The National Opioid Epidemic: The Emergence of a Multi-Layered Approach

These cases assert varying theories of liability, including negligence, nuisance, claims under state consumer-protection statutes, and RICO/racketeering. As the panel noted, they share common questions of fact, including whether:

1. manufacturers of prescription opioid medications overstated the benefits and downplayed the risks of the use of their opioids and aggressively marketed (directly and through key opinion leaders) these drugs to physicians, and/or
2. distributors failed to monitor, detect, investigate, refuse and report suspicious orders of prescription opiates. Id.

In addition, some municipalities, such as Seattle, have filed individual suits in local state courts and suggested that they will resist joining the combined litigation. One tribal entity, the Cherokee Nation, has filed an action in tribal court and shows no sign of joining the MDL. Cherokee Nation v. McKesson Corp. et al., CV-17-203 (Cherokee Tribal Ct. 2017). It is likely that, while the bulk of the civil litigation brought by local governments will join the consolidated cases, a significant number of cases will still be brought in state courts.

A number of defenses have been raised in response to these claims. Distributors, who are charged with reporting suspicious orders under the Controlled Substances Act (CSA), have argued that the CSA does not provide a private right of action. Manufacturers have noted that a legitimate doctor's prescription necessarily breaks the chain of causation, precluding the manufacturers from being held liable for any resulting harm caused by opioids. Finally, some claims have been contested under the Free Public Services Doctrine, which limits recovery of money spent by public entities to provide services, under the theory that choosing how the government spends its money is fundamentally a legislative, not a judicial, concern.

State Attorneys General Respond

On Sept. 19, 2017, a coalition of 41 state attorneys general issued subpoenas to five pharmaceutical manufacturers and three distributors. Other state attorneys general, including those in Ohio, Washington, Louisiana, New Mexico, Missouri, Oklahoma and Mississippi, have already filed lawsuits against certain manufacturers and distributors.

Cases that have been brought to date by state attorneys general, like those brought by municipal and county plaintiffs, allege a variety of claims, including violations of state consumer protection laws, together with claims sounding in nuisance, negligence and fraud. (The National Association of Attorneys General has written to America's Health Insurance Plans (AHIP) requesting that the latter proactively encourage its members to “review their payment and coverage policies and revise them, as necessary and appropriate” to prioritize non-opioid treatments for chronic non-cancer pain. AHIP responded that it recognizes that opioid abuse presents “an urgent public health crisis,” and described how its members “have already instituted new programs to dramatically reduce how much — and how often — opioids are prescribed.” These efforts include formulary development to favor non-opioids and fraud prevention programs.)

But state attorneys general have also commended companies that have taken proactive steps to address opioid abuse. For example, on Oct. 19, 2017, attorneys general in 17 states and the U.S. Virgin Islands wrote to CVS to “applaud” initiatives including limiting the daily dosage of certain opioids, limiting the supply of certain opioid prescriptions, and other measures.

The DOJ Flexes Its Enforcement Muscles

Over the past five years, the Department of Justice (DOJ) has prosecuted hundreds of individual doctors for knowingly dispensing prescription opioids improperly. Recently, the DOJ has also entered into a number of civil settlements with retail pharmacy chains regarding alleged violations of the record-keeping provisions of the CSA, with the DOJ claiming that the pharmacies filled unauthorized prescriptions. Since 2013, a number of retail pharmacy chains have settled civil claims of this nature, for amounts ranging from $3 million to $80 million.

The DOJ's efforts have also impacted distributors and manufacturers. In July, the DOJ announced a $150 million settlement with McKesson, one of the so-called “Big Three” distributors of pharmaceuticals, and a $35 million settlement with Mallinckrodt, a manufacturer of generic opioids, for allegedly failing to report suspicious orders in violation of the CSA.

There are signals that the DOJ's and DEA's efforts will expand further. In November 2017, Acting Administrator of the DEA, Robert W. Patterson, announced that the DEA's Diversion Control Division is working with representatives in 44 states to address opioid diversion, and that DEA will use “all available means — administrative, civil and criminal — to ensure that its 1.7 million registrants handling prescription drugs comply with the law.”

As potential federal enforcement activity increases, registrants may wish to consider enhancing their compliance and internal investigation functions and should be prepared to implement remediation measures. The DOJ will consider a company's compliance and remediation efforts in making a determination of charges and penalties. United States Attorneys' Manual § 9-28.800 and § 9-28.1000. A corporation's timely and voluntary disclosure of wrongdoing can also positively impact the course of an enforcement action. See, e.g., United States Attorneys' Manual § 9-28.900.

Executive and Congressional Actions

Congress has engaged in efforts to fight the opioid epidemic through proposed legislation and its investigatory powers. On June 27, 2017, a bipartisan task force in the House of Representatives issued a legislative agenda to “address the opioid epidemic from the perspective of law enforcement, prevention, treatment, and recovery.” In July, the Senate's Homeland Security and Governmental Affairs Committee requested documents from four manufacturers and three distributors.

Allegations that prior enforcement efforts have been lax further suggest that future actions may increase. On Oct. 15, 2017, 60 Minutes and The Washington Post issued the first part of a report in which the former head of the DEA's Office of Diversion Control provided his view that distributors “turned a blind eye” to suspicious orders and that enforcement efforts were compromised because companies in the pharmaceutical industry “have an influence over Congress.” Not long after the report aired, the House Committee on Oversight issued a document request to the U.S. Attorney General to “help the Committee better understand why DEA's enforcement numbers have decreased as the number of American deaths has increased.” On Nov. 1, 2017, the President's Commission on Combating Drug Addiction and the Opioid Crisis issued a draft report which, while focusing on increased research into opioid alternatives and an awareness campaign, identifies manufacturers and distributors as contributors to the crisis. And on Dec. 17, 2017, 60 Minutes and The Washington Post, in Part Two of their investigative series, highlighted the McKesson settlement as being too lax, suggesting that even settled cases can face new scrutiny.

Conclusion

In the current environment, any company involved in the opioid supply chain could face risks from lawsuits or government enforcement actions. Companies can minimize those risks, however — and do their part to address the crisis and demonstrate responsible corporate governance — by thoroughly reviewing and, when appropriate, strengthening their compliance policies and procedures. This may entail engaging experts working with counsel, to conduct an audit or internal investigation to determine whether compliance policies have been followed and, if necessary, conduct a root cause analysis and remedy any deficiencies.

***** Richard S. Hartunian is a partner in the Corporate Investigations and White Collar Defense group at Manatt, Phelps and Phillips LLP and the former U.S. Attorney for the Northern District of New York. Jacqueline C. Wolff, a member of this newsletter's Board of Editors, is Co-Chair of the group. Andrew C. Case is a litigation associate.