United States: Local Governments vs. Big Pharma - A New Wave of Litigation Alleges Liability for the Opioid Epidemic

*This article was originally published by L3: Long Leaf Law, The blog of the North Carolina Bar Association. To read this article in its original publication and with full footnote citations, please click here.

Introduction

The opioid epidemic is an American tragedy. It is difficult to convey the breadth of the epidemic with a single statistic, but let this sink in: For every person killed by gun violence, three people will die from an opioid overdose.

As the epidemic worsens, local governments are scrambling for solutions. They are also scrambling to keep up with the costs—the public health, law enforcement, public employment, and other costs that the opioid crisis has left on their doorstep. With insufficient financial assistance from Congress and state legislatures to cover these costs, local governments are turning to the courts.

Across the nation, cities and counties are suing opioid drugmakers and distributors. These lawsuits seek to hold drug companies accountable—at least in part—for the opioid epidemic. No North Carolina city or county has filed a lawsuit of this kind yet, but they surely will soon.

The authors of this article—two litigators and their future colleague—would like to explore this litigation in three parts:

The first part gives a brief overview of the costs of the opioid epidemic on North Carolina and its local governments. The second part discusses state and local government litigation against drug companies in other states—essentially a preview of what future litigation in North Carolina might look like. The third part gives the authors' predictions for the litigation, along with recently released information about a number of large settlements.

The Costs of North Carolina's Opioid Epidemic

Most North Carolinians are aware of the opioid epidemic, but many do not realize just how hard this epidemic has hit our state.

According to a recent study, four of America's worst cities for opioid abuse are in North Carolina. In the North Carolina city topping that list, approximately 11.6% of the population abuses opioids. If that statistic is not sufficiently shocking, then consider this: In that same city's neighboring county, the ratio of opioid overdoses to traffic fatalities is 2 to 1. In short, North Carolinians are suffering at unprecedented levels.

North Carolina's epidemic is not isolated to a few communities, however. Across the state, approximately 12,000 people have died from opioid-related overdoses in the past two decades. That death rate is rising dramatically: Over the next five years, opioids are projected to kill an additional 7,000 North Carolinians.

As this plague spreads across North Carolina, so do its costs. The Center for Disease Control and Prevention estimates that the opioid crisis costs North Carolina over $1.3 billion each year. From the societal impacts of drug use (for example, the breakdown of family units) to increased crime rates, every new opioid addiction in North Carolina carries a cost. On a granular level, a recent study by the U.S. Department of Health and Human Services identified the number of emergency room visits and other medical costs that occur on average for every single overdose, and it concluded that for every single overdose, there are approximately $4.35 million in healthcare costs.

To defray these costs, the federal government has begun funneling additional resources to North Carolina. In May of this year, Governor Roy Cooper announced that the State had received a $31 million grant through the federal 21st Century Cures Act. To be sure, these funds will provide much needed relief. As illustrated above, however, they will hardly offset North Carolina's financial burden. This is especially true at the local level, where cities and counties continue to foot much of the bill.

As the frontline of defense in the opioid crisis, cities and counties face an array of costs that are unique to local government. Broadly categorized, these costs include:

  • public health costs, such as those associated with the exponential increase in emergency room admissions and emergency overdose treatment (e.g., local first responders, emergency response services, equipment, and vehicles, etc.), drug treatment centers and community health clinics, and the costs related to caring for infants born addicted to opioids
  • law enforcement costs, which stem from the dramatic increase in criminal possession charges for opioid drugs
  • public employment costs, such as the hiring of additional public health and law enforcement personnel, as well as increased costs of comprehensive health care protection (including prescription drug benefits) for local government employees and retirees, which are passed on to—and paid by—local governments
  • other costs, such as the costs of economic instability on the local tax base and the corresponding effect on local government budgets

These costs are unsustainable for local governments. As a means of offsetting these costs, local governments have been seeking to hold drugmakers and distributors accountable.

Overview of Local Government Opioid Litigation

Much like the tobacco litigation of the 1980s, the opioid crisis has government officials knocking down the courthouse doors. In 2017 alone, the pharmaceutical industry faced an onslaught of more than 100 lawsuits.

The plaintiffs in these lawsuits cross the government spectrum. They include:

  • States, including Alaska, Missouri, New Hampshire, New Jersey, Ohio, Oklahoma, South Carolina and West Virginia
  • Cities, including large cities like Chicago and Birmingham, mid-sized cities like the City of Everett (Washington), and small municipalities, such as a coalition of six small towns in West Virginia
  • Counties, including ten West Virginia counties that have filed suit, and a group of 50 Wisconsin counties that are expected to file soon
  • Native American tribes, most notably the Cherokee Nation

In a major development last month, a Judicial Panel on Multidistrict Litigation consolidated 66 federal lawsuits spanning 11 federal districts and 9 states into a must-watch MDL: the "National Prescription Opiate Litigation."

So what, exactly, are these governmental plaintiffs accusing Big Pharma of doing? To briefly summarize, the lawsuits allege that the drug manufacturers and distributors created and accelerated the opioid crisis through acts that were reckless. The lawsuits allege the following acts:

  • Trivializing the addictive nature of opioids. The lawsuits allege that drug companies spent billions of dollars on marketing campaigns that downplayed the risks of opioids by, among other things, promulgating a theory of "pseudoaddiction." The lawsuits further allege that the drug companies instructed doctors and pharmacists to ignore ordinary signs of addiction, and instead, suggested that the cure for "pseudoaddiction" was more opioids.
  • Falsely claiming the effectiveness of opioids. South Carolina, for example, alleges that a drug company touted the benefits of long-term treatment with opioids without sufficient support and without appropriately disclosing the risks of addiction.
  • Profiting off the growing opioid crisis. The lawsuits allege that drug companies took advantage of the growing public concerns by promoting "reformulated" pills claimed to reduce the risk of abuse, despite knowing there was no impact on addictiveness.
  • Concealing data on the illegal trafficking of opioids. The City of Everett's lawsuit alleges that a drug company collected, tracked, and monitored extensive data evidencing illegal trafficking, but failed to alert authorities or slow the flow of its drugs into the black market.
  • Failing to report suspicious orders for opioids. The City of Everett's complaint cited emails in which a drug company employee raised concerns about the company's continuous supply of opioids to a particular medical clinic that was alleged to have been overrun with "gang members" and was essentially "an organized drug ring." Similarly, a single pharmacy in Kermit, West Virginia—a town with just 393 people—reportedly ordered nine million hydrocodone pills in just two years. That is 22,900 pills per person.

Armed with these allegations, local governments have asserted a number of legal theories against the drug companies. The most common claims are:

  • negligence claims, which assert that drug companies had a duty to safely manufacture, sell, and distribute their hazardous product but failed to do so
  • public nuisance claims, which assert that drug companies unlawfully created a public health crisis that damaged local communities
  • unjust enrichment claims, which assert that drug companies were unfairly enriched by the opioid epidemic
  • claims for violations of consumer protection statutes, which assert that drug companies violated various statutory protections—for example, statutes that prohibit unfair and deceptive trade practices
  • claims for violations of consent orders, which assert that drug companies disregarded prior consent orders that were negotiated with government entities for the purpose of curtailing the opioid epidemic

In most instances, these lawsuits seek statutory treble damages, punitive damages, and attorneys' fees.

Predictions for the Litigation

The opioid litigation is still in its infancy, but the authors believe that the potential exposure for the drug companies—even the defense costs alone—could be significant.

There are two reasons the authors share this view:

First, at least some of these government lawsuits have the potential to proceed to discovery, which, of course, substantially increases the chances of settlement. To date, the lawsuits described above have either survived motions to dismiss or (in state court, at least) are proceeding to discovery.

In the City of Chicago's lawsuit, for example, the federal district court "reject[ed] defendants' argument that their alleged misrepresentations cannot be the basis for any fraud-based claim," and it denied the defendants' Rule 12 motions on key claims. The case is now in discovery, and the city has filed a motion to compel one of the drug company defendants to produce documents from its employees who were responsible for opioid marketing.

Similarly, in the City of Everett's lawsuit, the federal district court largely denied the defendants' Rule 12 motion, and it granted the City an opportunity to amend the claims that were subject to dismissal. As these rulings illustrate, at least some of these lawsuits have the potential to proceed to discovery.

Second, drugmakers and distributors have already paid large settlements related to their alleged role in the opioid epidemic. In the past year alone, these settlements have included the following:

  • In January 2017, the drug distributor McKesson Corporation agreed to pay a $150 million civil penalty for failing to report allegedly suspicious orders.
  • In January 2017, distributor Cardinal Health announced it would pay $20 million to West Virginia to settle allegations that it failed to report suspicious orders. Just one month prior, Cardinal Health agreed to pay $44 million to resolve a federal investigation into its distribution of opioids in Maryland, Florida, and New York.
  • In January 2017, Costco Wholesale agreed to pay a $11.75 million to settle allegations that its pharmacies had been improperly filling opioid prescriptions in Washington and Southern California.
  • In April 2017, oxycodone manufacturer Mallinckrodt agreed to pay $35 million to resolve an investigation into its monitoring and reporting of suspicious orders.

These large settlements may be further motivation for local government plaintiffs to join the opioid litigation in the coming months.

Conclusion

In view of the wave of opioid lawsuits across the nation, it is only a matter of time before the first lawsuits are filed by local governments in North Carolina.

The authors hope that this article may be useful in inviting a dialogue on this important topic. We are genuinely interested in hearing from local government attorneys about their city or county's experiences with the opioid epidemic, and we invite your thoughts by phone or e-mail.

* This article states the authors' personal views, not necessarily the views of our colleagues or of any client.

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
J.M. Durnovich
 
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