J&J, Teva Opioid Trial May Signal Cost of Drug Maker Settlements

(Bloomberg) -- A California judge may soon provide a clearer picture of what it will cost drug makers including Johnson & Johnson and Teva Pharmaceutical Industries Ltd. to resolve liability for their role in the U.S. opioid epidemic.

The first trial against opioid companies in almost two years is set to start Monday in Santa Ana, where four California municipalities are demanding at least $50 billion for what they claim was the illegal marketing of pain pills. The case, which will be decided without a jury, may be a road map for thousands of similar claims pending against drug makers, distributors and pharmacies.

While it’s unlikely the city of Oakland and the counties of Los Angeles, Santa Clara and Orange will get anything close to $50 billion, the California trial “ratchets up settlement pressure on Teva and J&J,” which have already made proposals to end all the cases against them, said Holly Froum, a Bloomberg Intelligence analyst who follows the opioid litigation.

“This case could wind up being a real worst-case scenario for some of these companies,” said Richard Ausness, a University of Kentucky law professor who teaches about mass-tort cases.

More than 400,000 Americans have died from opioids over the past 20 years, sparking lawsuits by state and local governments across the country seeking compensation for spending on police and drug treatment.

Opioid companies want global settlements that cover all their liability, but some cases are moving forward to trials, including the one that starts this week before Orange County Superior Court Judge Peter J. Wilson.

In 2019, J&J proposed paying $5 billion, part of a combined $26 billion that included contributions from three drug distributors. No final agreement has been reached on that offer, which a federal judge overseeing opioid litigation called a benchmark for future settlements. Teva offered what it says is $23 billion of opioid-treatment medications, a valuation disputed by some states, cities and counties.

McKinsey & Co., the consultant that advised the industry on how to sell more pills, reached a $641.5 million settlement with states this year, but it’s being challenged by some municipalities and Native American tribes.

Public Nuisance

The California trial involves J&J, Teva, Endo International Plc and AbbVie Inc.’s Allergan Plc. The first claims were filed in 2014 by Santa Clara and Orange counties. Los Angeles County and Oakland were added later to the case, which accuses the companies of creating a public nuisance through deceptive marketing campaigns for the painkillers.

J&J, which has stopped selling opioid-based pain medications in the U.S., appropriately marketed the drugs and “will challenge plaintiffs’ unverified claims at trial, which do not contain any proof of causation,” spokesman Jake Sargent said in an emailed statement.

“We plan to defend ourselves vigorously against these claims,” Endo spokeswoman Heather Zoumas Lubeski said in an email.

Teva spokeswoman Kelley Dougherty said the company remains ready to finalize a settlement offer it made in 2019. “While we do remain eager to identifying collaborative solutions to this crisis, we will vigorously defend Teva against these unproven allegations in Court,” she said in an email.

An AbbVie spokesperson declined to comment.

In court filings, the drugmakers argue that some of the blame for California’s opioid problem lies with state residents who abused the drugs and criminals who supplied them.

Court Loss

The last opioid trial occurred in 2019, when an Oklahoma judge ordered J&J to pay $465 million for creating a public nuisance by duping doctors in that state to overprescribed opioid-based medications. The ruling is on appeal.

“The companies’ prospects for a win here are worse than they were in Oklahoma” because California’s public-nuisance law is even broader, said Albert Lin, a University of California law professor.

Santa Clara v. Purdue Pharma LP, No. 30--2014-00725287, Superior Court for Orange County, California (Santa Ana)

©2021 Bloomberg L.P.