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Our Take: Judge rules against Johnson & Johnson in landmark opioid case

Sep 09, 2019

A judge ordered Johnson & Johnson to pay $572 million to Oklahoma for creating a “public nuisance.” The state had sought $17.5 billion in a lawsuit against J&J, contending that the company had engaged in misleading marketing and contributed to the opioid epidemic that has claimed the lives of more than 6,000 Oklahomans. J&J plans to appeal, and the company’s shares rose in after-hours trading on the day of the ruling, suggesting that investors believed the outcome could have been much worse.

Oklahoma’s attorney general had also included Purdue Pharma and Teva Pharmaceutical Industries in the lawsuit, but those companies settled with the state earlier this year for $270 million and $85 million, respectively.

More than 2,000 opioid-related lawsuits are pending throughout the country, including a landmark federal trial scheduled to begin next month in Ohio involving multiple drugmakers. Endo International and Allergan recently reached settlements in that litigation for $11 million and $5 million, respectively.

Purdue, also named as a defendant in the Ohio trial, recently offered as part of a negotiated Chapter 11 case to settle all of its lawsuits for up to $12 billion by restructuring the company as a “public benefit trust” for at least 10 years and making other concessions; if a deal can’t be reached this month, Purdue may seek a “free-fall” bankruptcy, which would likely result in only about $1 billion in recoveries for plaintiffs, Reuters reported.

Our Take: Without excusing drugmakers, what’s getting missed in these lawsuits are the deaths from synthetic opioids, which are a far greater problem than prescription painkillers. According to a recent report from the Rand Corporation, deaths from synthetic opioids skyrocketed from about 3,000 in 2013 to more than 20,000 in 2018.

That means that of the estimated 47,000 deaths from opioids last year, about two-thirds were related to synthetic opioids — most of them involving fentanyl. In the U.S., synthetic opioid death rates are highest in New England, parts of the Midwest, and Appalachia.

Rand cites multiple “supply-side” factors as being behind the rising use of synthetic opioids, including online dissemination of new and more-efficient manufacturing methods, anonymous e-commerce, detection challenges, and poor regulation in China.

“This crisis is different because the spread of synthetic opioids is largely driven by suppliers’ decisions, not by user demand,” wrote lead author Bryce Pardo, Ph.D., an associate policy researcher at Rand, in an accompanying editorial to the report. “Most people who use opioids are not asking for fentanyl and would prefer to avoid exposure.”

According to Rand, dealers mix fentanyl into baggies of heroin or press them into fake opioid tablets made to look like the prescription drug. Why? After adjusting for potency, synthetics are up to 99% cheaper per dose.

Seems like a smart business move until you lose your customer base to, well, death.

Pardo likens the synthetic opioid problem to a poisoning outbreak and says it will require solutions far different from those for people who abuse prescription pain medications.

“New ideas — be they public policies, technologies, or law enforcement strategies — are desperately needed,” Pardo wrote. “Continuing to treat fentanyl just like previous drug epidemics will likely be insufficient and may condemn thousands more to early deaths.”

Lawsuits like the J&J case in Oklahoma might give some people a sense of justice, but their value in stemming the opioid crisis is limited. After all, as the company noted in its response to the judgment, J&J’s opioid product sales represent less than 1% of the prescriptions in Oklahoma and across the U.S.

People will find more than drugmakers to blame for opioids. Last week, a group of 29 Texas-based hospitals filed suit against at least a dozen opioid manufacturers, suppliers, and distributors, including CVS Health, Walgreens, and Walmart.

Ultimately, what these lawsuits don’t acknowledge is that the larger issue lies with synthetics — a problem that will be much, much more difficult to solve.

What else you need to know
Capital Rx, a startup pharmacy benefit manager, launched its Clearinghouse Model last Wednesday. The novel drug pricing framework is designed to eliminate spread pricing and price variability, and promote greater transparency. With spread pricing, PBMs profit by billing insurers and employers more for drugs than what the PBM reimburses the pharmacy for the drugs. Capital Rx’s Clearinghouse Model uses the National Average Drug Acquisition Cost, which is maintained by CMS and updated weekly, as a benchmark for pricing. That means all employer groups doing business with Capital Rx will pay the same actual unit costs for drugs and will know those costs when signing a contract — a major departure from current standard practices in the industry. More here.

In merger and acquisition news, a federal judge officially approved the merger between CVS Health and Aetna last Wednesday. U.S. District Judge Richard Leon initiated a review late last year of the settlement agreement the two companies reached with the Department of Justice regarding antitrust concerns; he found that the merger would not be anticompetitive. Michigan-based insurers Priority Health and Total Health Care will merge, pending regulatory and state approvals, and will establish a $25 million foundation to improve health outcomes in Detroit. Georgia’s Northside Hospital and Gwinnett Medical Center have officially merged, creating a five-hospital system with 1,636 inpatient beds and more than 250 outpatient locations. A number of Gwinnett’s locations will undergo name changes.

Amgen will buy Celgene’s Otezla (apremilast), a psoriasis drug, for $13.4 billion. When Bristol-Myers Squibb (BMS) provided an update in June on its plans to acquire Celgene, the company said it would divest Otezla to gain clearance from the Federal Trade Commission (FTC); BMS has an investigational TYK-2 inhibitor that could eventually compete with Otezla. Currently, Otezla is the only oral, nonbiologic treatment approved for psoriasis and psoriatic arthritis. Of note, Amgen makes Enbrel (etanercept), a biologic approved for psoriasis and other diseases. Amgen noted that its acquisition of Otezla is contingent on BMS entering into a consent decree with the FTC in connection with the Celgene merger, the closing of the Celgene merger, and other customary closing conditions.

CMS rejected Idaho’s request for a waiver for Medicaid expansion on the grounds that it was incomplete. The waiver would make it possible for residents earning between 100% and 133% of the federal poverty level to stay on Idaho’s health insurance exchange. A ballot initiative last November to expand Medicaid passed with 60% of the vote, but state legislators subsequently added several restrictions, each of which requires a waiver. CMS said even if Idaho revises its application to address the insufficiency, it is unlikely to be approved because the waiver still won’t satisfy guardrails under Section 1332 of the Affordable Care Act.

Meanwhile, in Nebraska, a Medicaid advocacy group has filed a lawsuit in an attempt to force state officials to offer expanded coverage — which won voter approval last November — before the currently scheduled rollout on Oct. 1, 2020. The suit is asking for expansion to begin by mid-November of this year, while the state still qualifies to have 93% of the expansion costs paid for with federal funding; the percentage drops to 90% on Jan. 1, 2020, and the state will forfeit additional federal funding by delaying the expansion until the fourth quarter of 2020.

Blue Cross and Blue Shield of Minnesota (BCBSM) announced a five-year, value-based agreement with Minnesota Oncology. According to the agreement, terms are “based on the principle that effective outcomes for patients are determined by the quality of care provided — not the quantity.” BCBSM and Minnesota Oncology will be jointly accountable for the overall cost of cancer care for BCBSM members. The partnership includes adherence to a set of quality metrics based on clinical guidelines and evidence-based practice. Other specific terms of the agreement, such as shared savings and performance bonuses, were not disclosed.

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