Report to Mayor and City Council
Tuesday, April 04, 2023
Consent
SUBJECT:
Title
CONSIDER APPROVAL OF FORMS, AGREEMENTS AND RESOLUTION NO. 23-071 ALLOWING THE CITY OF CARSON TO PARTICIPATE IN ADDITIONAL NATIONAL OPIOID SETTLEMENTS WITH TEVA, ALLERGAN, WALMART, WALGREENS AND CVS (CITY COUNCIL)
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I. SUMMARY
In 2021, the City entered into settlement agreements with McKesson Corporation, Cardinal Health, Inc., and AmerisourceBergen Corporation. (collectively, the “Distributors”) and Johnson & Johnson, Janssen Pharmaceuticals, Inc., Ortho-McNeil-Janssen Pharmaceuticals, Inc., and Janssen Pharmaceutica, Inc. (collectively, the “Manufacturer”) (for purposes of this submittal, the Distributors and Manufacturer are collectively referred to as the “2021 Settling Defendants”). The 2021 settlement agreements concerned litigation (the City was not a party to this litigation) by various States, cities, and counties relating to the 2021 Settling Defendants’ manufacture and distribution of opioids and, in particular, the impact of such activities upon the national opioid epidemic (“2021 Settlement Agreements”). The 2021 Settlement Agreements required that a “critical mass” of public agencies participate in order for it to become effective, which was achieved in 2022.
At this time, a new settlement is proposed with Teva, Allergan, Walmart, Walgreens, and CVS, who are additional defendants that are retailers and manufacturers of opioids (for the purposes of this submittal, Teva, Allergan, Walmart, Walgreens, and CVS are collectively referred to as the “2023 Settling Defendants”). The terms of the 2023 Settlement Agreements are similar to the 2021 Settlement Agreements, which includes the requirement that a critical mass of participation is required, provides for a broad release of the 2023 Settling Defendants from liability relating to opioids, and, further, direct or indirect payment of settlement funds to the various local agencies agreeing to participate. Similar to City Council’s election to direct settlement payments be made to the County under the 2021 Settlement Agreements, it is recommended that City Council again direct settlement payments under the current settlement be made to the County with the understanding that City may change its election so that it receives direct payment at any time so long as such election is made 60 days prior to a payment date.
II. RECOMMENDATION
Recommendation
TAKE the following actions:
1. APPROVE Settlement Agreements and Participation Forms for the City’s participation in the National Opioid Settlement Agreements with Teva, Allergan, Walmart, Walgreens, and CVS.
2. APPROVE the California State-Subdivision Agreements Regarding Distribution and Use of Settlement Funds relating to the National Opioid Settlement Agreements with Teva, Allergan, Walmart, Walgreens, and CVS.
3. ADOPT Resolution No. 23-071 approving and authorizing the City Manager to carry out all necessary acts such that the City can participate in the National Opioid Settlements with Teva, Allergan, Walmart, Walgreens, and CVS, including signing necessary documents and transmittal thereof as necessary.
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III. ALTERNATIVES
By not opting into the settlements and therefore, not releasing claims that may be available to City, City will reserve its option to file any actions against the 2023 Settling Defendants.
IV. BACKGROUND
In 2021, the City entered into settlement agreements with McKesson Corporation, Cardinal Health, Inc., and AmerisourceBergen Corporation. (collectively, the “Distributors”) and Johnson & Johnson, Janssen Pharmaceuticals, Inc., Ortho-McNeil-Janssen Pharmaceuticals, Inc., and Janssen Pharmaceutica, Inc. (collectively, the “Manufacturer”) (for purposes of this submittal, the Distributors and Manufacturer are collectively referred to as the “2021 Settling Defendants”). The 2021 settlement agreements concerned litigation (the City was not a party to this litigation) by various States, cities, and counties relating to the 2021 Settling Defendants’ manufacture and distribution of opioids and, in particular, the impact of such activities upon the national opioid epidemic (“2021 Settlement Agreements”). The 2021 Settlement Agreements required that a “critical mass” of public agencies participate in order for it to become effective, which was achieved in 2022.
At this time, a new settlement is proposed with Teva, Allergan, Walmart, Walgreens, and CVS, who are additional defendants that are retailers and manufacturers of opioids (for the purposes of this submittal, Teva, Allergan, Walmart, Walgreens, and CVS are collectively referred to as the “2023 Settling Defendants”). The terms of the 2023 Settlement Agreements are similar to the 2021 Settlement Agreements, which includes the requirement that a critical mass of participation is required, provides for a broad release of the 2023 Settling Defendants from liability relating to opioids, and, further, direct or indirect payment of settlement funds to the various local agencies agreeing to participate. Additional information about these settlements can be found here: www.nationalopioidsettlement.com <http://www.nationalopioidsettlement.com>.
With respect to the release, as indicated above, it is a very broad release covering any activities by the 2023 Settling Defendants relating to opioids. It arguably also includes a release from liability relating to land use matters for facilities that manufactured, distributed, or sold opioids within the City, although this position appears to be untenable as not being within the scope of the intention of the settlements.
With respect to the settlement funds, the 2023 Settlement Agreements could provide up to approximately $1.8 billion to California. This amount assumes maximum participation. Similar to the 2021 Settlement Agreements, the more local agencies that participate, the more funds will be available to California. Further, the City’s share of this amount is approximately $230,000, which is distributed over a 5 to 15 year period depending on the settlement agreement. It must be emphasized that this amount is an estimate of what the City may receive and assumes a best-case scenario where all local agencies participate. The actual amount will not be known until the process has completed. Similar to the 2021 Settlement Agreements, the use of the funds is restricted to opioid remediation (e.g., addiction treatment and abatement programs). By default, these funds are allocated to the County, but the City is able to elect to receive a direct distribution; however, use of the funds also requires strict accounting requirements. These requirements only apply to the City if it elects to receive direct distribution and does not apply to the City if the funds go to the County. In terms of enforcement, the State enforces the expenditure requirements. Because of this, and because the County is already required to utilize the funds toward opioid addiction/harm abatement activities within the County based on data specific to the City of Carson and additionally, already has the infrastructure and programs in place to implement these abatement activities whereas the same cannot be said for the City, it is recommended that the funds be allocated to the County similar to what the City elected to do for the 2021 Settlement Agreements. It should be noted here that the City may change its election so that it receives direct payment at any time so long as such election is made 60 days prior to a payment date.
Approval of Recommendation Nos. 1 and 2 would authorize the City to participate in the National Opioid Settlements with the 2023 Settling Defendants on the terms and conditions of those settlement agreements and, further, approve agreements with the State of California on the distribution of settlement funds, consistent with the 2023 Settlement Agreements. (Exhibits 1, 2, and 3).
Approval of Recommendation No. 3 (Exhibit 4) would approve and authorize the City Manager to carry out all necessary acts such that the City can participate in the National Opioid Settlements with Teva, Allergan, Walmart, Walgreens, and CVS, including signing necessary documents and transmittal thereof as necessary.
Council approval and authorization for execution, submission, and receipt of all required documents must be completed before April 18, 2023.
V. FISCAL IMPACT
None. Any funds allocated will automatically be transferred to the County of Los Angeles.
VI. EXHIBITS
1. Settlement Participation Form for the City’s participation in the National Opioid Settlements with Teva, Allergan, Walmart, Walgreens, and CVS. (pgs. 5 - 19)
2. 2023 Settlement Agreements with Teva, Allergan, Walmart, Walgreens, and CVS (due to the length of each agreement, these documents are on file with the City Clerk’s office).
3. Proposed California State-Subdivision Agreements Regarding Distribution and Use of Settlement Funds in the Teva, Allergan, Walmart, Walgreens, and CVS Settlement Agreements. (pgs. 20 - 169)
4. Resolution No. 23-071 approving and authorizing the City Manager to carry out all necessary acts such that the City can participate in the National Opioid Settlements with Teva, Allergan, Walmart, Walgreens, and CVS, including signing necessary documents and transmittal thereof as necessary. (pgs. 170 - 173)
Prepared by: City Attorney's Office and City Manager's Office