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Drug distributors, J&J agree to $24 billion deal to help cities, states address the opioid crisis

McKesson Corporation's headquarters in San Francisco. After two years of wrangling, the country's three major drug distributors and a pharmaceutical giant reached a $26 billion deal with states that would release some of the biggest companies in the industry from all legal liability in the opioid epidemic.Anastasiia Sapon/NYT

After two years of wrangling, the country’s three major drug distributors and Johnson & Johnson have reached a $26 billion deal with states that would release some of the biggest companies in the industry from all legal liability in the opioid epidemic, a decades-long public health crisis that has killed hundreds of thousands of Americans.

The announcement, made Wednesday by a bipartisan group of state attorneys general, had been widely expected.

The offer will now go out to every state and municipality in the country for approval. If enough of them formally sign on to it, billions of dollars from the companies could begin to be released to help communities pay for addiction treatment and prevention services and other steep financial costs of the epidemic.

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Massachusetts was one of 14 states participating in the negotiations and will receive more than $500 million in the settlement, the office of Attorney General Maura Healey said Wednesday.

“I promised the people of Massachusetts that the opioid crisis would be a top priority, that we would hold the bad actors accountable, and that the billion-dollar companies who got rich off the suffering in our communities would pay,” Healey said in a statement. “Today’s announcement is another step forward in that work. This money will benefit every city and town in every part of our state.”

With the formal announcement of the settlement, some public health experts are calling on the governments to spend the money exclusively on programs to abate the opioid crisis. They cite the 1998 agreement with tobacco companies as a cautionary tale of misplaced government spending and missed opportunities for saving more lives.

Mere fractions of the $200 billion-plus tobacco settlement have gone toward preventing smoking and helping people quit in many states. Instead, much of the money has helped to balance state budgets, lay fiber-optic cable, and repair roads.

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And while the settlement was a success in many ways — smoking rates have dropped significantly — cigarettes are still blamed for more than 480,000 American deaths a year.

“We saw a lot of those dollars being spent in ways that didn’t help the population that had been harmed by tobacco,” said Bradley D. Stein, director of the RAND Corporation’s Opioid Policy Center. “And I think it’s critical that the opioid settlement dollars are spent wisely.”

Healey plans to sign onto the settlement by Aug. 20 and vowed to use the intervening days to establish a framework to spend the money directly on harm reduction, drug treatment, and prevention, to hear from families affected by the opioid crisis, and to ensure the funds reach every community in the state, her office said.

Lawyers for states and local governments and the companies on Wednesday said there are provisions to make sure the money is used as intended.

The deal calls for the drug maker Johnson & Johnson to pay up to $5 billion. Distributors AmerisourceBergen and Cardinal Health are each to contribute $6.4 billion. McKesson is to pay $7.9 billion.

Nearly $2 billion of the funds would be reserved for private lawyers who were hired by governments to work on their suits against the industry. State attorney general offices could also keep some of the money.

Local governments will have five months to sign on. Each company will decide whether enough jurisdictions agree to the deal to move ahead with it. The more governments sign on, the more the companies will pay.

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Not every state is ready to agree. Washington state Attorney General Bob Ferguson said he would reject the deal as “insufficient” and move ahead with a trial on claims against the distributors scheduled to start in September.

Connecticut Attorney General William Tong said it would be the second-biggest cash settlement of its kind in US history behind the tobacco deal in the 1990s.

Grant Woods, a former Arizona attorney general who’s been involved in both the tobacco and opioid lawsuits, said the difference this time is that “everybody wants this money to go toward opioids and abatement around the country”

Nonetheless, a group of advocacy organizations, public health experts, and others are pushing for governments to sign on to a set of principles for how settlement money should be used. They include establishing a dedicated fund for combating the epidemic with the settlement money and making sure that it doesn’t just replace other funding streams in the budget.

The group has pointed out that many state and local governments have already made cuts to substance use and behavioral health programs because of economic downturn wrought by the coronavirus pandemic. And government officials may be tempted to fill holes in budgets with the money.

Joshua Sharfstein, a vice dean at the Johns Hopkins Bloomberg School of Public Health, said it’s crucial that the money is spent to combat the opioid scourge because the overdose epidemic is raging.

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Last year, there were a record 93,000 fatal overdoses from all drugs in the nation. The majority of them involved fentanyl, a potent synthetic opioid that has medical uses but is also produced illicitly. Prescription drugs and illegal ones like heroin and fentanyl have been linked to more than 500,000 deaths since 2000.

“Everybody is both excited and a little worried,” Sharfstein said of the expected funds, “a little worried that they may be squandered.”

Paul Geller, a lawyer representing local governments, said the structure of the settlement ensures the money will be used as intended.

“It won’t be used to fill potholes or build libraries or balance budgets,” Geller said.

Those are the kind of things that a significant portion of the tobacco settlement money has been spent on, according to the Campaign for Tobacco-Free Kids, which tracks the money.

Campaign president Matthew L. Myers said the tobacco settlement is “one of the greatest missed public health opportunities of our lifetime.”

“We would have saved massively more lives,” he said if more money was spent on cessation and prevention.

Wednesday’s agreement is likely to be the biggest group of settlements, but other companies, including OxyContin maker Purdue Pharma, generic drug maker Mallinckrodt, and the consulting firm McKinsey have all reached or nearly reached national settlements over opioids, too. Some drug makers, smaller distributors, and pharmacy companies are still being sued by thousands of government entities.

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Globe correspondent Jeremy Fox contributed to this report. Material from the Associated Press and New York Times was also used.