TheChek News Flow

Higher settlement demand comes as trial dates in Ohio and West Virginia add urgency to talks

States are asking for around $26.4 billion from major pharmaceutical industry players to help pay for damage wrought by the opioid crisis, people familiar with the matter said, the latest demand in yearslong litigation seeking to hold companies accountable for widespread drug addiction.

The current talks involve McKesson Corp., AmerisourceBergen Corp. and Cardinal Health Inc., which collectively distribute the majority of pharmaceutical drugs in the country, as well as Johnson & Johnson, which makes some opioid painkillers, the people said.

More than 3,000 states, local governments and Native American tribes have sued companies up and down the pharmaceutical supply chain, blaming them for contributing to an influx of opioids into their communities.

The distributors in particular have come under scrutiny for allegedly failing to flag suspicious orders that were diverted for improper uses. The companies have denied the allegations in the lawsuits, though some have reached settlements with the Justice Department in recent decades over faulty order-monitoring programs.

One case so far has gone to trial, resulting in a $465 million verdict against Johnson & Johnson in Oklahoma. Others have resulted in smaller settlements, but the majority of the cases are unresolved. The litigation drove one company, OxyContin maker Purdue Pharma LP, into bankruptcy, and shareholders have looked for the remaining defendants to reach deals to cap their liability.

Meanwhile, many communities continue to grapple with opioid overdoses and have faced challenges during the coronavirus pandemic to treat those who are addicted.

Settlement discussions with the four companies have been under way for a year but stalled during the onset of the pandemic. The delay of a major trial slated to take place in March in New York eliminated what was expected to be a pressure point on settlement talks.

A new round of trial dates, including ones in October in Ohio and West Virginia, are once again ramping up a sense of urgency to resolve the cases, those involved in the talks say.

Around a dozen attorneys general, including those from Florida, Delaware and North Carolina, made their latest settlement demand on a Monday call with the drug companies, the people familiar with the request said. The ask includes a collective $21.14 billion from McKesson, AmerisourceBergen and Cardinal, and $5.28 billion from Johnson & Johnson, one of the people said. The majority of the money would be slated for abating the crisis, with $2.42 billion going to fees and expenses, the person said.

Johnson & Johnson reiterated a prior statement that the company is working toward a resolution that will “provide certainty for involved parties and critical assistance for families and communities in need.”

Cardinal, AmerisourceBergen and McKesson declined to comment.

Attorney fees have been one sticking point in resolving the cases, and the current proposal includes money for both private lawyers that have been hired by states and local municipalities, as well as money to reimburse states that staffed their own cases, the people said.

At least 400,000 people have died in the U.S. from overdoses of legal and illegal opioids since 1999, according to federal data. The lawsuits are seeking to recoup costs borne by communities such as burdens on emergency services, medical care and foster services for children born to addicted parents.

Settlement discussions last October centered around the three distributors paying $18 billion over 18 years, and Johnson & Johnson contributing $4 billion. Those talks were spearheaded by Tennessee, North Carolina, Texas and Pennsylvania, but many states wanted more money from the companies.

As some states and lawyers focus on settlement talks, others continue to pursue lawsuits. Alaska recently sought court permission to update its complaint to name McKesson’s former chairman and several members of its board of directors. Using emails and internal documents turned over by McKesson as part of the sprawling litigation, Alaska alleges the board members failed to improve McKesson’s compliance programs in the wake of a 2008 settlement with federal prosecutors that found McKesson allowed controlled substances to flow to pharmacies that sold drugs online to customers without legal prescriptions.

Another drugmaker involved in earlier settlement proposals, Teva Pharmaceutical Industries, wasn’t involved in Monday’s call, the people familiar with the discussions said. Teva Chief Executive Kare Schultz said earlier this month he had pinned his hopes on a deal going through before the New York trial in March but that talks continue. “Unless we have that time pressure, it probably won’t get finalized,” he said in an interview with The Wall Street Journal.

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A deep-pocketed venture-capital firm run by Jared Kushner’s brother watched some of its tech startups rake in millions of dollars in federal coronavirus relief loans — despite the fact that it urged them not to take the cash, The Post has learned.

Five tech firms backed by Thrive Capital — whose 35-year-old, Harvard-educated founder Joshua Kushner is married to supermodel Karlie Kloss, and who runs the firm out of the landmark Puck Building in Manhattan’s trendy SoHo neighborhood — have snagged at least $2.8 million from the Trump administration’s Paycheck Protection Program, federal data show.

Among them are payments processor Dwolla, which has raised more than $51 million in private funding, including a $16.5 million round that Thrive backed in 2013; and Welkin Health, a software startup that’s received $29 million from private investors, including $1.5 million in seed funding and two other investments from Thrive. Dwolla and Welkin each snagged loans worth between $1 million and $2 million in April, according to federal records.

That’s despite the fact that Thrive — whose other investments include Oscar Health, ClassPass, Instacart and Robinhood — strongly warned against taking PPP funds in an April 7 email to portfolio companies that asked for advice about the loans. Among other concerns, Thrive executives warned that well-heeled startups could crowd out mom-and-pop businesses in danger of folding during the pandemic.

“The PPP loans are intended, first and foremost, for the smallest, most vulnerable businesses in our communities — the corner deli, bakery, or dry cleaner that has had to or will soon lay off its entire workforce and is on the precipice of going out of business entirely,” Thrive wrote in the email obtained by The Post. “These loans are less obviously for the startup with a host of institutional investors and several years of cash in the bank, looking to extend runway.”

Thrive executives likewise warned in the letter about “a potential backlash against those venture-backed companies who are genuinely struggling … Indeed, we are already seeing hints of this backlash in recent media reports.”

Three days earlier, a partner at Union Square Ventures had published a blog post advising venture-backed firms “with a lot of money in the bank and limited COVID19 impact to think twice about applying for PPP.”

A source close to Thrive said companies that took PPP money represent less than 1 percent of the firm’s investments so far.

“We stand by the opinion we gave to our portfolio companies who reached out that PPP loans were intended first and foremost for the smallest, most vulnerable businesses in our communities,” Thrive spokesman Jesse Derris told The Post.

Dwolla, however, never got Thrive’s letter because it never asked for the firm’s advice on PPP to begin with, Thrive said. Ditto for Imbellus, a standardized test developer that won at least $350,000; and Long Game Savings, a personal finance app that was approved for at least $150,000, federal data show.

Dwolla and Imbellus didn’t respond to requests for comment. But San Francisco-based Long Game confirmed it did not consult Thrive on its loan application because the fund does not sit on its board.

Welkin Health, meanwhile, was among the recipients of Thrive’s letter. It nevertheless cashed in on its $1 million-plus PPP loan a few weeks later in late April. Thrive said it also warned Morty, an online mortgage marketplace that got Thrive funding in 2017 and 2019 but went on to grab a PPP loan worth $350,000 to $1 million, according to Small Business Administration data.

Welkin didn’t respond to a request for comment. But Morty said it “carefully reviewed” the program’s guidelines and intent before applying for the money. The loan “allowed us to continue providing home ownership solutions to Americans during this challenging time,” a Morty spokesperson told The Post.

Critics say the feds made it too easy for venture-backed firms to take advantage of a $659 billion relief program that failed to reach many Main Street merchants.

“The program wasn’t there to benefit entities that had access to other capital,” Liz Hempowicz, director of public policy at the nonpartisan Project on Government Oversight, told The Post. “The well-banked, the well-lawyered and the politically well-connected did benefit from this program in a way that absolutely undermined the effectiveness of this program for those smaller businesses.”

Government watchdog group Accountable.US claimed that the fact that the startups snagged funds showed that the Trump administration managed to “pervert a program meant for struggling small businesses into another vehicle for enriching the wealthy and well-connected.”

Noting Joshua Kushner’s family ties, the handouts to startups “just happened to work to the benefit of people connected to the White House in more ways than one,” Accountable.US President Kyle Herrig told The Post.

Still, the Kushner-led venture firm’s correspondence with its startups shows it was concerned about the fallout early in the process.

“For those companies that are truly struggling and remain intent on pursuing a PPP loan, we would ask that you reach out to us directly,” Thrive executives wrote. “ Please know that now more than ever, we are here to help you and your teams in any way we can.”

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