Kansas Attorney General Derek Schmidt and other state attorneys general have agreed to a nationwide settlement framework that would require the country’s largest manufacturer of generic opioids to set aside $1.6 billion to address opioid-fueled addiction costs. However, the company’s recently announced plans to file bankruptcy make final settlement uncertain and will delay any payment for an undetermined amount of time.
Schmidt announced the global settlement framework with Mallinckrodt Pharmaceuticals plc, which would resolve claims by 47 state attorneys general that the company’s business and marketing practices contributed to the epidemic of opioid addiction the country is facing. The Ireland-domiciled company, which makes generic oxycodone and several other opioid-related products, delivered more that 527 million doses into Kansas from 2006 to 2014, according to U.S. government data. Mallinckrodt’s actions fueled opioid addiction in Kansas where, according to the Kansas Department of Health and Environment, 169 people died from opioid poisoning, including 83 from prescription opioids, in 2018, the last year for which complete data is available.
Under the framework, the company would agree to pay $1.6 billion in cash to a trust to cover costs of opioid-addiction treatment and related efforts. The agreement allows for the potential for increased payment to the trust and subjects the company’s future opioid business to strict rules to prevent marketing and diversion. The company’s planned bankruptcy filing, however, clouds any ability to predict how much of, or how soon, those funds will be available to help the State of Kansas or affected local communities in the state, and it is unclear how much of those funds may be siphoned off to pay the private attorneys hired by many local governments.
The Mallinckrodt settlement framework is the second reached by Kansas with an opioid manufacturer to pay costs associated with its role in causing the national opioid addiction crisis. In September, Schmidt joined with 28 other states and territories, along with more than 2,000 cities and counties, in a structured settlement with Purdue Pharma estimated to be worth at least $5 billion. That agreed framework was reached shortly before Purdue also filed for bankruptcy, and negotiations are ongoing in the bankruptcy proceeding.
“These settlement negotiations are extraordinarily complex,” Schmidt said. “The scale of the claims, the unprecedented actions by thousands of local governments to hire private counsel and pay their attorney fees by giving away part of any funds recovered, the extraordinary demands by some of those private attorneys to take at least part of their cut off the top of any settlement, the uneven effect of the opioid crisis in different regions of the country and the ever-present risk of bankruptcy combine to make this one of the most complicated legal cases in U.S. history. But my objective remains simple: Get as much money into the hands of state and local governments in Kansas to pay for addiction treatment as soon as possible. And, of course, change corporate behavior to stop the practices that fueled this in the first place.”
In addition to the settlements with Mallinckrodt and Purdue, Kansas is in ongoing negotiations with the three major nationwide pharmaceutical distributors: Cardinal Health Inc., McKesson Corporation and AmerisourceBergen Corporation. Schmidt was one of a small bipartisan group of attorneys general who last week traveled to federal court in Cleveland, Ohio, for settlement discussions with the companies and with private attorneys representing thousands of local governments. No comprehensive settlement with all parties has been reached.
Kansas also is engaged in ongoing negotiations with Johnson and Johnson, Teva Pharmaceutical Industries Ltd., Endo International plc and other companies the state believes played a role in fueling opioid addiction.