Editor’s Note: On October 26, 2017, Eric D. Hagan, Acting Secretary of the Department of Health and Human Services, announced that “a public health emergency exists nationwide” as a result of the opioid epidemic. In a recent article in the February issue of Business Crimes Bulletin, summarized below, Manatt examines the multi-layered approach emerging to fight the opioid epidemic, including the civil suits filed as cities, counties and tribes go on the offensive; how state attorneys general are responding; Department of Justice (DOJ) enforcement efforts; and executive and congressional actions.

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According to the Centers for Disease Control and Prevention (CDC), from 1999 to 2016, “spending on Medicaid-covered prescriptions used to treat opioid addiction and overdoses increased from $364 million to $920 million, an average annual increase of 19[%] … with a 30[%] increase between 2015 and 2016.” As a result, cities, counties, states and the federal government have mounted an attack.

Cities, Counties and Tribes on the Offensive

Starting with Chicago in 2014, more than 100 cities and counties have filed civil suits against pharmaceutical manufacturers, distributors and retail pharmacies, seeking damages for costs they allegedly spent or will spend to fight the opioid epidemic. On December 5, 2017, the Judicial Panel on Multidistrict Litigation (MDL) consolidated and transferred 64 of these cases, which will now be heard by a single judge in the Northern District of Ohio, and noted there are more than 50 potential “tag-along” actions.

In addition, some municipalities, such as Seattle, have filed individual suits in local state courts and suggested they will resist joining the combined litigation. In addition, the Cherokee Nation has filed an action in tribal court and shows no sign of joining the MDL.

The cases assert varying theories of liability, and a number of different defenses have been raised in response. They all share, however, common questions of fact, including whether:

  • Opioid manufacturers overstated the benefits and downplayed the risks of using their opioids, and aggressively marketed these drugs to physicians; and/or
  • Distributors failed to monitor, detect, investigate and report suspicious orders of prescription opiates.

State Attorneys General Respond

On September 19, 2017, a coalition of 41 state attorneys general issued subpoenas to five pharmaceutical manufacturers and three distributors. Other state attorneys general, including those in Ohio, Washington, Louisiana, New Mexico, Missouri, Oklahoma and Mississippi, have already filed lawsuits against certain manufacturers and distributors.

Cases that have been brought by state attorneys general, like those brought by municipal and county plaintiffs, allege a variety of claims, including violations of state consumer protection laws, together with claims of nuisance, negligence and fraud. State attorneys general, however, also have commended companies, such as CVS, that have taken proactive steps to address opioid abuse.

The DOJ Flexes Its Enforcement Muscles

Over the past five years, the DOJ has prosecuted hundreds of doctors for knowingly distributing prescription opioids improperly. It also has settled civil claims with retail pharmacies allegedly violating the record-keeping provisions of the Controlled Substance Act (CSA) for amounts ranging from $3 million to $80 million. In addition, it has announced major settlements with distributors (e.g., McKesson for $150 million) and manufacturers (e.g., Mallinkrodt for $35 million) for allegedly failing to report suspicious orders in violation of the CSA.

It is likely that enforcement efforts will continue to expand. In November 2017, the Drug Enforcement Administration announced that it is working with 44 states to address opioid diversion and will use “all available means—administrative, civil and criminal—to ensure that its 1.7 million registrants handling prescription drugs comply with the law.” As federal enforcement activity increases, registrants may want to consider actions that can positively impact the determination of charges and penalties, including enhancing compliance and investigation functions, being prepared to implement remediation efforts, and ensuring timely and voluntary disclosure of any wrongdoing.

Executive and Congressional Actions

Congress has engaged in efforts to fight the opioid epidemic through proposed legislation and its investigative powers. On June 27, 2017, a bipartisan task force in the House of Representatives issued a legislative agenda to “address the opioid epidemic from the perspectives of law enforcement, prevention, treatment and recovery.” In July, the Senate’s Homeland Security and Governmental Affairs Committee requested documents from four manufacturers and three distributors. Allegations in the media that prior enforcement efforts have been lax suggest that future actions may increase.

Conclusion

In the current environment, any company involved in the opioid supply chain could face risks from lawsuits or government enforcement actions. Companies can minimize those risks—and do their part to address the crisis—by thoroughly reviewing and, when appropriate, strengthening their compliance policies and procedures.