Oct. 21 Cleveland trial. Last month, Endo International Plc’s units agreed to an $11 million settlement, while Allergan Plc signed off on a $5 million deal.

The case is In Re National Prescription Opioid Litigation, 17-md-2804, U.S. District Court, Northern District of Ohio (Cleveland).

(Updates with McKesson declining to comment.)

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Peter Jeffrey, Steve Stroth

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