TO: Board of Supervisors
FROM: Sheryl L. Bratton, County Counsel
REPORT BY: Jason M. Dooley, Chief Deputy County Counsel
SUBJECT: Participation in the National Opioids Settlement with Sandoz, Inc., Purdue Pharma L.P. & Sackler Family, and several small generic pharmaceutical opioid manufacturers.
RECOMMENDATION
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Authorize the Chief Executive Officer to execute documents necessary to participate in the National Opioids Settlements with multiple opioid manufacturer defendants, including: (1) Sandoz, Inc.; (2) Purdue Pharma L.P. & Sackler Family; and (3) Other several small generic pharmaceutical opioid manufacturers collectively. (Fiscal Impact: Increased Revenue; General Fund; Not Budgeted; Discretionary)
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BACKGROUND
In May 2018, the Board authorized a consortium of outside counsel involved in the nationwide opioid litigation to file a federal complaint on behalf of the County against 14 manufacturers, distributors, and retailers of opioid drugs. In June 2018, the County joined with numerous other public entities across the state and nation in filing a federal complaint against opioid drug manufacturers, distributors, and retailers. In July 2021, the County entered into a set of settlement agreements with the opioid manufacturer Janssen Pharmaceuticals and its parent company, Johnson & Johnson and the three largest pharmaceutical distributors of opioids, entitling it to a share of statewide settlement funds. In March 2023, the County entered into similar settlement agreements with two pharmaceutical manufacturers, Teva and Allergan, and three pharmacies, CVS, Walgreens, and Walmart. In August 2024, the County entered into a settlement agreement with Kroger. Overall, from these settlements, the County is expected to receive approximately ten million dollars over 18 years, of which it received $951,605 at the close of FY 23-24. Since then, our office was notified by outside counsel of other opioid settlements that the County is eligible to participate in. These settlements are as follows:
(1) Sandoz Inc. Proposed Settlement
Sandoz Inc., an opioid manufacturer defendant, entered an agreement-in-principle with Litigating Subdivisions and Litigating Tribes to establish a $99,500,000 settlement fund to resolve pending opioid-related litigation. Napa County named Sandoz, Inc. as a defendant in its opioid litigation complaint, therefore, is eligible to participate in this settlement. Since the total number of Litigation Subdivisions can be identified, the estimated allocation is relatively accurate; Napa County’s estimated allocation is approximately $170,000. This amount will be received as a one-time payment issued to participating subdivisions in 2026 and use of the funds is restricted to opioid remediation. To participate in the Sandoz Inc. Settlement Program, the County has until September 30, 2025, to sign and submit the Participation Agreement.
(2) Purdue Pharma L.P. & Sackler Family Proposed Settlements
Purdue Pharma has been the leading manufacturer of prescription opioids, since 2017. In 2019, Purdue filed for bankruptcy. In 2021, a proposed settlement with the Sackler family Defendants and a corresponding Purdue bankruptcy reorganization plan was presented to the bankruptcy court. The 2021 settlement and bankruptcy plan were the subject of additional litigation. It was challenged, and later, vacated by the courts. Certain states and other plaintiffs challenged the release of personal liability for the Sackler Family Defendants that was part of the bankruptcy plan. In 2024, the U.S. Supreme Court affirmed the invalidation of the proposed settlement and bankruptcy plan. Both parties revisited settlement negotiations which resulted in a two-part proposed settlement. The proposed settlement is being implemented in connection with Purdue’s bankruptcy proceedings, and consist of, among other things, a settlement of direct claims against the Sacklers held by the states, local governments and other creditors (“the Direct Settlement”) and a settlement of Purdue’s bankruptcy estate, which includes funding from the Sacklers and certain other parties (the “Estate Settlement”).
The two proposed settlements contemplate that the Sacklers will be paying an aggregate of up to $6.5 billion in 16 payments over 15 years, including $1.5 billion on the settlement’s effective date, expected to be in 2026, though some amounts are subject to discounted prepayments. These amounts are in addition to amounts available from Purdue estate including amounts expected to be around $900 million and amounts that may be paid in the future. Both settlements also contain injunctive relief governing opioid dispensing practices and require the successor-in-interest of Purdue Pharma L.P. to implement safeguards to prevent diversion of prescription opioids and restrict certain Sacklers from directly or indirectly engaging in the manufacturing or sale of opioids.
The County is eligible to participate in the Direct Settlement. The more subdivisions that participate, the more funds flow to that state. Any subdivision that does not participate cannot directly share in any of the Direct Settlement funds. This settlement will utilize the same allocation procedure as the prior agreements and will follow any applicable state agreements. As the participation agreements are submitted, more information on allocation will become available. The amount of the County’s share will not be calculated until all participants in California have opted in. Rough estimates put the County’s share at just over $1.1 million.
Concurrently, the Estate Settlement is up for approval of Purdue Pharma L.P.’s bankruptcy plan, which will provide distributions from the Estate Settlement. More information on the Estate Settlement and bankruptcy plan is forthcoming and outside counsel encourages the County to participate in the voting process of the plan.
(3) Other Small Generic Pharmaceutical Opioid Manufacturers Proposed Settlements
These are multi-Defendant settlements that will resolve claims against several small generic pharmaceutical opioid manufacturers: (1) Alvogen, Inc.; (2) Amneal Pharmaceuticals, Inc.; (3) Apotex Inc.; (4) Hikma Pharmaceuticals USA Inc.; (5) Indivior Inc.; (6) Mylan Pharmaceuticals Inc.; (7) Sun Pharmaceutical Industries, Inc.; and (8) Zydus Pharmaceuticals (USA), Inc. The County did not name these manufacturers as defendants, but this is a national settlement and participants did not have to have sued these companies in order to participate in the settlement. This settlement will utilize the same allocation formulas as the prior agreements, which means the amount that the state will receive depends on the overall participation of the subdivisions. These settlements will collectively add an additional $1.1 billion in cash and pharmaceutical products to be distributed among the state and local governments across the country. The amount of the County’s share will not be calculated until all participants in California have opted in. Rough estimates put the County’s share at just over $170,000.
The community can only benefit from receiving additional funding to help abate the ongoing opioid abuse epidemic. Given the circumstances for each of these settlements, it is unlikely the County would have an independent basis to recover damages through continued litigation, especially against those defendants not named in the County’s complaint.
Requested Action: Approve participation in the three Opioid Settlements and authorize the Chief Executive Officer to execute any documents required to opt in to the settlement agreements.
FISCAL IMPACT
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Is there a Fiscal Impact? |
Yes |
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Is it currently budgeted? |
No |
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Where is it budgeted? |
Not applicable |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
Participating in the settlement will provide funding for opioid abuse abatement services. |
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Is the general fund affected? |
No |
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Future fiscal impact: |
The exact settlement payments cannot be calculated until all participating jurisdictions are identified. At this time, the County’s estimated total is approximately $1,500,000, in addition to existing settlement payments. Any future appropriations will be presented to the Board for its consideration. |
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Consequences if not approved: |
The funding will not be available. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14C.C.R 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.