CVS Health Corp. and Walgreens Boots Alliance Inc. have agreed to pay more than $10 billion in a landmark settlement to resolve opioid-crisis lawsuits brought by states, cities, and other governments.
The two largest U.S. drugstore chains announced a framework agreement to settle a collection of lawsuits filed by governments and Native American tribes accusing pharmacies of contributing to the nation’s opioid epidemic.
CVS would pay $4.9 billion to states and municipalities and $130 million to tribes over the next ten years, beginning in 2023, under the proposed agreement. The company stated that the agreement is not an admission of guilt and that it will continue to defend against any litigation that is not resolved by the settlement.
Walgreens stated that it has offered to pay up to $4.79 billion to states over a 15-year period, as well as approximately $155 million to tribes. It also expects to pay up to $753.5 million in legal fees over the next six years. According to the company, the settlement does not constitute an admission of wrongdoing.
Each state, local government, and tribe must still decide whether to join the settlement. Plaintiffs’ attorneys, who were appointed to lead the negotiations, stated that they encouraged governments and tribes to join the settlement, which they claim holds pharmacies accountable.
On a conference call with analysts, CVS Chief Executive Karen Lynch stated that the settlement is in the “best interests of all parties and helps put a decades-old issue behind us.”
CVS has been involved in a separate legal battle with its insurers over whether they should cover some of the company’s liability for the opioid lawsuits.
More than 500,000 people have died as a result of widespread opioid abuse, which has resulted in more than 3,000 lawsuits filed by governments, hospitals, and others against pharmaceutical industry players such as manufacturers, distributors, and drugstores.
Many of the lawsuits claim that pharmacies did not do enough to stop the flow of pills into neighborhoods. The drugstores have claimed that they attempted to prevent pills from being illegally diverted and followed all regulatory requirements.
A federal judge in Ohio ordered CVS, Walgreens, and Walmart Inc. to pay $650 million to two Ohio counties over 15 years in August after a jury found the companies liable for contributing to the opioid epidemic.
That case, which was closely followed by other attorneys, was the first to reach a decision in the opioid lawsuits against pharmacy chains. The judge’s decision came after a six-week trial; the companies announced at the time that they intended to appeal the decision.
CVS agreed to pay $484 million to settle opioid-related claims brought by the state of Florida in March, without admitting wrongdoing. Walgreens later agreed to settle the Florida lawsuit for $683 million without admitting wrongdoing. CVS, Walgreens, and Rite Aid Corp. also reached a $26 million settlement with two New York counties in 2021.
Rite Aid and Walmart representatives were not immediately available.
A group of states agreed to a $25 billion settlement with Johnson & Johnson and drug distributors such as McKesson Corp., AmerisourceBergen Corp., and Cardinal Health Inc. in 2021. The agreement was completed this summer.
J&J stated that its $5 billion payment did not constitute an admission of liability. The drug distributors, who are paying about $20 billion over 18 years, have denied the allegations. Cities and counties have stated that the funds will be used to strengthen social services focused on the harms of opioid addiction, as well as funds for first responders.
Members of the Sackler family, who own Purdue Pharma LP and became wealthy from OxyContin sales, agreed earlier this year to pay up to $6 billion to settle lawsuits accusing them of contributing to the opioid epidemic. The settlement came after a federal judge overturned an earlier $4.5 billion settlement.
The family did not admit liability but agreed to relinquish control of Purdue, which declared bankruptcy in 2019 and pleaded guilty to three federal felonies related to the marketing and sale of OxyContin in 2020.
CVS stated that deferring the settlement payments would allow it to continue investing in its business. For years, the company has worked to transition from a pharmacy chain to an integrated provider of medical services, with the most significant step being its 2018 acquisition of insurer Aetna. CVS agreed to buy home-care provider Signify Health Inc. for $8 billion in cash in September.
CVS reported results for the fiscal quarter ended Sept. 30 on Wednesday, including a 10% increase in revenue and a $3.42 billion net loss, weighed down by charges for opioid litigation and other items.
Adjusted earnings per share were $2.09 after one-time items were removed. FactSet polled analysts, who predicted adjusted earnings of $2 per share.
CVS reported quarterly sales of $81.16 billion, with revenue increasing across segments, including a 9.9% increase in the insurance business and a 6.9% increase in the pharmacy business, aided by higher prices, purchases of at-home Covid-19 test kits, and increased prescription sales.
The company increased its earnings-per-share targets for the calendar year and now anticipates cash flow from operations of $13.5 billion to $14.5 billion, up about $1 billion from an earlier estimate.