MEETING DATE:
December 14, 2021
SUBJECT:
Title
RESOLUTION NO. 2021-8957 AUTHORIZING THE CITY MANAGER OR DESIGNEE TO EXECUTE AND SUBMIT THE OPIOID SETTLEMENT PARTICIPATION FORMS FOR THE PROPOSED CALIFORNIA STATE-SUBDIVISION AGREEMENTS REGARDING DISTRIBUTION AND USE OF SETTLEMENT FUNDS FOR THE JANSSEN SETTLEMENT AND THE DISTRIBUTORS SETTLEMENT
Body
Recommendation
Recommendation
ADOPT resolution authorizing the City Manager or designee to execute and submit the Opioid Settlement Participation Forms for the proposed California State-Subdivision Agreements Regarding Distribution and Use of Settlement Funds for the Janssen Settlement and the Distributors Settlement
Body
Board or Commission Action
Relevant Council Strategic Theme
Planning for the Future
Good Governance
Relevant Department Goal
Not applicable
Executive Summary
California has joined other government agencies across the United States that have agreed to pending Opioid Settlements with Janssen and with Cardinal, McKesson, and AmerisourceBergen (Distributors) relating to the opioid epidemic. To be able to participate in any settlement, the City of San Marcos must execute and submit two Settlement Participation Forms. The City must submit these forms by January 2, 2022 in order to be a Participating Subdivision in the settlements and, pending final acceptance by all parties of the settlements, receive Settlement Funds.
Discussion
On July 1, 2021, California Attorney General Rob Bonta announced settlements to resolve claims made by 4,000 state and local governments across the country in federal and state courts against Janssen, a company that manufactured and marketed opioids, and Cardinal, McKesson, and AmerisourceBergen - the nation’s three major pharmaceutical distributors. If approved, the settlements would resolve litigations over the companies’ role in creating and fueling the opioid epidemic.
Following the July 1, 2021 announcement, states and local governments were given the opportunity to join on as participants in the settlement. Local governments have until January 2, 2022 to submit the Settlement Participation Form for the Janssen Settlement (Attachment B) and submit the Settlement Participation Form for the Distributor Settlement (Attachment C).
The financial terms of the settlements are that the three distributors will collectively pay up to $21 billion over 18 years and Janssen will pay up to $5 billion over nine years. The substantial majority of the money is to be spent on opioid treatment and prevention and each state and subdivisions share of the funding has been determined by agreement among the states using a formula that considers the impact of the opioid crisis on the state. As part of the proposed settlement, California stands to receive a maximum of nearly $2.34 billion if all California local governments sign on.
If all states and subdivisions sign on to participate in the settlement, the City of San Marcos would receive a maximum amount of $1.4 million over 18 years beginning as early as April of 2022. Janssen would pay its portion of the settlements (a maximum of $5 billion nationally) in the first nine of the eighteen years. The Distributors would pay their portion of the settlements (a maximum of $21 billion nationally) throughout the eighteen years. Because of these terms, payments to the City in the first nine years would be higher (a maximum estimate of $92,000 annually) than the latter nine years (a maximum estimate of $63,555 annually).
The City would be required to expend or allocate the money according to the agreed to Exhibit E of the two settlement agreements, the List of Opioid Remediation Uses (Attachment D) within five years of receipt. The List of Opioid Remediation Uses includes, but is not limited to, efforts to provide support to people in treatment and recovery, prevent deaths among those suffering from opioid addiction, prevent the misuse of opioids, as well as educate law enforcement and other first responders on appropriate practices and precautions to take when dealing with opioids. Additionally, no less than 50% of the funds received by participating subdivisions from the settlements must be used for one or more of the following High Impact Activities identified in the settlements:
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. (3) addressing the needs of communities of color and vulnerable populations (including sheltered and unsheltered homeless populations) that are disproportionately impacted by SUD;
4. Diversion of people with SUD from the justice system into treatment, including by providing training and resources to first and early responders (sworn and non-sworn) 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.
The settlement also includes injunctive relief terms designed to prevent recurrence of another substance abuse crisis from occurring. It will result in court orders requiring the distributors to, for a period of ten years, establish a clearing house to aggregate data and analytics on where drugs are going and how often, use data-driven systems to detect suspicious opioid orders from customer pharmacies, terminate customer pharmacies ability to receive shipments when they show certain signs of drug diversion, report and prohibit shipping of suspicious opioid orders, prohibit sales staff from influencing decisions related to identifying suspicious opioid orders, and require senior corporate officials to engage in regular oversight of anti-diversion efforts.
The settlement also will result in court orders requiring that, for ten years, Janssen stop selling opioids. Janssen will also be prohibited from funding or providing grants to third parties promoting opioids and from lobbying on activities related to opioids, and it will be required to share clinical trial data with the Yale University Open Data Access Project.
Environmental Review
Not applicable.
Fiscal Impact
Pending final acceptance of the settlements by all parties, the City would receive an estimated maximum amount of $1,400,000 over the course of 18 years with payments beginning as early as April of 2022. The payments in the first nine years are estimated at $92,000, and the payments for years 10 through 18 are estimated at $63,555 for an average of approximately $77,777 per year. Pending participation of subdivisions (cities and counties) in the settlement, these amounts could be less. Due to the nature of the terms of the settlement, an Opioid Abatement Fund would be created to demonstrate the allocation and expenditure of these funds according to the terms of the settlements, and would be brought back to City Council at a later meeting for final allocation.
Attachment(s)
Attachment A - Resolution Authorizing Execution and Submission of Settlement Participation Forms
Attachment B - Settlement Participation Form - Janssen Settlement
Attachment C - Settlement Participation Form - Distributor Settlement
Attachment D - List of Opioid Remediation Uses - Exhibit E of the Settlements
Prepared by: Sean Harris, Management Analyst
Approved by: Jack Griffin, City Manager