REPORT TO COUNCIL
SUBJECT
Title
Action on Resolution Authorizing the City Manager to Execute Agreements and Other Necessary Documents for Participation in the National Prescription Opiate Litigation Settlement; Action to Authorize the City Manager to Negotiate and Execute Future Agreement(s) with the State or County for Use of Settlement Proceeds Without Further Council Action
Report
COUNCIL PILLAR
Enhance Community Engagement and Transparency
BACKGROUND
On July 21, 2021, a proposed settlement was announced to resolve lawsuits against three large pharmaceutical distributors (McKesson, AmericourceBergen, and Cardinal Health) and Janssen (including Johnson & Johnson) (“Settlement Agreements”). Under the Settlement Agreements, the three large Distributors could pay up to $21 billion and Janssen could pay up to $5 billion to eligible counties and cities to resolve lawsuits nationwide.
The settlement arose out of litigation brought in Ohio by states and cities against pharmaceutical distributors and opioid manufacturers. The 3,800 litigants argued that the distributors and Janssen contributed to the national opioid crisis by ignoring signs of opioid addiction and overselling opioids.
California’s share of the $26 billion is approximately $2.263 billion if all eligible counties and cities in California participate. The Distributor payments are spread over 18 years and the Janssen payments are spread over no more than nine years.
The state was tasked with developing a way to distribute the funds to cities and counties through an interstate allocation deal. Based on the interstate allocation agreements 15% of settlement funds will go to the State of California, 70% is reserved as future abatement funds (“Abatement Fund”) allocated among all 431 eligible counties and cities that participate, and 15% is further allocated to only the eligible counties and cities that filed a lawsuit.
Counties and cities that receive money from the 70% abatement fund must spend the funds only on eligible abatement activities and expenditures, which are listed in Exhibit E of the Distributor and Janssen agreements (Attachment 4 & 5). Additionally, in California, 50% of the funds must be spend on High Impact Activities, which are listed in the Distributor and Janssen Subdivision agreements (Attachment 6 & 7) (“Subdivision Agreements”). Most of the abatement activities involve changes to medical treatment and prescriptions, counseling services, recovery services, supportive housing, etc., which are not services directly provided by the City of Santa Clara. Therefore, it is likely that the City will, in the future, like most other eligible cities in the County, assign its portion of the settlement proceeds to the State or the County such that the funds may be used for the appropriate purposes.
If an eligible county or city does not participate in the settlement it could reduce the overall amount that all California counties and cities will receive, so it is in the collective best interest of all the eligible public entities to participate in the settlement
Eligible counties and cities have until January 2, 2022 to sign and return the participation forms effectuating the entities’ agreement. More information can be found and should be reviewed at www.nationalopioidsettlement.com <http://www.nationalopioidsettlement.com>
DISCUSSION
Despite not participating in the litigation against the opioid distributors and manufacturers, the City is eligible to receive payments through the proposed settlement. In Santa Clara County, only the County and the City of San Jose participated in the litigation. If the City accepts the settlement, it must release its claims against the opioid distributors and manufacturers and, in exchange, the City will receive funds that may be used to combat opioid abuse.
Counties and cities receiving funds must meet reporting requirements under the settlement agreements and the state-subdivision agreements, including annual reports to the California Department of Health Care Services, describing the expenditures. If the City chooses to assign its portion to the State or the County, the reporting obligation would likewise be transferred to the assignee entity.
Under the Subdivision Agreements, the City of Santa Clara would receive 0.067% of Abatement Funds for a weighted total of 0.0549723%. Assuming all 431 eligible counties and cities join both the Distributor and Janssen offers, the City may receive up to $1,057,851 over 18 years. The amount received would decrease if fewer eligible entities participated in the settlement.
Funds received through the Abatement Fund must be spent on eligible abatement activities and expenditures, which are listed in Exhibit E of the Settlement Agreements. At least 50% of the funds received each year must be used for the following high impact abatement activities:
(1) The provision of matching funds or operating costs for substance use disorder facilities within the Behavioral Health Continuum Infrastructure Program;
(2) Creating new or expanded Substance Use Disorder (SUD) treatment infrastructure;
(3) Addressing the needs of communities of color and vulnerable populations that are disproportionately impacted by SUD;
(4) Diversion of people from the justice system into treatment, including by providing training and resources to first responders and implementing best practices for outreach, diversion and deflection, employability, restorative justice, and harm reduction; and/or
(5) Interventions to prevent drug addiction in vulnerable youth.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
If the City participates in the Opioid settlement deal, up to $1,057,851 may be received over an 18-year period to help treat opioid addiction. The total amount that the City would actually receive depends on how many eligible cities and counties participate in the settlement deal.
COORDINATION
This report was coordinated between the City Attorney’s Office and City Manager’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Adopt a Resolution Authorizing the City Manager to Execute Agreements and Other Necessary Documents for Participation in the National Prescription Opiate Litigation Settlement; and
2. Authorize the City Manager to Negotiate and Execute Future Agreement(s) with the State or County for Use of Settlement Proceeds Without Further Council Action.
Staff
Reviewed by: Sujata Reuter, Chief Assistant City Attorney
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Resolution
2. Distributor Settlement Participation Form
3. Janssen Settlement Participation Form
4. Proposed Distributor Settlement Agreement
5. Proposed Janssen Settlement Agreement
6. California Subdivision Agreement - Distributors
7. California Subdivision Agreement - Janssen