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Opioid Verdict Puts Health Systems Next in Line for Lawsuits

Dec. 15, 2021, 10:30 AM

Health systems and companies collecting drug prescription data could be caught in the crosshairs of opioid liability following a federal jury finding that major pharmacy chains helped create the nationwide addiction crisis, attorneys say.

Walmart Inc., CVS Health Corp., and Walgreens Boots Alliance Inc. join Johnson & Johnson, McKinsey and Co., and others in the drug supply chain that have faced blame for allegedly fueling an epidemic that’s led to more than 800,000 U.S. overdose deaths. A Cleveland panel found that the three pharmacy chains failed to properly monitor opioid prescriptions.

Legal observers say the verdict marks a shift in the direction of lawsuits, and that plaintiffs’ bar will start eyeing other entities that play a role in the dispersal of opioid prescriptions.

“The opioid class actions have moved from drug manufacturers to distributors to pharmacies by moving away from intentional deception” and to those that failed “to do more in response to red flags,” said Harry Nelson, founder at health and life sciences law firm Nelson Hardiman LLP.

“We may see plaintiff lawyers zero in on health systems or large, managed care medical groups for the same issue—tolerating and not doing enough to curb the problem,” Nelson said.

The verdict marks the first in a sprawling four-year litigation over the opioid crisis as overdose deaths continue to skyrocket. U.S. municipalities have accused opioid makers, sellers, and distributors of downplaying the addiction risks posed by painkillers and overlooking safety for profits.

The argument that prevailed against the pharmacy chains was that they allegedly failed to establish monitoring systems to detect illegitimate opioid prescriptions.

“The same lines of argument that succeeded against the pharmacies here—that there were red flags that compliance systems should have picked up—could work against practices that prescribed large numbers of opioids,” said David Noll, a Rutgers law professor focusing on complex litigation.

The outcome of the latest jury trial marks a departure from previous settlements getting Big Pharma off the hook and could open the door to forum shopping. The verdict, however, is far from the last step for pharmacies embroiled in litigation. Walgreens, CVS, and Walmart have all said they’d appeal.

“For folks suffering from opioid orders, the verdict is an important acknowledgment of corporations’ role in creating the opioid epidemic,” Noll said. “But for things to change on the ground, major settlements will have to be finalized. We’re moving in that direction but are not there yet.”

Volume and Compliance

The Nov. 23 verdict follows a string of settlements with drugmakers and distributors in the massive opioid litigation. But other companies in and around the pharmaceutical prescription chain—whether by prescribing, managing, or collecting information—may yet find themselves caught up in litigation.

“What’s unique about Walmart, CVS, and Walgreens is that they filled a large number of prescriptions and were organized in a way where more robust compliance systems would have made a difference,” he said.

“From the plaintiff’s perspective, I think counsel will be looking for defendants with those characteristics—i.e., high volume and substandard compliance systems,” he added. That would mean, for instance, hospitals along with large networks of multiple doctors with centralized prescribing information, where a centralized compliance system would be in place.

Aside from opioid manufacturers, marketers behind alcohol and other drugs should also be on watch, attorneys say.

Among the marketers at risk of liability are “peripheral organizations” that drugmakers like Purdue Pharma engaged to “drum up market demand” for opioids, Noll said. Also potentially on the line are “data aggregators” that collect data from pharmacies and health-care providers for marketing information to sell to manufacturers, he said.

“The plaintiffs’ theory is that there’s this industry-wide conspiracy to flood the market with pills. I could see data aggregators playing a roll in that,” Noll said.

Forum Shopping

The jury’s finding in the Cleveland case departs from earlier wins for the pharmaceutical industry. In that case, counties accused pharmacies of creating a public nuisance when they failed to properly monitor opioid prescriptions.

But in California, Teva Pharmaceutical Indutries Ltd., J&J, and others succeeded in November in getting a judge to toss claims that they created a public nuisance by pumping opioids through the state. And the Oklahoma Supreme Court, that same month, tossed a $465 million award against J&J, determining four municipalities couldn’t prove the company created a public nuisance with opioid sales tactics and marketing.

Such diverging conclusions could lead attorneys to shop around for the court most likely to rule in their favor. Defendants could try to force transfers of their case to venues with more lenient rules on public nuisance—the key issue in the litigation. Generally, public nuisances are conditions or activities that negatively impact a community.

“This verdict signals uncertainty in the application of public nuisance law, which can vary in its language, scope and application from state to state,” said Charlotte Bismuth, a former assistant district attorney who prosecuted the doctor who was New York City’s most prolific opioid prescriber.

“Any company or individual who profited from the misleading marketing and overprescribing of opioids should expect to be called to account—they’ll have to make decisions about their willingness to gamble in each forum,” Bismuth said.

To contact the reporter on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editor responsible for this story: Alexis Kramer at akramer@bloomberglaw.com, Melissa B. Robinson at mrobinson@bloomberglaw.com