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 spen...
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