As drug overdoses increase, North Carolina medical providers and community workers await long-expected settlement funds as part of landmark litigation by states’ attorneys general against opioid manufacturers and distributors for their role in a decadeslong national opioid epidemic.
Oxycontin creator Purdue Pharma and nine attorneys general, not including North Carolina’s Josh Stein, are nearing a settlement expected to eclipse the original $4.3 billion agreed to last fall. Stein initially opposed the agreement before reversing his position last summer.
North Carolina is preparing to distribute at least $750 million from a $26.4 billion settlement reached in November between states and Johnson & Johnson, along with three distributors.
Another $100 million — if not more — will be decided in the coming days as nine states look to conclude negotiations with the Sackler family, which owns pharmaceutical giant Purdue Pharma.
The company pleaded guilty to three federal criminal charges in November 2020, including conspiracy to defraud the government, after admitting to illegal kickbacks and pushing its highly addictive painkiller, OxyContin, to doctors suspected of writing illegal prescriptions.
Many experts point to the widespread abuse of OxyContin as a driver of the epidemic. More than 930,000 Americans died from fatal drug overdoses from 1999 to 2020, according to a study by the National Center for Health Statistics. Preliminary reports estimate an additional 100,000 overdose deaths in 2021.
From 2000-20, more than 28,000 people in North Carolina died from drug overdose, according to the N.C. Department of Health and Human Services.
A federal judge rejected the $4.3 billion agreement in December, saying the New York bankruptcy court that previously ruled in favor of the settlement did not have the authority to grant legal immunity to the Sacklers.
On Tuesday, the court approved the mediator’s request to extend the negotiations deadline, for a third time, to Feb. 16 at 5 p.m.
Before the initial $4.3 billion agreement was struck down, Stein expected North Carolina to receive about $100 million of those funds.
Under the terms of the agreement, states received more funds if all counties participated. All 100 North Carolina counties and 17 municipalities agreed to sign on to the $750 million payment.
Stein changes stance on Purdue settlement
In September, a judge in White Plains, New York approved a bankruptcy plan to dissolve Purdue, require the Sacklers to pay $4.3 billion, and resolve thousands of lawsuits filed by individuals, hospitals, and local governments. Most notably, it would shield the Sackler family from any future civil suits.
The bankruptcy judge who approved the settlement ordered mediation between the Sackler family and nine states opposing the settlement agreement.
After the U.S. Department of Justice reached an initial $8.3 billion agreement with Purdue in October 2020, a deal Stein said he would not support because it did not “force the Sacklers to take meaningful responsibility for their actions.”
Nazneen Ahmed, Stein’s press secretary, said the 2020 settlement “did not reflect money that Purdue would actually be required to pay since it was in bankruptcy proceedings and did not require the Sacklers to contribute any money.” The settlement was part of a larger set of proposed settlements that would force the Sacklers to pay only $3 billion for opioid remediation and victim compensation, according to Ahmed.
“A real agreement to resolve these cases would force the Sacklers to pay more and would provide funding to help pay for the treatment and programs people need to get well,” Stein said after the deal was announced.
Stein withdrew from the group of opposing states last July, arguing that while the plan was “far from perfect,” it was the best way to ensure North Carolina receives its share of opioid settlement funds from Purdue.
In an op-ed published on New Year’s Eve, Pharma board chairman Steve Miller argued the U.S. District Court’s rejection of the settlement threatened “not only to upend U.S. bankruptcy law but also to significantly delay — and possibly prevent entirely — billions of dollars from being used to address the opioid crisis.”
Is it enough?
The federal judge ruled against the settlement because it protected the Sackler family from thousands of personal injury claimants who, according to UNC law professor Melissa Jacoby, “do not consent to their rights (to litigation) being wiped out.” She said the settlement was far less than what experts say is required to effectively tackle the endemic.
“Every drop of money and help counts, but based on estimates of what it takes to abate the opioid crisis, getting $4.5 billion over 10 years is a drop in the bucket,” Jacoby said.
In a 2017 study, the North Carolina Medical Society estimated the total economic costs of opioids in the state — in 2016 alone — to be $21.3 billion.
North Carolina could receive more than the initial $100 million allocated to the state by the initial Purdue settlement, if current negotiations yield a higher penalty from the Sackler family, Jacoby said. She questioned whether a large bankruptcy settlement should fund major public health initiatives in the first place.
“This is an odd way to try to collect the money,” she said.
A landmark bankruptcy settlement like the one reached in September could set a dangerous precedent going forward, according to Jacoby.
Not only would it protect families like the Sacklers from what they should be accountable for, she argued, it would also continue to pit the interests of states against the interests of personal injury claimants.
Alternative solutions to fund abatement programs are complex, she said.
“But it would not be a system organized around protecting Purdue and the Sacklers and framed in primarily economic terms run by lawyers who typically handle institutional lender and capital markets debt,” Jacoby said.
“There also is a difference between what the states are aiming for and what the individual opioid survivors (and their) families need from the process.”
The settlement encouraged a “take it or leave it” ethos among states like North Carolina, according to Jacoby; but if Stein had continued to oppose the $4.5 billion settlement, “that would not have deprived North Carolina of the money under the plan.”
“It wasn’t like you had to sign up or you would get nothing,” Jacoby said.
“If this plan had actually been upheld, the citizens of the states that opposed it would still get something. The question is whether it was enough and whether that was really what they were after.”
Addressing a growing problem
The ongoing litigation takes place as the number of opioid overdose deaths in North Carolina continues to rise during the COVID-19 pandemic. Overdose death increased by 29% from June 2020 to June 2021 in North Carolina, according to CDC data.
Experts cite an increase of isolation and anxiety during the pandemic, as well as the continued proliferation of fentanyl as the cause of increased deaths, according to NC Health News.
A memorandum of agreement that Stein and the NCACC signed last April allows local governments to use the funds for a variety of strategies in addiction treatment, recovery support and harm reduction. Those include the distribution of Naloxone, a medication used to revive overdosed patients, and sterile syringes to combat HIV and hepatitis C caused by unclean injection methods.
Sara Mogilski, chief operations officer of the North Carolina Association of County Commissioners, expects the state to start allocating funds from the $750 million settlement this spring.
Fifteen percent of the state’s $750 million share will go to the state while local governments receive 85% of the total. When North Carolina’s memorandum of understanding was created in July, the NCACC was not aware of any other states paying more than 85% to local governments, Mogilski said.
The formula used to determine these allocations is based on county statistics relative to national statistics: the portion of a county’s population with an opioid-use disorder, opioid overdose deaths and the percentage of national opioid shipments that produced “negative outcomes,” according to data gathered by the U.S. Drug Enforcement Agency.
The state will also benefit from $19 million in funds from a settlement with behemoth consulting firm McKinsey & Company, which advised Purdue on how to maximize profits from its opioid products and target high-volume prescribers. The 2021-2022 state budget allocated $15.7 million from these funds to opioid recovery and treatment programs.
“We’re hopeful that these parties will reach a swift agreement so that communities across North Carolina can get these funds for treatment and recovery as quickly as possible,” Ahmed said last month.