The Opioid Epidemic Settlements: Who Will Benefit?

October 10, 2019

Judgements and settlements are starting in Oklahoma against various pharmaceutical companies for their alleged roles in that state’s opioid crisis. Who would be the beneficiaries of these funds?

Judgements and settlements are starting in Oklahoma against various pharmaceutical companies for their alleged roles in that state’s opioid crisis. During these judgements and negotiations with three major companies, the financial liability potentially ranged from a judgement for more than $500 million in this single state case to negotiations that might reach $10 billion for each company to resolve national claims. In this most recent Oklahoma case, the judge stated that one company “engaged in false and misleading marketing of both their drugs and opioids generally, and the law makes clear that such conduct is more than enough to serve as the act or omission necessary to establish the first element of Oklahoma’s public nuisance law.”

Several aspects of this ruling seem remarkable and perhaps contradictory. From a conventional understanding of a “public nuisance,” this bland-sounding civil offense seems relatively minor and hardly the basis for a significant financial judgement. Police officers may issue fines for a public nuisance offense, which is a ticket with a payable fine that ranges from $100 to $300. From an international perspective, the Indian Penal Code states that a public nuisance “. . . shall be punished with a fine, which may extend to two hundred rupees,” which is equivalent to about $3. Is the severity of the alleged pharmaceutical manufacture’s public nuisance offense consistent with the magnitude of the financial liability in this judgement?

Compared with the tobacco smoking settlement amounts for hundreds of billions of dollars or to the Wall Street analysts’ expectation of a fine up to $5 billion for this case in Oklahoma, this $500 million seems a relatively modest amount to pay. The importance of this initial landmark case is of course significant; however, we need to recognize that nationally more than 2000 additional court cases are still pending. Moreover, the recent Purdue offer to settle its 2000 pending opioid related lawsuits for $10 to $12 billion needs to be recognized.

Since most major pharmaceutical companies and wholesale distributors are defendants in these nationally pervasive cases, how large could the ultimate pool of funds be? If each of these 20 to 30 companies was required to pay even $500 million over 2000 lawsuits the national settlement would be about $10 billion each. The $10 billion from a single company would lead to about $6 million for each of the municipal plaintiffs, which, when multiplied by the 20 to 30 companies with pending lawsuits, would result in hundreds of billions of dollars to distribute.

What is the implication of having hundreds of billions of dollars available for addiction disorders, mental health, and other health care services? Would these be the only beneficiaries of these funds? In 2017, the White House Council of Economic Advisors estimated the national health care costs related to the opioid epidemic to be about $500 billion, but that estimate is of money already spent and does not offer a framework for spending new funds from a settlement with the pharmaceutical companies.

Furthermore, by 2017 much of the fatal and catastrophic outcomes associated with opioids were attributable to heroin and illicit fentanyl, not pharmaceutic company sources. Thus, what portion of any final settlement would health care components deserve to provide care for the estimated 11 million current and potentially future substance use disorder patients? We might learn something from the tobacco company financial settlements and their distribution across the US, when the period of being a public nuisance lasted considerably longer and had an impact on a substantially larger proportion of the population.

A look back on the benefits for addictions prevention and treatment and for health care broadly is not encouraging on this 20th anniversary of the Master Settlement Agreement (MSA), which is an accord reached in November 1998 between the state Attorneys General of 46 states, five US territories, the District of Columbia, and the five largest cigarette manufacturers in America. This MSA settlement required the tobacco industry to pay the settling states billions of dollars annually forever. Specifically, the MSA also had the original participating manufacturers agree to pay a minimum of $206 billion over the first 25 years of the agreement. Over the years, the states have collected tremendous amounts of revenue related to the MSA, but are spending little of it on tobacco prevention and cessation programs.

States collected an estimated $27.3 billion from the MSA and taxes in fiscal year 2019, yet today no state funds tobacco prevention at the level recommended by the Centers for Disease Control and Prevention (CDC). Overall, states spend less than 3% of MSA funds on programs to prevent kids from smoking and help smokers quit. Twenty-nine states and the District of Columbia spend less than 20% of the CDC recommendation.1 Alaska and California spend more than 70% of the CDC recommended funding-$655 million annually on prevention and cessation programs. Tobacco companies, on the other hand, spend more than $14 to market tobacco products for every $1 the states spend to reduce tobacco use.

Despite overall progress in reducing smoking rates to 14%, smoking rates are highest among people with lower income and less education, American Indians/Alaska Natives, LGBT Americans, those who are uninsured or on Medicaid, and those with mental illness. These differences are in part due to the misallocation of these MSA funds to many other conditions unrelated to health care, prevention, and biomedical research.

New challenges have also evolved in the spread of nicotine abuse and dependence among youth. Youth e-cigarette use has skyrocketed to epidemic levels; the CDC and FDA show that from 2017 to 2018 e-cigarette use increased by 78% among high school students (to 20.8%) and by 48% among middle school students (to 4.9%). The obvious parallel for opioids with the many other DEA scheduled medications such as stimulants and sedatives strongly argues that investments of these settlement funds in prevention, treatment, and research in related types of addictive substances and their delivery systems is essential. However, how likely is that to happen based on our experience with the MSA for tobacco and nicotine?

The funds are available to put into health care, particularly for the youth of America, but our state leaders are not funding these programs at levels recommended by the CDC. Thus, the upcoming challenge will not be in the courts, but in the state legislatures, which are likely to get a substantial influx of financial resources to address the current epidemic with opioids. The fatalities associated with this epidemic have indeed shifted to an illicit market of heroin and fentanyl and away from the original challenges with marketed commercial opioids. Nevertheless, financial resources are clearly on their way to states and communities, and we need appropriate planning for wisely spending-not wasting these resources by missing the mark for which they were intended.

Disclosures:

Dr Kosten is Jay H. Waggoner Endowed Chair, Co-Founder, Institute for Clinical and Translational Research, and Professor of Psychiatry, Neuroscience, Pharmacology, and Immunology, Baylor College of Medicine, Houston, TX.

References:

1. Campaign for Tobacco Free Kids. A State-by-State Look at the 1998 Tobacco Settlement 20 Years Later; 2018. https://www.tobaccofreekids.org/what-we-do/us/statereport.

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