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Opioid Legal Fight Closer to Costly Asbestos Suits Than Tobacco

Sept. 3, 2019, 9:30 AM

Opioid litigation against drugmakers and the drug supply chain is more akin to lawsuits against asbestos manufacturers than the challenges to Big Tobacco in the 1990s, suggesting far more difficulty for the drug industry to end the fight.

In 1998, tobacco manufacturers settled with state attorneys general for $246 billion over 25 years to end litigation about the industry’s marketing and promotion of cigarettes. Lawyers and analysts frequently liken the tobacco litigation of 20 years ago to the explosion of opioid suits now in courts against the drug industry for its role in the pain-killer addiction crisis.

But the asbestos litigation is closer to the opioid legal action, lawyers familiar with both situations told Bloomberg Law. The suits against asbestos manufacturers for its cancer-causing product have dragged on for nearly 30 years, bankrupted multiple companies, and generated billions in payouts, said Harry Nelson, founder of the Los Angeles-based health-care firm Nelson Hardiman.

“There is this similarity [to the asbestos litigation] that this is going to be a long-term deal too, depending on what form the settlement takes,” said Richard Ausness, a law professor at the University of Kentucky. “If it’s in the form of addiction abatement, it could be 30 to 40 years.”

Like the opioid litigation, the asbestos lawsuits include a wide array of players with varying levels of liability, making it virtually impossible to reach the kind of universal settlement that was achieved in the Big Tobacco case. And as various companies in the industry go bankrupt, the survivors could find themselves holding the bag.

The comparison doesn’t bode well for the defendants in the upcoming multi-district opioid litigation in Ohio, where two counties are representing tens of thousands of localities in suing drugmakers, opioid distributors, and pharmacies for their role in the public health crisis. A jury trial begins Oct. 21.

“If you model out the liability less like cigarettes and more like cancer-causing asbestos, then you end up with a far more desolate picture of the liability for the pharmaceutical industry,” Nelson said.

Oklahoma: Not Exactly a Victory

That’s despite the outcome in Oklahoma state court last week that many have characterized as a near-victory. Johnson & Johnson was ordered to pay just $572 million to cover one year of Oklahoma opioid abatement efforts, or 3.3% of the $17.5 billion that state’s attorney general sought in that case. The market appeared to rejoice at the proportionally small payout—the company’s shares rose as much as 5.4% in the immediate aftermath of the decision.

Lawyers watching the Oklahoma case say the relatively low dollar amount shouldn’t be viewed as a win, given that the pending litigation against the various players in the opioid supply chain includes more than 45 states and 2,000 localities.

“If you multiply this out by all of the states that still have unresolved claims and factor in all of the local cities and counties and other litigants who are still sitting with their claims, this puts Johnson & Johnson easily into a double-digit billion and maybe even higher, a triple-digit billion liability exposure in the United States alone,” Nelson said.

“If a manufacturer or a group of manufacturers is ordered to pay for remediation or abatement for more than a year, it’s going to be a number closer to the $17.5 billion that Oklahoma was looking for. And if you extrapolate that to all these states and jurisdictions, it is going to be an astronomical number,” said Andrew S. Pollis, a law professor at Case Western Reserve University in Cleveland.

J&J officials cautioned against drawing conclusions about future litigation based on the outcome in Oklahoma. “The opinion in Oklahoma does not have a binding impact on other courts, including those involved in ongoing federal litigation, litigation in other states, or how the company approaches these matters given different laws, defendants, and claims in these other cases,” they wrote in a release.

Spreading the Pain

The opioid litigation has had multiple phases, and each phase has had a different relevant comparison, said Abbe Gluck, a professor of law at Yale Law School who is watching the case and authored papers on the subject.

“In the early phases, tobacco was a relevant comparison, because you have the same lawyers using a similar legal playbook and similar concerns about making sure that any funds actually go to those harmed,” Gluck said. “Differently from tobacco, the opioid litigation from the start was much more sprawling, involved many more defendants and many different kinds of defendants.”

“Now we’re in a different stage of the litigation, one where we’re trying to facilitate a settlement,” Gluck added. “And the best comparison in my view are other big, large-scale litigations in which the big challenge has been trying to assure the defendants what they pay out now is all they’re going to have to pay for the foreseeable future. And that requires some mechanism to find not only people who sue today, but people who may sue in the future.”

Given that J&J is just one defendant among many in the opioid supply chain on the hook in the Ohio multi-district suit, it could spread the pain among the industry. Smaller companies that focus their products solely on treating pain will be the most vulnerable.

J&J isn’t likely to be bankrupted by the litigation, even as costs climb, because the company has a diverse portfolio and operates around the globe, said David Noll, a law professor at Rutgers University.

The ongoing litigation is “not going to be a gun to the head that threatens J&J with bankruptcy,” he added.

Long-Term Litigation

Purdue Pharma Inc. is now facing the possibility of bankruptcy as it seeks to negotiate a $10 billion to $12 billion global settlement.

If the company does file for Chapter 11 bankruptcy, that could leave other drugmakers on the hook with state attorneys general and other plaintiffs seeking money to address the opioid crisis.

And, like the asbestos litigation, efforts to end the crisis could drag on for years. The White House Council of Economic Advisers issued a study in 2017 estimating the opioid epidemic is causing $500 billion in economic losses annually.

In addition, the chances of a global settlement among all defendants in Ohio is less likely than in the tobacco litigation because reaching an agreement on how much each party contributed to the crisis—and what their individual liability is—would be far more difficult than in the Big Tobacco litigation, where the defendants had more clear-cut liability, Ausness said.

The case is Oklahoma v. Purdue Pharma, Okla. Dist. Ct., CJ-2017-816, 8/26/19

To contact the reporter on this story: Valerie Bauman in Washington at vbauman@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Randy Kubetin at rkubetin@bloomberglaw.com