Justice Department cites ‘substantial financial stake’; Wants role in opioid settlement talks

The U.S. government wants a seat at the table as lawyers for hundreds of municipalities and other plaintiffs negotiate a potentially multibillion-dollar settlement of lawsuits over the opioid addiction crisis, citing its “substantial financial stake” in the matter and need to recover its own costs.

The Justice Department, in a filing late yesterday, said it wouldn’t be appropriate for the federal government to join the multidistrict litigation consolidated in federal court in Ohio, but that it wanted to participate as a so-called amicus or friend of the court. Justice already has agreed to cooperate in the MDL by providing data from its Automation of Reports and Consolidated Orders Systems, or ARCOS, which details the path of every legally manufactured opioid pill through the system from factory floor to retail pharmacy.

More ominously for the municipal plaintiffs and their private lawyers, who hope to earn contingency fees as high as 30 percent or more on any financial recovery, the government reiterated the “numerous ways” it can “seek reimbursement for its direct and indirect costs of providing medical care to opioid users.”

In a statement of interest with the MDL court last month, Justice said it may seek recovery under federal laws covering Medicare and Veterans Administration benefits obtained through fraud. State attorneys general also may pursue their own recoveries, diminishing the pot of money left for municipal plaintiffs and potentially even eliminating their claims.

Yesterday’s filing in the court of U.S. District Judge Dan Aaron Polster came a month after the judge asked the federal government to state whether it wanted to join the MDL. After evaluating its options and the potential for separate recovery of its costs, the government said, it would prefer to limit its role to participating in settlement discussions and “providing information to the Court and the parties to facilitate effective non-monetary remedies to address problems arising from the national opioid crisis.”

“Here, the United States has a unique interest and expertise regarding the subjects at issue in this litigation and can provide information and expertise to assist the parties and the Court in reaching a comprehensive and effective resolution of the issues in this case,” the Justice Department said in the five-page filing.

Settlement talks have been conducted largely out of public view after Judge Polster ordered the parties to maintain “strict confidentiality.”

The judge has made no secret of the fact he wants a prompt resolution that would “dramatically reduce” the number of overdose deaths in the country, preferably this year. He has already been forced to recognize the reality that defendants – the entire spectrum of the opioid distribution chain, from manufacturers to pharmacies and physicians – have little incentive to settle until thorny legal issues have been resolved including whether they will still be subject to lawsuits outside the MDL.

Early last month Judge Polster urged plaintiffs and defendants to prepare for bellwether trials, citing “various barriers to settlement.”

Typically in MDL litigation the parties tee up a few trials to see how judges and juries resolve disputed issues of fact and law. In this case that might include whether manufacturers like Purdue Pharma and Johnson & Johnson’s Janssen unit can be held liable for the abuse of drugs that were sold only through a doctor’s prescription, and whether distributors like Cardinal Health and McKesson can be required to pay for shipments of pills to regions with suspiciously high levels of consumption. The distributors will likely argue only the Drug Enforcement Administration, through its ARCOS system, had a complete picture of how many pills were being shipped to specific stores or regions.

In an order last week with implications for a global settlement, Judge Polster authorized the distributor defendants to discuss their own methods for detecting suspicious orders, saying the sharing of proprietary data on this subject among competitors would not violate antitrust laws. In that order, the judge cited the need for “preventing further litigation by private parties or state attorneys general” by establishing “improvements in monitoring and/or reporting” of drug transactions.

The federal government, in yesterday’s filing, said its participation as an amicus “could help ensure that remedial action in the multi-district litigation is structured to serve the public interest.”

On April 5, it plans to supply redacted ARCOS data for 2012 and 2013 showing the number of pills distributed to each state with numerical identifiers for buyers and sellers. The DEA regulates the entire opioid distribution chain, dictating the number of pills that can be manufactured each year and tracking the movement of narcotics until they are in the hands of individual patients.