United States: America On Opioids

Last Updated: August 14 2017
Article by Adam H. Fleischer

Co-authored by Steven Garrett

As the Epidemic Continues, the Legal Landscape for Manufacturers and Distributors Unfolds

Ninety-one Americans will die today from an opioid overdose. This is the same number who died from opioids yesterday, and who will die tomorrow and every day in 2017, according to the Centers for Disease Control and Prevention.

It is widely acknowledged that opioid abuse is the worst drug crisis in American history. In 2015, more than 33,000 people died from opioid overdoses. This number has quadrupled since 1999, as has the number of prescription opioids sold in the United States. The epidemic has led to astronomical economic costs, with recent estimates of the total cost of the opioid crisis at $78.5 billion so far. This includes costs related to health care, substance abuse treatment, lost productivity, and criminal justice expenses.

Although West Virginia has been called "ground zero" for the devastation of opioid abuse, this national epidemic is certainly not limited to one state. Recent lawsuits have been filed in Illinois, California, Ohio, New York, Kentucky, the Cherokee Nation in Oklahoma, and Washington State.

The attorneys fueling these claims crisscross the country, meeting with attorneys general and seeking an exponential increase in the number of cases currently pending. Apart from the altruistic motives, there is a financial incentive for doing this. In December 2015, a suit in a remote Kentucky courthouse against opioid industry powerhouse Purdue Pharma settled for $24 million. More recently, suits against opioid distributors in West Virginia have reaped over $40 million in settlements.

So, who is being sued? For what? And is any of this insured?

Two decades ago, Purdue Pharma launched the opioid OxyContin, promising sustained pain relief for 12 hours. OxyContin generated $31 billion and sprouted an industry of potent painkillers. However, it became evident that these painkillers did not last as long as advertised. This resulted in excruciating symptoms of withdrawal, thereby causing some doctors and manufacturers to resort to higher dosages, driving patients either deeper into the clutches of prescription opioid addiction via Vicodin and Percocet, or toward the readily available and illegal cousin, heroin.

Savvy litigators tore a page straight from the tobacco litigation playbook and went to work. They discovered that, just maybe, the opioid manufacturers knew of the treacherously addictive qualities of their drugs, the agony suffered between doses, and the over-prescription for inappropriate maladies. And so the lawsuits began to target the manufacturers, and have since spread right down the distribution line.

CLAIMS AGAINST MANUFACTURERS

In June 2014, Chicago and California filed similar lawsuits against manufacturers, including Purdue Pharma, Teva Pharmaceuticals, and Actavis. The suits allege that the manufacturers fraudulently marketed opioids to convince doctors and patients that opioids are safe for long-term use while failing to disclose risks such as addiction, overdose, and death. Chicago and California each seek payment of restitution, civil penalties, treble damages, and attorneys' fees. As of June 2017, the Chicago suit is in the midst of discovery and the California suit is awaiting the filing of an amended complaint, with three defendants having recently settled for $1.6 million.

On Dec. 15, 2015, Mississippi filed a similar manufacturer lawsuit alleging that, since the 1990s, pharmaceutical companies engaged in a common scheme to deceptively market the risks, benefits, and superiority of opioids to treat chronic pain. Mississippi allegedly has spent more than $5.6 million on opioid products through its Medicaid program and over $141 million in addiction treatment. As of June 2017, the case is proceeding into discovery.

Most recently, on May 31, 2017, Ohio's attorney general sued manufacturers, alleging that they have contributed to the opioid epidemic by falsely promoting drugs like OxyContin and Percocet as safe and non-addictive. Ohio alleges that it is "awash in opioids and engulfed in a public health crisis the likes of which [has] never been seen before."

The complaint alleges that in 2016, roughly 20 percent of the state's population was prescribed an opioid drug, and that the Ohio Department of Medicaid has spent $175 million on the defendants' opioid products.

CLAIMS AGAINST DISTRIBUTORS

After opioids are manufactured, they are purchased and resold by distributors. West Virginia opened this litigation door by filing suits against the three largest wholesalers: AmerisourceBergen Drug Corporation, Cardinal Health, and McKesson Corporation. West Virginia's suit alleged that its costs for the opioid epidemic were "as much as $430 million in the year 2010, with costs projected to be as much as $695 million annually by 2017."

West Virginia alleged that the distributors failed to maintain controls and procedures to prevent theft and diversion of controlled substances and to report suspicious orders, as legally required. Each distributor has since been sued in over 15 "copycat" lawsuits by West Virginia municipalities that are lining up, hat in hand. These suits also name smaller distributors such as H.D. Smith and Anda Inc.

On April 25, 2017, the Cherokee Nation sued the same opioid distributors for damages involving 177,000 Cherokee Nation citizens spanning 14 counties in northeast Oklahoma. The case is premised upon Article 13 of the 1866 Treaty of Washington between the United States and the Cherokee Nation, which grants tribal courts jurisdiction over claims arising in tribal territories. The tribe seeks up to $10,000 per violation for the defendants' failure to implement effective controls against diversion of the addictive opioids they supplied.

CLAIMS AGAINST PHARMACIES

Some pharmacies have been labeled as "pill mills," typically in rural or low-population areas where the amounts of controlled substances sold are much greater than a population of that size typically would warrant. The attorney general of West Virginia has filed lawsuits against three such pharmacies, alleging that each failed to identify suspicious prescriptions or recognize when its prescriptions reached an outrageously inflated volume. For example, it is alleged that from 2006 to 2016, Larry's Drive-In Pharmacy distributed over 7.7 million doses of hydrocodone in a county that has fewer than 25,000 residents.

One pharmacy suit has already been before the West Virginia Supreme Court of Appeals to determine whether the drug users themselves can shift blame and compensation onto the pharmacies. In Tug Valley Pharmacy v. All Plaintiffs, the court ruled that substance abusers could pursue compensation from those who prescribed the medications even though the abusers engaged in a series of illegal activities such as lying to physicians and "doctor shopping." The May 2015 ruling rejected the "wrongful conduct rule" that would have precluded the individuals from bringing claims arising from their own illegal activities. The court concluded that it would be for juries to allocate liability among those who used the drugs and those who supplied them.

COVERAGE ISSUES

A handful of litigated coverage disputes have so far involved two discrete questions:

  • Do insurers have to defend claims when there is no specific compensation sought for bodily injury to specific individuals?
  • Does the alleged violation of business practice statutes constitute an occurrence?

In July 2014, the Western District of Kentucky in Cincinnati Ins. Co. v. Richie Enterprises found that if a policy states that it only covers suits seeking damages "because of bodily injury," then such a policy has no obligation to defend against West Virginia's distributor suit. The court reasoned that West Virginia's claims against the distributors do not really seek damages "because of bodily injury." Instead, West Virginia was seeking reimbursement for public expenditures due to the defendants' distribution of drugs in excess of legitimate medical need, and this is not the same as paying compensation "because of bodily injury."

A contrary decision came in July 2016 from the 7th Circuit Court of Appeals, in Cincinnati Ins. Co. v. H.D. Smith. The court held that it does not matter if West Virginia is seeking recovery of amounts paid to compensate the injured drug users themselves or, alternatively, reimbursement for expenses incurred by the state. The court concluded that West Virginia's effort to recover its health care expenditures is no different than a mother's lawsuit to recover her money spent to care for her injured son. Both payments, the court determined, implicate bodily injury coverage since the payments were "because of bodily injury," thereby requiring the insurer to defend.

In a third opioid coverage case, the District Court for the Southern District of Florida examined the difference between a policy providing coverage "for bodily injury" as opposed to "because of bodily injury." In a March 2016 ruling in Travelers v. Anda Inc., the court concluded that an insurer does not have a duty to defend West Virginia's distributor lawsuit because West Virginia's alleged damages were for its own economic loss, rather than "for [the] bodily injury" of its residents. This ruling may dictate that policies providing coverage "for bodily injury" can escape claims for reimbursement of public health expenditures, which may not be the case for policies covering damages "because of bodily injuries." The decision was affirmed on Aug. 26, 2016.

The Chicago and California manufacturer lawsuits are subjects of one combined coverage action filed by Travelers against Actavis in California state court. On April 11, 2016, the trial court ruled that Travelers has no duty to defend because the underlying lawsuits against the manufacturers do not allege an occurrence, as the marketing scheme alleged does not constitute an accident. Actavis filed an appeal of the court's ruling, arguing that Actavis' alleged conduct could indeed constitute an occurrence because Actavis did not intend the harm caused by its marketing scheme (even if the scheme itself was intentional). The briefing on this case was completed on Jan. 23, 2017, and is awaiting a date for oral argument.

A new distributor coverage action got underway on March 16, 2017, in which AmerisourceBergen filed a coverage suit in West Virginia against four of its insurers, seeking insurance for its $16 million settlement of the West Virginia distributor suit against it, as well as coverage for the many copycat claims that have been filed by county and local municipalities.

New coverage suits will bring new coverage issues. For example, in 2007, $160 million in fines was paid by opioid manufacturers to reimburse the federal government and states for damages suffered by Medicaid programs due to the improper promotion of OxyContin. This early knowledge that something was amiss in the world of prescription opioids will lead to coverage questions involving prior knowledge, and the extent to which those in the distribution chain were aware that the damage had begun "in whole or in part" prior to the years 2007 to 2016 that are so often now at issue.

Other inevitable questions will include if those in the distribution line were misreporting the amounts of narcotics sold, then were they also misreporting these issues on their insurance applications? Might this be a material issue leading to claims for policy rescission?

The insurance industry will also have to answer the time-honored question of how many occurrences exist for these claims. If the municipalities recover damages or fines on a per-dose basis, then why shouldn't each dose constitute a separate occurrence, perhaps triggering a separate retention? Or maybe the separate occurrence is each prescription filled, or maybe each person receiving a prescription is a separate occurrence.

With opioids, the culpability of the injured party raises questions about whether high compensatory awards will be the norm. This may be less significant if municipalities can recover expenditures paid for generalized harm to the public as opposed to individual people. Whether generalized harm to the public is an insurable risk is questionable, as is whether such damages can be covered if the public impact of the opioids was indeed the result of an intentional plan by those distributing the product.

The pervasiveness and staying power of opioid litigation may turn on the extent to which insurance coverage is available to fund such suits. For now, it is undeniable that the worst drug crisis in American history is here. It arises from legal drugs, and from legal distributors that all have their own insurance. The solutions and funding mechanisms to address these issues will be inextricably intertwined with insurance coverage for the foreseeable future.

Originally published by CLM Magazine, August 2017.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions