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Teva, 3 others settle Ohio opioid case for $265M, nearing global deal

Four companies cited in a lawsuit from counties in Ohio seeking blame for the ongoing opioid epidemic have settled the so-called bellwether case for a total of $265 million, attorney Hunter Shkolnik, who represents the counties, told S&P Global Market Intelligence.

Drug manufacturer Teva Pharmaceutical Industries Ltd. will pay $20 million up front and offered $25 million worth of the opioid addiction treatment Suboxone. The company is also nearing a comprehensive deal worth about $23 billion that would settle all cases being levied against it.

McKesson Corp., Cardinal Health Inc. and AmerisourceBergen Corp. will account for the remainder of the Ohio settlement.

Ohio's Cuyahoga and Summit counties argued in a trial, set to be overseen by U.S. District Court Judge Dan Polster in Cleveland, that the companies' marketing strategies contributed to the opioid epidemic, which takes the lives of about 130 people per day.

Drug distributor Henry Schein Inc. was dismissed from the Ohio case. The company said it would donate $1 million donation toward opioid educational efforts, plus $250,000 for Summit County's legal expenses.

One of the original defendants in the case, Walgreens Boots Alliance Inc., did not reach a deal by the trial's scheduled start on Oct. 21. Other pharmacy defendants are CVS Health Corp., Riteaid, Walmart Inc., Giant Eagle and Discount Drug Mart Inc. Shkolnik said in an email that Cuyahoga County will carry on with the trial in the coming months.

Other drugmakers had settled before the Oct. 21 start date: Johnson & Johnson settled the lawsuit at the beginning of October for just over $20 million. In Oklahoma in August, J&J chose not to settle an opioid trial, which culminated in a fine of $572 million, which the company is seeking to appeal.

Mallinckrodt PLC, Endo International PLC and Allergan PLC also settled with the Ohio counties prior to court proceedings. OxyContin maker Purdue Pharma LP, which filed for bankruptcy, has settled all opioid cases for up to $12 billion, though the deal is still being contested.

Global opioid deals in the works

The Oct. 21 settlement ends the case in Ohio — called "Track 1" collectively — for those making a deal, but a broader federal case remains.

Teva said it has designed a framework for a global settlement of opioid cases in which the Israeli drugmaker would donate about $23 billion worth of addiction drugs, as well as $250 million over 10 years.

The company has reached an "agreement in principle" with attorneys general from North Carolina, Pennsylvania, Tennessee and Texas, as well as "certain defendants," according to an Oct. 21 release.

Co-lead attorneys on the deal, however, told CNBC that they were "not on board with this framework," according to a tweet from the news agency.

Other talks to reach settlements to cover about 2,600 cases across the country continue, including a possible deal worth $18 billion from McKesson, Cardinal Health and AmerisourceBergen.

Teva's improved outlook

Shares of Teva initially fell in price early in the day, but were up more than 18% after the framework announcement in the afternoon, and were still up 6.87% to $8.02 per share at 3:31 p.m. ET Oct. 21.

SVB Leerink analyst Ami Fadia said in an Oct. 21 note that although Teva's Ohio settlement was higher than those before it, the timing of the deal likely led to the premium. Fadia also said the global deal could finally bring the company to closure in the opioid saga.

"The announcement of a global settlement in principle is positive news that the uncertainty around opioid litigation may be finally coming to a close," Fadia said. "While we look for more details on what aspects will need to be addressed to finalize this settlement, we are not surprised to see the stock be up on the news given that this news company press release."

The agreement could also be positive for other drugmakers in coming to their own deals with less cash payout, Fadia added.

The Ohio case showed that distributors like Cardinal Health, AmerisourceBergen and McKesson were being represented more in opioid litigation, Fadia said.

"Recall that in the Oklahoma state proceedings, only drug manufacturers were named as defendants," Fadia said. "So we believe this settlement is incrementally positive that manufacturers are being assessed in a more balanced fashion by plaintiffs in the multi-district litigation."