At the 2018 RIMS Annual Conference, a session discussed the wave of litigation against pharmaceutical companies, pharmacies and distributors related to the opioid epidemic.
The panel included:
- John Denton – Managing Director, Marsh
- Anna Engh – Partner, Covington & Burling, LLP
We all remember past litigation by governmental entities against industries for the ills of society. The best example of this is the tobacco litigation, but we are also seeing suits against gun manufacturers, wine and spirits companies and even oil and gas companies because of climate change.
Status of Litigation
The big wave of opioid litigation really started in late 2017 with over 200 lawsuits filed in the last quarter of the year and over 300 suits filed in the first quarter of 2018. We are seeing an average of 100 lawsuits a month the last five months. This is a huge burden on the courts, the companies being sued, their carriers and the defense counsel.
Over 35 different states have filed litigation related to opioids. Half the litigation is in 10 states with the frequency in this order: Ohio, Wisconsin, Alabama, Kentucky, Michigan, West Virginia, Texas, Illinois, New York and Indiana. The multi-jurisdiction litigation is all consolidated in the U.S. Federal Courts in Cleveland, OH. The suits are mostly being filed by local government entities, but there are also suits filed by state attorney generals, third-party payers, hospitals, Indian tribes and individuals.
The attorneys representing the plaintiffs are the same law firms that are very well known in class action litigation as these are the same firms that filed asbestos, tobacco and other class-action lawsuits.
The lawsuits are expanding in their targets. Initially, it was the manufacturers, however, lawsuits are now being filed against pharmacy benefit managers, retail pharmacies. Even grocery chains that have a pharmacy are being sued.
The suit allegations are:
- Failure to follow state or federal Controlled Substance Acts
- Public Nuisance
- Unfair/deceptive business practices
- Negligent and/IMR fraudulent misrepresentations
- Civil RICO
Remedies sought include:
- Damages including costs for abating the nuisance, treatment, recovery and educational programs
- Statutory damages
- Injunctive relief
- Punitive relief
Legal defenses include:
- No causation
- No private right of action under federal or state Controlled Substances Acts
- Statute of limitations
- No duty owed to the plaintiffs; no breach of duty
- No misrepresentations
- Nuisance is not applicable theory of liability
- No standing, no enterprise, no racketeering activity
One of the biggest defense arguments is that there is no negligence when something that is legal is intentionally misused and abused by individuals. The manufacturers do not have a duty to stop their products from being illegally abused.
One of the things being sought in the litigation is DEA records on the shipment of these controlled substances. Once that information is made public, they expect additional parties to be named in the litigation.
The federal court overseeing the multi-state litigation is consolidating the cases and trying to move things forward quickly to resolution. The judge is pushing for quick settlements, such as what was seen in the big tobacco litigation. However, this litigation is much more complex because it involves hundreds of more defendants. In addition, the dollars involved in terms of revenue from sale of opioids is just a fraction of the revenues from tobacco sales, so the large pot of money just does not exist compared to tobacco.
Insurance Coverage Issues
Potentially applicable policies include:
- General Liability
- Druggist Liability
- E&O, medical malpractice
- Directors & Officers
The biggest insurance coverage issues are whether the damages sought are covered under the policy. Most general liability policies will cover damages because of bodily injuries. However, it is very questionable whether many of the alleged damages are actually for bodily injury. The courts have been mixed on how they are interpreting this issue.
Another insurance coverage issue is that the allegations do not constitute a covered “occurrence” under the policy. Thus far, the courts have not been very receptive of this allegation.