Funds to be distributed over a period of up to 18 years
With a 4-1 vote on the part of the Sarasota City Commission and a unanimous County Commission vote, the two local governments have agreed to participate in a national settlement over the opioid crisis.
The county board vote came on July 13; the City Commission, with Vice Mayor Erik Arroyo in opposition, followed on July 19.
Just days later — on July 21 — “A bipartisan coalition of state attorneys general announced … a $26 billion national settlement with drugmaker Johnson & Johnson and three companies that distributed opioid painkillers even as addiction and overdose deaths skyrocketed,” National Public Radio reported.
“States have 30 days to decide whether to embrace the deal,” National Public Radio added. “Local governments will have 150 days to sign on.”
In an April 13 letter to city and county leaders, John Guard, the chief deputy attorney general for Florida, explained that state Attorney General Ashley Moody “has been heavily involved in leading both the State’s ongoing opioid litigation and several different negotiations with defendants in that litigation.” Copies of the letter went to Sarasota Mayor Hagen Brody and County Commission Chair Alan Maio.
“After multiple sessions and significant compromise by both sides,” Guard continued, a memorandum of understanding (MOU) has been reached.
“We have offered and the lawyers for the litigating [political] subdivisions are recommending to their clients that the … MOU be accepted,” Guard wrote.
“The allocation agreement is intended to govern the distribution of settlement proceeds” obtained through the Purdue Pharma bankruptcy, the Mallinckrodt PLC bankruptcy, opioid distributors Cardinal Health, McKesson Corp. and AmerisourceBergen Corp. — “collectively referred to as the ‘Distributors,’” an attached document noted — and Johnson & Johnson.
Joe Rice, a founding member of the Motley Rice law firm, which is based in Mount Pleasant, S.C., told the city commissioners on July 19 that, as negotiations proceeded, the attorneys involved learned that the companies that distributed the opioids “are not as financially viable” as people initially thought. “They’re stable,” he added of the firms, but not as wealthy as the tobacco companies that were the focus of national litigation decades ago.
“So we have to be realistic in approaching this,” Rice added.
Sarasota attorney William Robertson, who also represented the city in the issue, pointed out that, based on the negotiations as of July 19, the city would get around $1.7 million spread out over 18 years, or approximately $94,000 per year.
The funds would have to be used primarily for the “future abatement” of opioid issues, Robertson added.
(The Office of the County Attorney estimated that Sarasota County would receive an estimated $375,000 per year “for the first few years” after the settlement, “with the amount decreasing to $289,000 in the middle years, and $202,000 in the later years.” A memo that the Office of the County Attorney provided to the county commissioners anticipated that the payouts would take place over a period of 10 to 18 years, “depending on the structure of the final settlements with the manufacturers and distributors.”)
Sarasota Vice Mayor Arroyo asked about the potential flexibility of changing the amount the city would receive. “The Sarasota-Manatee area was disproportionately affected [by the opioid epidemic],” Arroyo pointed out during his board’s July 19 meeting. “We were called the worst area in the country for opioids,” he added, though he acknowledged that the situation was worse in Manatee County than in Sarasota County.
“I don’t think there’s any room to move on that,” Robertson replied. The allocation of the settlement funds is based on population, Robertson said.
“There will be additional funding through [Sarasota] County,” which will come to the city, Robertson told the city commissioners.
Nonetheless, Robertson agreed that the Sarasota-Manatee area “was at the top of the list” of areas affected by the opioid crisis.
Attorney Rice then explained that, for the settlement to move forward, a “critical mass” of the parties must agree to it. However, he pointed out, “I can’t tell you what ‘critical mass’ is. But it’s certainly going to be an overwhelming majority” of the affected population in the states that are involved.
“What happens if we don’t accept this settlement offer?” Arroyo asked.
Then his firm would continue to negotiate on behalf of the city, Rice responded.
“What are your thoughts [about accepting the settlement]?” Mayor Brody asked City Attorney Robert Fournier.
“I’m inclined to recommend that you go forward with it,” Fournier told him.
When Brody posed the same question to Robertson, Robertson responded that his advice was the same as Fournier’s. Rice concurred, as well.
Brody agreed with them, adding that he recently had read that the United States recorded a record number of overdoses in 2020.
(The Washington Post reported on July 14 that the number of overdoses “soared to more than 93,000 last year, a staggering record that reflects the coronavirus pandemic’s toll on efforts to quell the crisis and the continued spread of the synthetic opioid fentanyl in the illegal narcotic supply …” The 2020 figure was announced by the National Center for Health Statistics. “The death toll jumped by more than 21,000, or nearly 30 percent, from 2019,” according to the provisional federal data, The Post added.)
Arroyo also asked whether the settlement funds could be used to assist people who became homeless because of their opioid use.
“My information is it is pretty broad … for you to make those decisions,” Rice replied.
Further, Rice said, local governments that participated in the litigation would be able to apply for reimbursement for their expenses. However, he continued, the portion of the anticipated $26-billion settlement for such funding would be limited to $150 million. “It’ll be paid out pro rata,” he noted, if the total is insufficient to cover all those expenses.
Rice again emphasized that the companies named as the distributors in the litigation were not as well off financially as the public might think. “They work on a very small [profit] margin.”
Even though their revenue levels put them “in the top 25% or so” of all United States companies, Rice said, their profits placed them in the 470s out of the top 500 firms in the nation.
Moreover, Rice stressed, litigation remains underway in other states. As settlements are reached in those cases, he pointed out, less money will be available for the “global settlement” the attorneys general negotiated.
Arroyo countered that he understood that, in 2020, Johnson & Johnson was in the top 10 of U.S. companies in terms of profit, with $17.3 billion. Even though he has heard that that company might file for bankruptcy, he said, he did not believe it.
When Brody asked for a motion, Commissioner Liz Alpert made it, calling for the commission to accept the recommendation of the attorneys and agree to participate in the global settlement.
Brody seconded the motion.
“I appreciate the vice mayor’s concerns,” Alpert said. However, she added that she doubted the likelihood of the city’s attorneys being able to succeed in winning a bigger proportion of funds for the city.
Brody agreed with her. “We don’t have a strong position to change the formulas.”
“I disagree,” Arroyo told his colleagues. “I think we do have special standing.” If the city took the case to trial, he added, he believed the city could end up with a lot more money.
Attorney Rice again emphasized his concern that, with other trials expected to start later this year and in early 2022, “the vast majority” of those local governments that have not already won court dates will be left to deal with the bankruptcies of the companies that made and distributed the opioids.
“It’s about maximizing our opportunity,” Commissioner Jen Ahearn-Koch added.
Nonetheless, she did thank Arroyo for bringing up the points about the Sarasota-Manatee area’s status as “the opioid crisis capital of Florida.”
Alpert’s motion passed 4-1.
At the County Commission dais
During his report to the County Commission as part of its regular meeting on July 13, County Attorney Frederick “Rick” Elbrecht alluded to a memo that he had sent the board members about the status of the “global settlement” talks.
His memo, too, noted the concern about the “pending bankruptcies,” along with the fact that the Florida attorney general is seeking “to maximize recovery under the potential settlement.”
Elbrecht also pointed out in his memo, “If local governments do not agree to [the memorandum of understanding relating to the settlement], the Attorney General has threatened to resolve and release all claims from political subdivisions of the State of Florida.”
Further, his memo said that the memorandum of understanding (MOU) calls for the money to be funneled to one of three “pots”: a City/County Fund; a regional fund; and the State Fund. “The City/County Fund represents 15% of the total settlement amount,” the memo added.
“The Regional Fund would be controlled by a ‘Qualified County’ as that term is defined in the MOU,” the memo continued. Such a county has a population of at least 300,000; an opioid task force that the counties operate in collaboration with the municipalities; and “an abatement plan responding to the opioid epidemic.” Additionally, it has, or it will enter into, an agreement with the majority of its municipalities — “(majority being more than 50% of the total population within the municipalities).”
If Sarasota County were able to forge an agreement with the municipalities to become a “Qualified County,” the memo said, “then it could control the Regional Fund of $1.27 million per year in the early years, $982,000 per year in the middle years, and $687,000 per year in the later years.”
The memo noted that Attorney General Moody has agreed that counties could have until Jan. 1, 2022 to win that “Qualified” status.
None of the county commissioners offered comments on Elbrecht’s remarks.
Commissioner Michael Moran made the motion to accept the global settlement, and Commissioner Nancy Detert seconded it. The motion passed 5-0.