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Moody's: J&J, others face different effects of opioid litigation

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Moody's: J&J, others face different effects of opioid litigation

As the number of opioid lawsuits against pharmaceutical manufacturers and distributors continues to rise, the liability they will face depends on a variety of factors, Moody's said in a June 3 report.

Pharmaceutical companies like Johnson & Johnson, Allergan PLC, Teva Pharmaceutical Industries Ltd., Endo International PLC and Mallinckrodt PLC that face litigation in the U.S. for allegedly engaging in marketing practices that contributed to the ongoing opioid epidemic all face some sort of risk, as do those that distributed the pain medications, such as Cardinal Health Inc., McKesson Corp. and AmerisourceBergen Corp., the ratings agency said.

But the ability to absorb the impact of that litigation — and the massive payouts that could ensue — will depend on how much cash they have on hand, their financial leverage and their cash flow situation.

Johnson & Johnson, for instance, is likely to absorb the payouts with its high rating and conservative financial policies, Moody's said. They retain high cash levels above $15 billion.

Mallinckrodt and Endo would have a tougher time, the rating agency said, due to limited cash resources and higher financial leverage.

Teva is somewhere in the middle as it is transitioning to a company with less debt. For them and others, the timing of the opioid resolution will play an important part, Moody's said.

Private OxyContin maker Purdue Pharma LP has borne the brunt of the public's ire for supposedly spearheading the types of marketing practices that courts around the U.S. have said led to thousands of addictions and deaths. The company's settlement of a case in Oklahoma for $270 million could paint a picture of the liability, Moody's said, but is not dependable as a predictor for exposure.

Other settlements of $85 million from Teva in Oklahoma and $37 million from McKesson in West Virginia will play the same role.

"[T]he willingness of one party to settle does not predict the willingness of other parties to do the same," the rating agency said.

Johnson & Johnson was unwilling to settle in its case with Oklahoma, the trial for which began May 28. Moody's said it is likely to lead to an appeal no matter who wins the first outcome.

Another important trial, Moody's pointed out, is a multidistrict case in Ohio slated to begin in October. Allergan, Endo, Johnson & Johnson, Purdue and Teva, as well as the three distributors, are all defendants in that case, which is dubbed a "bellwether" for its purpose of testing the legal arguments on both sides.