At this point, it’s not really ground-breaking news that America has a problem with opioid drugs. By way of anecdote, when I became a federal prosecutor in 2011, the last heroin case that had been prosecuted in the Nashville U.S. Attorney’s office was in the early-1990s; although, to be fair, there were then lots of what we called “pill” cases involving opioids. When I left the office in 2017, at least half of the office’s major investigations were directly related to opioids–some pills, but mostly outright heroin or fentanyl/carfentanyl . In Nashville, Tennessee, OxyContin (which is an opioid-based painkiller) can be worth up to $1.25/milligram (mg). That means that just one 80mg OxyContin has a street value of $100. Price, is of course, a reflection of demand and demand, in this case, is driven by addiction.

That addiction is costing Americans a lot of money. The White House estimates that in 2015, over 33,000 Americans died from opioid related overdoses and that the economic cost of the opioid crisis was $504.0 billion, or 2.8% of GDP. To put that in some perspective, 2015 U.S. healthcare spending accounted for 17.7% of GDP, which means that Americans spent ~1/6 as much on opioids as they did on healthcare. State governments, often stuck footing the bill for indigent addicts because of increased law-enforcement activity and drug/medical treatment, are looking at the opioid manufacturers and distributors to help pay some of this cost.

In September, 41 state attorneys general announced serving subpoenas on 6 opioid manufacturers as part of a multi-state investigation into whether the companies engaged in any unlawful practices in the marketing and distribution of prescription opioids. The attorneys general are also looking into the distribution practices of 3 pharmaceutical distributors that account for the distribution of roughly 90% of the U.S. opioid supply. According the N.Y. State AG, opioid distributors alone make nearly $500 billion a year in revenue, but those numbers (perhaps as a result of the market response to the negative publicity generated by all of this) might not be as robust as they once were. Stock prices (many of these companies are privately held) for two of the manufacturers subject to the AG subpoenas have seen stocks nose dive by ~90% and ~75% respectively after both achieving all-time highs in 2015. Of course, the reason for those drops is likely non-singular, but the timing does perhaps signal the market’s appetite for risk.

So, obviously, if you are an AG looking to combat a public health disaster, going after the manufacturers of opioids (who, at least in 2015, had lots of money), much like the manufacturers of tobacco is pretty appealing. That said, there are some considerations that are likely to be major impediments in the effort to make this into a big tobacco settlement:

  1. Prescription pills are prescribed by a medical doctor. Unlike the pack of cigarettes bought at the gas station from a clerk whose only responsibility is to verify age, opioids are, ostensibly, ordered by someone with years of advanced medical training. Pinning all the responsibility (or even just “most of it”) on manufacturers and distributors alone will be a challenge.
  2. The success of the tobacco litigation was driven in no small part by the efforts of Richard “Dickie” Scruggs, the exceptionally well-connected Mississippi lawyer who spearheaded the class-action effort and coalesced all the states into letting him be the point-man for all negotiations. Much of what made Scruggs successful in that effort–1) the self-proclaimed advantage of home cookin‘; 2) the ability to wheel and deal in the Capital thanks to his access to then Senate Majority Leader, and brother-in-law, Trent Lott; 3) the close relationship with then Mississippi Attorney General Mike Moore (who, coincidentally, is advocating for the opioid suit, this time as a plaintiff’s attorney)–is unlikely to fly in today’s world given the guttural uneasiness associated with any of the tactics utilized by Scruggs, now a convicted felon for attempting to bribe a judge in a post-Katrina litigation, and overall discomfort with anything that smacks of nepotism.
  3. The stated goal of many of the proponents of the tobacco litigation was to put cigarette manufacturers out of business–this, of course, is a sentiment still voiced by some. But, no one is realistically seeking to litigate these pharmaceutical companies into the ground. While these companies manufacture opioids, they also research and manufacture drugs that help treat pediatric Crohn’s disease, multiple sclerosis and Parkinson’s disease, among others. Simply, even if there is a settlement in all of this, the reality is that the settlement is likely to contemplate the ability of these companies to continue to research and manufacture the next wave of pharmaceutical improvements.