By Drew Erteschik,[1] J.M. Durnovich and Cosmo Zinkow

        

Introduction

The opioid epidemic is an American tragedy.  It is difficult to convey the breadth of the epidemic with a single statistic, but let this sink in:  For every person killed by gun violence, three people will die from an opioid overdose.[2]

As the epidemic worsens, local governments are scrambling for solutions.  They are also scrambling to keep up with the costs—the public health, law enforcement, public employment, and other costs that the opioid crisis has left on their doorstep.  With insufficient financial assistance from Congress and state legislatures to cover these costs, local governments are turning to the courts.

Across the nation, cities and counties are suing opioid drugmakers and distributors.  These lawsuits seek to hold drug companies accountable—at least in part—for the opioid epidemic.  No North Carolina city or county has filed a lawsuit of this kind yet, but they surely will soon.

The authors of this article—two litigators and their future colleague—would like to explore this litigation in three parts:

The first part gives a brief overview of the costs of the opioid epidemic on North Carolina and its local governments. The second part discusses state and local government litigation against drug companies in other states—essentially a preview of what future litigation in North Carolina might look like. The third part gives the authors’ predictions for the litigation, along with recently released information about a number of large settlements.

The Costs of North Carolina’s Opioid Epidemic

Most North Carolinians are aware of the opioid epidemic, but many do not realize just how hard this epidemic has hit our state.

According to a recent study, four of America’s worst cities for opioid abuse are in North Carolina.[3]  In the North Carolina city topping that list, approximately 11.6% of the population abuses opioids.[4]  If that statistic is not sufficiently shocking, then consider this:  In that same city’s neighboring county, the ratio of opioid overdoses to traffic fatalities is 2 to 1.[5]  In short, North Carolinians are suffering at unprecedented levels.

North Carolina’s epidemic is not isolated to a few communities, however.  Across the state, approximately 12,000 people have died from opioid-related overdoses in the past two decades.[6]  That death rate is rising dramatically:  Over the next five years, opioids are projected to kill an additional 7,000 North Carolinians.[7]

As this plague spreads across North Carolina, so do its costs.  The Center for Disease Control and Prevention estimates that the opioid crisis costs North Carolina over $1.3 billion each year.[8]  From the societal impacts of drug use (for example, the breakdown of family units) to increased crime rates, every new opioid addiction in North Carolina carries a cost.  On a granular level, a recent study by the U.S. Department of Health and Human Services identified the number of emergency room visits and other medical costs that occur on average for every single overdose, and it concluded that for every single overdose, there are approximately $4.35 million in healthcare costs.[9]

To defray these costs, the federal government has begun funneling additional resources to North Carolina.  In May of this year, Governor Roy Cooper announced that the State had received a $31 million grant through the federal 21st Century Cures Act.[10]  To be sure, these funds will provide much needed relief.  As illustrated above, however, they will hardly offset North Carolina’s financial burden.  This is especially true at the local level, where cities and counties continue to foot much of the bill.

As the frontline of defense in the opioid crisis, cities and counties face an array of costs that are unique to local government.  Broadly categorized, these costs include:

  • public health costs, such as those associated with the exponential increase in emergency room admissions and emergency overdose treatment (e.g., local first responders, emergency response services, equipment, and vehicles, etc.), drug treatment centers and community health clinics, and the costs related to caring for infants born addicted to opioids
  • law enforcement costs, which stem from the dramatic increase in criminal possession charges for opioid drugs
  • public employment costs, such as the hiring of additional public health and law enforcement personnel, as well as increased costs of comprehensive health care protection (including prescription drug benefits) for local government employees and retirees, which are passed on to—and paid by—local governments
  • other costs, such as the costs of economic instability on the local tax base and the corresponding effect on local government budgets

These costs are unsustainable for local governments.  As a means of offsetting these costs, local governments have been seeking to hold drugmakers and distributors accountable.

Overview of Local Government Opioid Litigation

Much like the tobacco litigation of the 1980s, the opioid crisis has government officials knocking down the courthouse doors.  In 2017 alone, the pharmaceutical industry faced an onslaught of more than 100 lawsuits.

The plaintiffs in these lawsuits cross the government spectrum.  They include:

  • States, including Alaska, Missouri, New Hampshire, New Jersey, Ohio, Oklahoma, South Carolina and West Virginia
  • Cities, including large cities like Chicago and Birmingham, mid-sized cities like the City of Everett (Washington), and small municipalities, such as a coalition of six small towns in West Virginia
  • Counties, including ten West Virginia counties that have filed suit, and a group of 50 Wisconsin counties that are expected to file soon
  • Native American tribes, most notably the Cherokee Nation

In a major development last month, a Judicial Panel on Multidistrict Litigation consolidated 66 federal lawsuits spanning 11 federal districts and 9 states into a must-watch MDL:  the “National Prescription Opiate Litigation.”

So what, exactly, are these governmental plaintiffs accusing Big Pharma of doing?  To briefly summarize, the lawsuits allege that the drug manufacturers and distributors created and accelerated the opioid crisis through acts that were reckless.  The lawsuits allege the following acts:

  • Trivializing the addictive nature of opioids. The lawsuits allege that drug companies spent billions of dollars on marketing campaigns that downplayed the risks of opioids by, among other things, promulgating a theory of “pseudoaddiction.”  The lawsuits further allege that the drug companies instructed doctors and pharmacists to ignore ordinary signs of addiction, and instead, suggested that the cure for “pseudoaddiction” was more opioids.[11]
  • Falsely claiming the effectiveness of opioids. South Carolina, for example, alleges that a drug company touted the benefits of long-term treatment with opioids without sufficient support and without appropriately disclosing the risks of addiction.[12]
  • Profiting off the growing opioid crisis. The lawsuits allege that drug companies took advantage of the growing public concerns by promoting “reformulated” pills claimed to reduce the risk of abuse, despite knowing there was no impact on addictiveness.[13]
  • Concealing data on the illegal trafficking of opioids. The City of Everett’s lawsuit alleges that a drug company collected, tracked, and monitored extensive data evidencing illegal trafficking, but failed to alert authorities or slow the flow of its drugs into the black market.[14]
  • Failing to report suspicious orders for opioids. The City of Everett’s complaint cited emails in which a drug company employee raised concerns about the company’s continuous supply of opioids to a particular medical clinic that was alleged to have been overrun with “gang members” and was essentially “an organized drug ring.”[15]  Similarly, a single pharmacy in Kermit, West Virginia—a town with just 393 people—reportedly ordered nine million hydrocodone pills in just two years.[16]  That is 22,900 pills per person.

Armed with these allegations, local governments have asserted a number of legal theories against the drug companies.  The most common claims are:

  • negligence claims, which assert that drug companies had a duty to safely manufacture, sell, and distribute their hazardous product but failed to do so
  • public nuisance claims, which assert that drug companies unlawfully created a public health crisis that damaged local communities
  • unjust enrichment claims, which assert that drug companies were unfairly enriched by the opioid epidemic
  • claims for violations of consumer protection statutes, which assert that drug companies violated various statutory protections—for example, statutes that prohibit unfair and deceptive trade practices
  • claims for violations of consent orders, which assert that drug companies disregarded prior consent orders that were negotiated with government entities for the purpose of curtailing the opioid epidemic

In most instances, these lawsuits seek statutory treble damages, punitive damages, and attorneys’ fees.

Predictions for the Litigation

The opioid litigation is still in its infancy, but the authors believe that the potential exposure for the drug companies—even the defense costs alone—could be significant.

There are two reasons the authors share this view:

First, at least some of these government lawsuits have the potential to proceed to discovery, which, of course, substantially increases the chances of settlement.  To date, the lawsuits described above have either survived motions to dismiss or (in state court, at least) are proceeding to discovery.

In the City of Chicago’s lawsuit, for example, the federal district court “reject[ed] defendants’ argument that their alleged misrepresentations cannot be the basis for any fraud-based claim,” and it denied the defendants’ Rule 12 motions on key claims.[17]  The case is now in discovery, and the city has filed a motion to compel one of the drug company defendants to produce documents from its employees who were responsible for opioid marketing.

Similarly, in the City of Everett’s lawsuit, the federal district court largely denied the defendants’ Rule 12 motion, and it granted the City an opportunity to amend the claims that were subject to dismissal.[18]  As these rulings illustrate, at least some of these lawsuits have the potential to proceed to discovery.

Second, drugmakers and distributors have already paid large settlements related to their alleged role in the opioid epidemic.  In the past year alone, these settlements have included the following:

  • In January 2017, the drug distributor McKesson Corporation agreed to pay a $150 million civil penalty for failing to report allegedly suspicious orders.[19]
  • In January 2017, distributor Cardinal Health announced it would pay $20 million to West Virginia to settle allegations that it failed to report suspicious orders.[20] Just one month prior, Cardinal Health agreed to pay $44 million to resolve a federal investigation into its distribution of opioids in Maryland, Florida, and New York.[21]
  • In January 2017, Costco Wholesale agreed to pay a $11.75 million to settle allegations that its pharmacies had been improperly filling opioid prescriptions in Washington and Southern California.[22]
  • In April 2017, oxycodone manufacturer Mallinckrodt agreed to pay $35 million to resolve an investigation into its monitoring and reporting of suspicious orders.[23]

These large settlements may be further motivation for local government plaintiffs to join the opioid litigation in the coming months.

Conclusion

In view of the wave of opioid lawsuits across the nation, it is only a matter of time before the first lawsuits are filed by local governments in North Carolina.

The authors hope that this article may be useful in inviting a dialogue on this important topic.  We are genuinely interested in hearing from local government attorneys about their city or county’s experiences with the opioid epidemic, and we invite your thoughts by phone or e-mail.

Drew Erteschik is a partner in the Raleigh office of Poyner Spruill LLP, where he focuses his practice on high-stakes government litigation.  He is a member of the Section Council of the NCBA’s Government and Public Sector Section.

J.M. Durnovich is a senior associate in the Charlotte office of Poyner Spruill LLP, where he focuses his practice on government disputes and complex civil litigation.  He is a member of the NCBA’s Government and Public Sector Section.

Cosmo Zinkow is a third-year law student at Campbell Law School, where he is the Editor in Chief of the Campbell Law Review.  He is a member of the NCBA’s Government and Public Sector Section.  Cosmo will join Poyner Spruill as an associate in September 2018.

[1]         This article states the authors’ personal views, not necessarily the views of our colleagues or of any client.

[2]         Compare Centers for Disease Control and Prevention, National Vital Statistics Report 87 (2016), with The Opioid Epidemic in the U.S., HHS.gov, https://www.hhs.gov/opioids/about-the-epidemic/index.html.

[3]         Castlight Health, The opioid crisis in America’s workforce, 8 (2016), http://www.ncmedsoc.org/wp-content/uploads/2017/04/castlight-report-opioid-crisis-in-workforce-web.pdf.

[4]         Id.

[5]         Compare Fatality Rate – New Hanover, NCDOT.gov, https://www.ncdot.gov/ performance/FatalityRate.html, with Press Release, N.C. Gov. Roy Cooper, County-by-County Figures: The Opioid Crisis in North Carolina (May 16, 2017), https:// governor.nc.gov/news/county-county-figures-opioid-crisis-north-carolina.

[6]         North Carolina’s Opioid Action Plan 2017-2021, NC Dep’t of Health and Human Svcs., https://www.ncdhhs.gov/opioids.

[7]         Id.

[8]         Fact Sheet: Opioid-related Overdoses, N.C. Dep’t of Health and Human Svcs., https://files.nc.gov/ncdhhs/opioid%20plan%20fact%20sheet_final_6_27_17b. pdf.

[9]         Benjamin Schachtman, ‘Closer to home’ – the cost of the opioid epidemic may be the tip of the iceberg, Port City Daily (Apr. 3, 2017), https://portcitydaily.com/ 2017/04/03/closer-to-home-the-cost-of-the-opioid-epidemic-may-be-the-tip-of-the-iceberg/ (citing Substance Abuse and Mental Health Services Administration study).

[10]        Colin Campbell, Cooper says Senate is making opioid crisis a ‘political football,’ announces $31 million federal grant, The News & Observer (May. 18, 2017), http://www.newsobserver.com/news/politics-government/state-politics/article 151315847.html.

[11]        Complaint, South Carolina v. Purdue Pharma, L.P., et al., No 2017-CP-4004872 ¶ 11 (Richland Cty., SC Aug. 15, 2017).

[12]        Id. ¶ 11.

[13]        Id. ¶ 12.

[14]        Order, City of Everett v. Purdue Pharma, L.P., et al., No. C17-209RSM, at *4 (W.D.Wa. Feb. 25, 2017), https://everettwa.gov/DocumentCenter/View/ 11904 (hereinafter “Everett Order”).

[15]        Everett Order at 4.

[16]        Bill Whitaker, Ex-DEA Agent: Opioid Crisis Fueled by Drug Industry and Congress, CBS News: 60 Minutes (Oct. 15, 2017), https://www.cbsnews.com/news/

ex-dea-agent-opioid-crisis-fueled-by-drug-industry-and-congress.

[17]        City of Chicago v. Purdue Pharma, L.P., et al., 211 F. Supp. 3d 1058, 1074–75 (S.D. Ill. Sept. 29, 2016).

[18]        Everett Order at 19.

[19]        Press Release, U.S. Dep’t of Justice, McKesson Agrees to Pay Record $150 Million Settlement for Failure to Report Suspicious Orders of Pharmaceutical Drugs (Jan. 17, 2017), https://www.justice.gov/opa/pr/mckesson-agrees-pay-record-150-million-settlement-failure-report-suspicious-orders.

[20]        Carrie Ghose, Cardinal Health to Pay West Virginia $20M to Settle Opiates Lawsuit, Columbus Business First (Jan. 9, 2017), https://www.bizjournals.com/ columbus/news/2017/01/09/cardinal-health-to-pay-west-virginia-20m-to-settle.html.

[21]        Press Release, U.S. Dep’t of Justice, Cardinal Health Agrees to $44 Million Settlement for Alleged Violations of Controlled Substances Act (Dec. 23, 2016), https://www.justice.gov/usao-md/pr/cardinal-health-agrees-44-million-settlement-alleged-violations-controlled-substances-act.

[22]        Press Release, U.S. Dep’t of Justice, Costco Wholesale to Pay $11.75 Million to Settle Allegations of Lax Pharmacy Controls (Jan. 19, 2017), https://www.justice. gov/opa/pr/costco-wholesale-pay-1175-million-settle-allegations-lax-pharmacy-controls.

[23]        Nate Raymond, Opioid maker Mallinckrodt agrees to $35 million U.S. drugs probes settlement, Reuters (Apr. 3, 2017), http://www.reuters.com/article/us-mallinckrodt-settlement/opioid-maker-mallinckrodt-agrees-to-35-million-u-s-drugs-probes-settlement-iduskbn1751jm.