- Drugmaker Johnson & Johnson cut its third quarter profit by $3 billion to account for a proposed settlement deal reached by the pharma and a group of state attorneys general to resolve the many lawsuits facing the company over its alleged role in spurring a crisis of opioid addiction and overdose in the U.S.
- Per the agreement in principle, J&J would contribute $4 billion to fund efforts at addressing the crisis, and to state and local governments. The deal, which was negotiated with four states, isn't final and J&J said it could not predict whether it would be finalized.
- Along with J&J, Israeli generic giant Teva and three drug distributors are working toward a so-called global settlement to end all opioid litigation. Separately, the five companies avoided a closely watched federal trial, which was set to begin this week, by settling with two Ohio counties.
J&J, Teva and the three drug distributors have put their cards on the table with settlement offers that would reportedly amount to nearly $50 billion.
But it's not clear whether the agreement in principle struck between the companies and four states — North Carolina, Pennsylvania, Tennessee and Texas — will win the support of other state and local governments involved in negotiating a deal.
According to a Reuters report, government officials in Ohio, New Hampshire and West Virginia are not yet on board, citing concerns the proposed payments would be extended over a long time period.
Teva, for example, has offered to donate about $23 billion worth of the addiction treatment Suboxone (buprenorphine naloxone) over a decade. That valuation, though, is calculated using the drug's list price, rather than what it would cost the company to manufacture the treatment. Ronny Gal, an analyst at Bernstein, estimates Teva's cost of goods for Suboxone could be as low as 10%.
Teva also proposed paying $250 million in cash over the 10-year period.
For J&J, the $4 billion offer would trim its bottom line, although the pharma estimates such a settlement would take down its profit through nine months of 2019 to a still sizable $11.1 billion.
Yet opioid litigation is only one of the many legal headaches for J&J, which faces thousands of lawsuits regarding its Risperdal (risperidone) and talc products. Last week, the company recalled one lot of its talc-based baby powder after the Food and Drug Administration detected asbestos contamination, a finding that could undermine J&J's arguments that its baby powder does not contain the carcinogen.
The three drug distributors, AmerisourceBergen, McKesson and Cardinal Health, have reportedly offered $18 billion over 18 years, a proposal which was initially rejected.
All three, along with Teva, were set to go to trial on Oct. 21 in U.S. federal court in Cleveland, Ohio, but reached a last-minute settlement with Cuyahoga and Summit counties. J&J, as well as other drugmakers accused of spurring the opioid crisis, had previously settled with the two counties, which contain the cities of Cleveland and Akron.