Explained: The $26 billion opioid crisis deal that pharma firms have struck in the US

If the deal gets formal approval, lawsuits will be dropped against three drug distributors – McKesson Corp, Cardinal Health Inc and AmerisourceBergen Corp – and the manufacturer Johnson & Johnson.

Three of America’s biggest drug distributors and one manufacturer on Wednesday agreed with a group of state attorneys general to reach a settlement worth $26 billion for their alleged role in fueling the country’s deadly opioid epidemic, which has killed lakhs of people over the decades.

If the deal gets formal approval from states and thousands of local municipalities, lawsuits will be dropped against the three drug distributors – McKesson Corp, Cardinal Health Inc and AmerisourceBergen Corp– who will pay up around $21 billion combined, and the manufacturer Johnson & Johnson $5 billion.

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The framework under this settlement will allow billions of dollars to start flowing directly into communities to bear the steep costs of addiction treatment, family support, education and other social programs.

America’s opioid crisis

The US is currently going through an opioid overdose epidemic, with over 130 people dying each day from opioid-related drug overdoses.

The misuse and addiction to opioids, including prescription pain relievers, heroin, and synthetic opioids such as fentanyl, has caused a national health crisis that has affected public health as well as social and economic welfare, according to the National Institute on Drug Use (NIDU).

Since 2000, prescription opioids, heroin and fentanyl have been linked to the death of over 5 lakh Americans. In 2017, an estimated 1.7 million people suffered from substance use disorders related to prescription opioid pain relievers, and 652,000 suffered from a heroin use disorder (not mutually exclusive), according to NIDU. That year, former President Donald Trump declared the opioid crisis a “national emergency”.

In 2020, overdose deaths from the crisis crossed 93,000, a record high that was partly driven by isolation and discontinuation of services during the Covid pandemic.

As per the Centers for Disease Control and Prevention (CDC), the misuse of prescription opioids alone is estimated to cost the US $78.5 billion each year, including the costs of healthcare, lost productivity, addiction treatment, and criminal justice involvement.

The crisis began in the late 1990s, when pharmaceutical companies in the country aggressively marketed prescription opioid painkillers, while reassuring doctors that their patients would not get addicted to them. As rates of prescription soared, so did the diversion and misuse of drugs, making it clear that they were highly addictive.

What the $26 billion settlement does

The three distributors who are part of the deal were accused of ignoring for two decades the limits on prescription drug shipments as pharmacies across the US kept ordering the medicines in massive quantities. The manufacturer Johnson & Johnson is blamed for downplaying the addictive effects of their products to doctors and patients.

The three distributors said in a joint statement, “While the companies strongly dispute the allegations made in these lawsuits, they believe the proposed settlement agreement and settlement process it establishes are important steps toward achieving broad resolution of governmental opioid claims and delivering meaningful relief to communities across the United States.”

The Wednesday deal, worth $26 billion, will now go to states and their municipalities, which have 30 days to deliberate the offers and decide how much money each would receive under the settlement. For the agreement to be finalised, a high majority of states would have to be in favour. As per a New York Times report, over $2 billion of the $26 billion deal would end up going to cover the legal costs of the opioid litigation. Once finalised, the pharma companies will be able to walk away from the lawsuits.

Over the next 18 years, the money will go to governments to cover the costs of prevention, treatment, medicines, education and other opioid-related problems, and will not be used to compensate families of victims of the epidemic.

According to the NYT report, apart from the $26 billion settlement with the four giants, there are many negotiations still underway between other pharma players and governments. Put together, the total value of opioid crisis related settlements is expected to touch almost $33 billion.

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