Health and Healthcare

Unusual Settlement Deal Proposed for Opioid Lawsuits

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Five pharmaceuticals makers are proposing an unusual method for settling hundreds of the more than 2,500 lawsuits facing drugmakers that made and sold opioid painkillers. The five companies want to roll the lawsuits against them into the bankruptcy settlement reached by OxyContin maker Purdue Pharmaceuticals.

The five companies are Johnson & Johnson (NYSE: JNJ), Endo International PLC (NASDAQ: ENDP), Teva Pharmaceutical Industries Ltd. (NYSE: TEVA), Allergan PLC (NYSE: AGN) and Mallinckrodt PLC (NYSE: MNK).

The proposal, if accepted by the bankruptcy court, would permit the drugmakers to contribute to the trust established by Purdue in exchange for a full release from further legal liability, according to an unnamed source cited by The Wall Street Journal.

Getting the deal done would be difficult because nearly every state, dozens of cities and counties, Native American tribes and others have filed suit against the drugmakers to recover the costs of treating opioid addiction, including costs for hospitals, first responders and babies born with opioid dependence.

The Purdue settlement is valued at $10 billion to $12 billion, including $3 billion in cash from the Sackler family that owns the company. The trust would be funded in part by future sales of OxyContin and by sales of an addiction-treatment drug currently being developed.

Three of the pharmaceuticals makers (Endo, Allergan and Mallinckrodt) have so far reached settlements totaling $45 million to settle some claims in Ohio, where a trial scheduled to begin later this month is expected to set the tone for around 2,000 opioid-related lawsuits on the calendar of the Federal District Court in Cleveland.

In the case of Mallinckrodt, the company faces some 2,300 lawsuits, and it drew the last $95 million in its revolving credit facility in late August. The company’s debt totals some $5 billion, and that combination dragged the stock down to a 52-week low of $1.43 in early September, a loss of some 96% from its 52-week high of $32.34 posted last November.

Endo shares have lost more than 80% of their value in the past 12 months while Teva’s stock is down by more than 70%. Johnson & Johnson has managed to hold its losses through Tuesday morning to around 12%.

There is some precedent for the solution the drugmakers are reportedly considering. Automakers who were sued for including Takata’s defective airbags had the option of contributing to a trust, but in that case, most were also Takata creditors and did not take advantage of the option. Walmart used the mechanism to be freed of liability in lawsuits over dangerous plastic gasoline cans manufactured by a third party.

Some states do not permit these third-party releases, however, which will complicate what is already a proposal so complex that the only guaranteed winners are the law firms that will be making motions and filing briefs in dozens of jurisdictions.


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