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HomeMy WebLinkAboutE-10 Staff Report - 2022 National Opioid SettlementsCONSENT ITEM E-10 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: TALIKA M. JOHNSON, DIRECTOR ADMINISTRATIVE SERVICES DATE: MARCH 20, 2023 SUBJECT: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA CALIFORNIA AUTHORIZING THE CITY MANAGER TO ENTER INTO THE SETTLEMENT AGREEMENTS WITH WALGREENS CO., WALMART, INC., CVS HEALTH CORPORATION/CVS PHARMACY INC., TEVA PHARMACEUTICAL INDUSTRIALS LTD., AND ALLERGAN FINANCE LLC/ALLERGAN LIMITED, AGREE TO THE TERMS OF THE STATE-SUBDIVISION AGREEMENTS, AND AUTHORIZE ENTRY INTO THE STATE-SUBDIVISION AGREEMENTS WITH THE ATTORNEY GENERAL EXECUTIVE SUMMARY: Last year, litigation brought by states and cities across the United States against the three largest pharmaceutical distributors of opioid painkillers, Amerisource Bergen, Cardinal Health, and McKesson (the “Distributors”), and the opioid painkiller manufacturer, Janssen (owned by Johnson & Johnson) (“J&J”), resulted in two proposed settlements totaling approximately $26 billion dollars. The City has previously opted into the Distributors and the J&J Settlements and has started receiving payments. Between November and December 2022, five additional parties (the “New Parties”) have entered into National Opioid Settlements with terms identical to the Distributors/J&J Settlements. The City can opt into these new settlements, thereby releasing its claims against the new, in order to receive at most $319,000.00 paid out over a period of 15 years. The funds are restricted to certain opioid abatement/remediation uses. The City can either allow the funds to be used by the County of Los Angeles or elect to use the funds itself subject to reporting requirements to the state. Alternatively, the City can take no action, thereby opting out of the settlements, while maintaining its right to pursue litigation against the New Parties. Approved City Council March 20, 2023 Resolution Opting City into 2022 National Opioid Settlements March 20, 2023 Page 2 RECOMMENDATIONS: Staff recommends the City Council take the following actions: 1) Adopt Resolution No. 2023-C14, authorizing the City Manager to enter into the Settlement Agreements. 2) Opt into settlement agreement with opioid distributor, Walgreens Co., and direct the City Manager to execute any documents necessary to implement the action. 3) Opt into settlement agreement with opioid distributor, Walmart, Inc. and direct the City Manager to execute any documents necessary to implement the action. 4) Opt into settlement agreement with opioid distributor, CVS Health Corporation/CVS Pharmacy, Inc. and direct the City Manager to execute any documents necessary to implement the action. 5) Opt into settlement agreement with opioid manufacturer, Teva Pharmaceutical Industries Ltd., and direct the City Manager to execute any documents necessary to implement the action. 6) Opt into settlement agreement with opioid manufacturer, Allergan Finance, LLC/Allergan Limited and direct the City Manager to execute any documents necessary to implement the action. BACKGROUND: A. Allocation of Funds Additional litigation brought by states and cities across the United States against the New Parties has resulted in a proposed settlement totaling approximately $20.2 billion dollars. The proposed settlement is broken into five separate deals: (1) the Walgreens Settlement (Exhibit A); (2) the Walmart Settlement (Exhibit B); (3) the CVS Settlement (Exhibit C); (4) the Teva Settlement (Exhibit D); and the Allergan Settlement (Exhibit E). The estimated total nationwide payout and payment schedule are outlined below: Defendant Estimated Max Payout (100% Participation) Years Walgreens $5,522,528,766 15 years Walmart $3,011,242,061 Primarily paid within 3 years, but if participation levels are not met until later, payment can extend over 6 years CVS $5,002,083,578 10 years Teva $4,246,567,371.76 6 years Allergan $2,372,972,184.12 7 years Resolution Opting City into 2022 National Opioid Settlements March 20, 2023 Page 2 Of the amounts above, California is to receive approximately $1.8 billion and is to distribute these funds pursuant to intrastate allocation agreements for the new settlements. As outlined in the Intrastate Allocation Agreements, Settlement Fund payments due to the State of California are allocated as follows: 15% to the State Fund; 70% to the California Abatement Accounts Fund; and 15% to the California Subdivision Fund. This results in the State receiving 15% of the payments allocated to California and local subdivisions receiving the remaining 85%. The percentages paid out to the California Subdivision Fund is reserved or entities that participated in the litigation of the claims giving rise to the settlement agreements. The percentages paid out to local subdivisions that did not litigate, but choose to opt into the settlements comes from the share of the settlement proceeds that are placed in the California Abatement Accounts Fund. Essentially, this means that the City of Azusa, if it chooses to opt into the settlement, is entitled receive a percentage share from the California Abatement Accounts Fund. The City of Azusa has been allocated 0.026% of the 70% of the approximate $1,800,000,000 (i.e., best case scenario), which is equal to $319,000.00. This total amount will be disbursed over a period of 15 years, with payments decreasing as each settlement finishes paying out. The first payments are scheduled to occur in the latter half of 2023. After the receipt of these initial payments, further payments will be received annually thereafter. As stated above, the definite amount is not yet known because of the bonus structure built into the agreements. The default distribution of funds in the settlement agreements provides that the funds will go directly to the county in which a city is located. A city can elect to have its funds delivered directly to the city by providing notice in the settlement agreements. Additionally, a city within a county may opt in or out of direct payment at any time, and it may also elect direct payment of only a portion of its share, with the remainder going to the county, by providing notice to the settlement fund administrators at least sixty days prior to a payment date. In deciding whether to allow a city’s funds to go directly to the county in which a city is located, a city should consider the following: (1) whether the amount of money is substantial enough for the city to handle it on its own; (2) whether the city offers the services and has the employees to spend the money in accordance with its prescribed uses; and (3) whether the city wants to engage in the reporting requirements over the course of the next nineteen years (eighteen years of distribution and an additional year following final distribution). B. Use of Received Funds Similar to the Distributor and J&J Settlements, funds received from these additional settlements must be used for future opioid remediation or abatement. For instance, participating subdivisions may use funds for areas such as services to treat opioid use disorder; support people in treatment and recovery; connect people to care; address needs of criminal justice-involved persons; address the needs of pregnant or parenting women and their families, including babies with neonatal abstinence syndrome; prevent over-prescribing and ensure appropriate prescribing and dispensing of opioids; prevent misuse of opioids; prevent overdose deaths and other harms; provide leadership, planning, and coordination of programs; provide training; and conduct research. The Intrastate Allocation Agreements (Exhibit F) also provide spending limitations in addition to those provided in the settlement agreements. Under the Intrastate Allocation Agreements, no less than 50% of Resolution Opting City into 2022 National Opioid Settlements March 20, 2023 Page 2 the funds received in each calendar year will be used for one or more of the following High Impact Abatement Activities: (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) 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. In addition to these requirements, there is also a time limit on the spending of received funds. If funds are not expended or encumbered within five years of receipt and in accordance with the settlement agreements and the Intrastate Allocation Agreements, the funds are required to be transferred back to the State. C. Management of Funds Each county and city that receives payment of funds from the settlements must prepare written reports at least annually regarding the use of those funds until the funds are fully expended and for one year thereafter. Each county and city will need to track all deposits and expenditures. These reports will also include a certification that all funds received have been used in compliance with the allocation agreements. The California Department of Healthcare and Services (“DHCS”) may review these reports in order to determine compliance with the settlement agreements and the Intrastate Allocation Agreement. If the DHCS determines that a participating subdivision’s use of abatement funds is inconsistent with the settlement agreements or Intrastate Allocation Agreements, the parties are required to meet and confer. If the meet and confer process does not provide a resolution, the DHCS may conduct an audit, which can lead to a court action if the matter is still not resolved after an audit. D. Opting In The City must opt into the settlements by April 18, 2023, which requires the City to release its claims against the New Parties. If the City takes no action, it will have opted out of the settlements and its designated funds will flow to the State. The City would still have the opportunity to bring its own action against the New Parties. Resolution Opting City into 2022 National Opioid Settlements March 20, 2023 Page 2 CONCLUSION: Unless the City intends to pursue its own litigation against these parties, it is recommended that the City opt into the settlement and elect to receive payments directly. FISCAL IMPACT: This action will have a positive fiscal impact by providing roughly $319,000.00 in additional funding to address opioid abatement. Staff will not budget these funds until more information is available containing timing of receipt and allocation amounts by administrator/company. Upon receipt, revenues will be credited to these accounts: ADMINISTRATORS/COMPANIES GL ACCOUNT# Rubris-TEVA 28-90-800-002-4899 Rubris-Allergan 28-90-800-003-4899 Rubris-Walmart 28-90-800-004-4899 Rubris-Walgreen 28-90-800-005-4899 Rubris-CVS 28-90-800-006-4899 Prepared by: Reviewed and Approved: Marco Martinez Sergio Gonzalez City Attorney City Manager Attachments: 1) Resolution No. 2023-C17 2) Exhibit A – Walgreens Settlement Agreement 3) Exhibit B – Walmart Settlement Agreement 4) Exhibit C – CVS Settlement Agreement 5) Exhibit D – Teva Settlement Agreement 6)Exhibit E – Allergan Settlement Agreement 7) Exhibit F – Sample CA Allocation Agreement 8) Exhibit G – Sample Participation Agreement 45635.01000\41094703.1 1 RESOLUTION NO. 2023-C17 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA CALIFORNIA AUTHORIZING THE CITY MANAGER TO ENTER INTO THE SETTLEMENT AGREEMENTS WITH WALGREENS CO., WALMART, INC., CVS HEALTH CORPORATION/CVS PHARMACY INC., TEVA PHARMACEUTICAL INDUSTRIALS LTD., AND ALLERGAN FINANCE LLC/ALLERGAN LIMITED, AGREE TO THE TERMS OF THE STATE-SUBDIVISION AGREEMENTS, AND AUTHORIZE ENTRY INTO THE STATE-SUBDIVISION AGREEMENTS WITH THE ATTORNEY GENERAL WHEREAS, the United States is facing an ongoing public health crisis of opioid abuse, addiction, overdose, and death, forcing the State of California and California counties and cities to spend billions of dollars each year to address the direct consequences of this crisis; and, WHEREAS, pending in the U.S. District Court for the Northern District of Ohio is a multidistrict litigation (“MDL”) being pursued by numerous public entity plaintiffs against the manufacturers and distributors of various opioids based on the allegation that the defendants’ unlawful conduct caused the opioid epidemic; and, WHEREAS on or about November 14, 2022, a proposed nationwide tentative settlement was reached between the plaintiffs in the MDL and Walmart Inc. (“Walmart”); and, WHEREAS on or about November 22, 2022, a proposed nationwide tentative settlement was reached between the plaintiffs in the MDL and Teva Pharmaceutical Industries Ltd. and all of its respective past and present direct or indirect parents, subsidiaries, divisions, affiliates, joint ventures, predecessors, successors, assigns, including but not limited to Teva Pharmaceuticals USA, Inc., Actavis LLC (f/k/a Actavis Inc.), Actavis Elizabeth LLC, Actavis Kadian LLC, Actavis Pharma, Inc. (f/k/a Watson Pharma, Inc.), Actavis Kadian LLC, Actavis Laboratories UT, Inc. (f/k/a Watson Laboratories, Inc. – Utah), Actavis Mid Atlantic LLC, Actavis Totowa LLC, Actavis Laboratories FL, Inc. (f/k/a Watson Laboratories, Inc. – Florida), Actavis South Atlantic LLC, Warner Chilcott Company LLC, and Watson Laboratories, Inc., and Anda Inc. (collectively, “Teva”); and, WHEREAS on or about November 22, 2022, a proposed nationwide tentative settlement was reached between the plaintiffs in the MDL and Allergan Finance, LLC (f/k/a Actavis, Inc., which in turn was f/k/a Watson Pharmaceutics, Inc.) and Allergan Limited (f/k/a Allergan plc, which, in turn, was f/k/a Actavis plc)(collectively, “Allergan”); and, WHEREAS, on or about December 9, 2022, a proposed nationwide tentative settlement was reached between the plaintiffs in the MDL and CVS Health Corporation and CVS Pharmacy, Inc. and all of their past and present direct and indirect parent and subsidiaries (collectively, “CVS”); and, Attachment 1 45635.01000\41094703.1 2 WHEREAS, on or about December 9, 2022, a proposed nationwide tentative settlement was reached between the plaintiffs in the MDL and Walgreen Co. (“Walgreens”); and, WHEREAS, CVS, Teva, Walgreens, Walmart, and Allergan shall be referred in this Resolution as “Settling Defendants”; and WHEREAS, as part of the settlements with the Settling Defendants, local subdivisions, including certain cities, that are not plaintiffs in the MDL may participate in the settlements in exchange for a release of the Settling Defendants; and, WHEREAS, copies of the proposed terms of those proposed nationwide settlements have been set forth in the Master Settlement Agreements with the Settling Defendants; and, WHEREAS, copies of the Master Settlement Agreements have been provided to the City Council with this Resolution; and, WHEREAS, the Settlement Agreements provide, among other things, for the payment of a certain sum to settling government entities in California including to the State of California and Participating Subdivisions upon occurrence of certain events as defined in the Settlement Agreements (“California Opioid Funds”); and, WHEREAS, California local governments in the MDL have engaged in extensive discussions with the State Attorney General’s Office (“AGO”) as to how the California Opioid Funds will be allocated, which has resulted in the Proposed California State-Subdivision Agreements Regarding Distribution and Use of Settlement Funds (“Allocation Agreements”) from the settlements with the Settling Defendants; and, WHEREAS, copies of the Allocation Agreements for all of the settlements with the Settling Defendants have been provided with this Resolution; and, WHEREAS, the Allocation Agreements allocate the California Opioid Funds as follows: 15% to the State Fund; 70% to the Abatement Accounts Fund; and 15% to the Subdivision Fund. For the avoidance of doubt, all funds allocated to California from the Settlements shall be combined pursuant to the Allocation Agreements, and 15% of total from each settlement shall be allocated to the State of California (the “State of California Allocation”), 70% to the California Abatement Accounts Fund (“CA Abatement Accounts Fund”), and 15% to the California Subdivision Fund (“CA Subdivision Fund”); and, WHEREAS, under the Master Settlement Agreements, certain local subdivisions that did not file a lawsuit against the Settlement Defendants may qualify to participate in the settlements and obtain funds from the Abatement Account Fund; and, WHEREAS, the City is eligible to participate in the Settlement and become a CA Participating Subdivision; and, 45635.01000\41094703.1 3 WHEREAS, the funds in the CA Abatement Accounts Fund (the 70% allocation) will be allocated based on the allocation model developed in connection with the proposed negotiating class in the National Prescription Opiate Litigation (MDL No. 2804), as adjusted to reflect only those cities and counties that are eligible, based on population or litigation status, to become a CA Participating Subdivision (those above 10,000 in population). The percentage from the CA Abatement Accounts Fund allocated to each CA Participating Subdivision is set forth in Appendix 1 to the Allocation Agreements and provided to the City Council with this Resolution. The City’s share of the CA Abatement Accounts Fund will be a product of the total in the CA Abatement Accounts Fund multiplied by the City’s percentage set forth in Appendix 1 of the Allocation Agreements (the “Local Allocation”); and, WHEREAS, a CA Participating Subdivision that is a city will be allocated its Local Allocation share as of the date on which it becomes a Participating Subdivision. The Local Allocation share for a city that is a CA Participating Subdivision will be paid to the county in which the city is located, unless the city elects to take a direct election of the settlement funds, so long as: (a) the county is a CA Participating Subdivision, and (b) the city has not advised the Settlement Fund Administrator that it requests direct payment at least 60 days prior to a Payment Date; and, WHEREAS, it the intent of this Resolution is to authorize the City to enter into the Master Settlement Agreements with the Settling Defendants by executing the Participation Agreements and to enter into the Allocation Agreements by executing the signature pages to those agreements. NOW, THEREFORE, BE IT RESOLVED AS FOLLOWS: SECTION 1. The facts set forth in the Recitals, above, are true and correct and are hereby adopted in support of this Resolution. SECTION 2. The City Manager is authorized to settle and release the City’s claims against the Settling Defendants in exchange for the consideration set forth in the Settlement Agreements and Allocation Agreements, including taking the following measures: 1. The execution of the Participation Agreements with the Settling Defendants and any and all documents ancillary thereto. 2. The execution of the Proposed California State-Subdivision Agreement Regarding Distribution and Use of Settlement Funds with the Settling Defendants by executing the signature pages to those Allocation Agreements. 3. Notify the Settlement Fund Administrator that the City requests a direct payment under the Allocation Agreements at least 60 days prior to the Payment Date in the Settlement Agreements. 45635.01000\41094703.1 4 SECTION 3. CEQA. That the City Council finds this Resolution is not subject to the California Environmental Quality Act (CEQA) in that the activity is covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment. Where it can be seen with certainty, as in this case, that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. SECTION 4. Severability. If any provision of this Resolution or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications, and to this end the provisions of this Resolution are declared to be severable. SECTION 5. Effective Date. This Resolution shall become effective immediately. PASSED, APPROVED and ADOPTED this ___ day of March, 2023. Robert Gonzales Mayor ATTEST: Jeffrey Lawrence Cornejo, Jr. City Clerk 45635.01000\41094703.1 5 STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution No. 2023-C17 was duly adopted by the City Council of the City of Azusa, at a meeting thereof held on the ____ day of March 2023, by the following vote of the Council: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: Jeffrey Lawrence Cornejo, Jr. City Clerk APPROVED AS TO FORM: Marco A. Martinez City Attorney Attachments A-G Consent Item E-10 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA CALIFORNIA AUTHORIZING THE CITY MANAGER TO ENTER INTO THE SETTLEMENT AGREEMENTS WITH WALGREENS CO., WALMART, INC., CVS HEALTH CORPORATION/CVS PHARMACY INC., TEVA PHARMACEUTICAL INDUSTRIALS LTD., AND ALLERGAN FINANCE LLC/ALLERGAN LIMITED, AGREE TO THE TERMS OF THE STATE-SUBDIVISION AGREEMENTS, AND AUTHORIZE ENTRY INTO THE STATE-SUBDIVISION AGREEMENTS WITH THE ATTORNEY GENERAL The following attachments below are too large and available at the City Clerk’s Office for review and on our City website. https://www.ci.azusa.ca.us/1389/Watch-Meetings-Online Attachments: 2) Exhibit A – Walgreens Settlement Agreement 3) Exhibit B – Walmart Settlement Agreement 4) Exhibit C – CVS Settlement Agreement 5) Exhibit D – Teva Settlement Agreement 6)Exhibit E – Allergan Settlement Agreement 7) Exhibit F – Sample CA Allocation Agreement 8) Exhibit G – Sample Participation Agreement