A $37 million settlement was announced Thursday between West Virginia and McKesson Corp. for its role in fueling the opioid epidemic, according to a news release from state Attorney General Patrick Morrisey.
The lawsuit against McKesson alleged that the company failed to appropriately monitor the distribution of painkillers to pharmacies around the state, exacerbating the drug epidemic in some of West Virginia’s most vulnerable regions. McKesson, while agreeing to the settlement, denies any wrongdoing or responsibility for West Virginia’s opioid epidemic, according to the release.
While the news release states that the $37 million is “believed to be” the nation’s largest state settlement against a single pharmaceutical distributor, it is less than 1 percent of the company’s $208.4 billion annual revenue from fiscal year 2018 and just a little more than double McKesson CEO John H. Hammergren’s $18 million salary in 2018.
“I am grateful to our team, which under my watch has done as much or more than any office in the country to fight this terrible epidemic, fix the failed policies of the past and bring accountability to the system,” Morrisey said in a statement.
Morrisey would not comment on why he settled the lawsuit without obtaining an admission of guilt from McKesson regarding its responsibility in the state’s opioid epidemic.
The settlement with McKesson was announced more than a month after opioid manufacturer Purdue Pharma agreed to pay $270 million to settle a lawsuit, filed by the Oklahoma attorney general, which alleged the drug maker helped fuel the opioid epidemic in that state.
In a statement Thursday, Sen. Joe Manchin, D-W.Va., expressed his disappointment at the size of the settlement.
“Last October, I called on [Gov.] Jim Justice to deny the settlement but it appears that he didn’t care enough to fight for the money that West Virginia deserves,” Manchin said in the statement. “I spoke out then and I’m speaking out now that it makes me sick that the very people that are supposed to protect West Virginians are letting a drug distributor screw us over. It makes me sick and I know it makes every West Virginian sick, especially those who have lost someone to this drug epidemic or knows someone who is struggling with drug addiction now. This disgraceful settlement is a shameful injustice to us all.”
In October, just weeks before the general election for the Senate between Manchin and Morrisey, Manchin criticized the attorney general for an alleged $35 million settlement, citing “reliable sources.” He declined to identify them at the time.
“West Virginians can’t afford to let Patrick Morrisey cut a sweetheart settlement with McKesson,” Manchin said in October. “I’m speaking out because I will not watch our state get screwed over here by Morrisey because he wants to ram this through before the election. Can you believe that? This is a horrible deal anytime. Forget about politics, but Morrisey is playing politics with this.”
Manchin classified the alleged $35 million settlement as an unfair level of compensation when compared to “the damage that’s been done to the people of West Virginia” by the opioid epidemic.
“There’s no question the damage done by McKesson’s actions is considerably more than the $37 million it paid,” Richard Ausness, a University of Kentucky law professor who has been following opioid lawsuits nationwide, told Bloomberg on Thursday. “It may be Mr. Morrisey is looking for money now, rather than waiting to take a share of a larger recovery five years from now.”
Curtis Johnson, Morrisey’s press secretary, said Manchin’s criticism of the settlement is “the height of political hypocrisy,” since, according to Johnson, the influx of pain pills in West Virginia happened under Manchin’s leadership.
“Joe Manchin has no credibility to criticize any measures the state takes to clean up from the cataclysmic wake he left by driving West Virginia into the height of the opioid crisis while he was governor,” Johnson wrote in a statement. “While [Morrisey] and subsequent governors have fought to realize historic recoveries from drug distributors, it seems Manchin’s most significant impact in the opioid epidemic was the record breaking numbers of pills he allowed to proliferate throughout the state during his watch.”
In 1998, West Virginia agreed to a $1.8 billion settlement with cigarette manufacturers for harm done to West Virginians by the tobacco industry. In his statement Thursday, Manchin said the McKesson agreement, by comparison, is “disgraceful.”
“The governor and attorney general either don’t know how to negotiate, don’t understand the scope of this problem or don’t care about the impact this epidemic has had on the state of West Virginia,” Manchin wrote. “Either way, they have failed our state.”
Justice said Thursday that he did not think the settlement was as large as it should have been, but that “experts” told him this was the best deal that could be cut.
“I was advised over and over and over again, without any question, all of the advice that came to me, that you have to listen to your attorneys, and everybody, everybody that came to me said this is the absolute best we’re going to do, you know, without any question, this is the best,” Justice said. “I don’t think it’s enough but you have to go with your experts, because I don’t know all the particulars of the lawsuit.”
Bill Crouch, secretary of the state Department of Health and Human Resources, which filed the initial suit against McKesson along with the Attorney General’s Office and the Department of Military Affairs and Public Safety, wrote in a statement Thursday that attorneys involved in the case were “adamant” that the settlement was “the best deal” they could possibly make.
“Settlements like this, with drug manufacturers and distributors are difficult, because regardless of the amount, no settlement will ever be enough to make up for the pain and suffering many West Virginia families have endured,” Crouch wrote. “With this settlement, we hope to reduce some of the financial burden our state has carried due to substance use disorder and prevent further harm to our residents from the misuse of prescription pills.”
Per the news release, the McKesson settlement brings the total paid to West Virginia from pharmaceutical wholesalers to more than $84 million, about 1 percent of the $8.8 billion the American Enterprise Institute estimates the opioid epidemic costs West Virginia annually.
McKesson is the second-largest shipper of opioids to West Virginia, behind Cardinal Health.
In 2005 and 2006, McKesson shipped nearly 5 million doses of prescription painkillers to a now-shuttered Sav-Rite Pharmacy in Kermit, a town in Mingo County with 400 people, according to a letter sent to the company as part of a 2018 congressional committee investigation into drug distributors.
Between 2006 and 2014, McKesson also shipped 5.8 million hydrocodone and oxycodone pills to a small pharmacy in Mount Gay, population 1,800. The company supplied another 2.3 million prescription painkillers to the Logan County drugstore’s branch location in Stollings, just 3 miles away, according to the committee’s letter.
The settlement with McKesson concerns only the lawsuit and allegations brought against the company by the state, and is completely unrelated to ongoing litigation brought by counties and municipalities throughout West Virginia.
According to the news release, all parties involved in the lawsuit, including DHHR and DMAPS, agreed to the settlement to avoid “the delay, expense, inconvenience and uncertainty of protracted litigation.”
Per the terms in the settlement, McKesson must pay $14.5 million within three business days of the case’s dismissal, then make annual payments of $4.5 million until May 6, 2024, according to the release. Justice said spreading out the payments was against his wishes.
“I went back, pushed back, pushed back, really hard, I even said, you know, that my recommendation was we’ve got to have all the money now and we couldn’t get all the money now either,” Justice said.
The funds collected will be used to “further the collective fight against drug abuse” in West Virginia. However, no specifics were available as to how.
McKesson shares rose 3.62 percent as the markets closed Thursday in New York, according to a report from Bloomberg.