Pharmacy giant Walgreens will pay Baltimore $80 million to settle a lawsuit the city brought against the drug company and other pharmaceutical companies related to an overdose epidemic that has plagued the city for years, Mayor Brandon Scott’s office said Tuesday.
The settlement with Walgreens is the city’s second legal victory in a matter of days and comes just before lawsuits against other major pharmaceutical companies. On Monday, Scott’s office said the city had negotiated an $80 million deal with Teva Pharmaceuticals.
Unlike previous settlements, the exact terms of the agreement with Walgreens — when the money will be paid out, whether there are specific recipients and even the exact amount — will be kept secret until Oct. 3 at the company’s request, City Attorney Ebony Thompson said. The city was allowed to disclose the total amount all parties have received to date, and the $80 million amount for Walgreens was determined by subtracting the total amount the city received before today’s settlement from the updated total released this morning. To date, Baltimore has reached $402.5 million in settlements with pharmaceutical companies, including Cardinal Health, CVS and Allergan.
“In order to resolve the charges against him and focus our trial on the worst actors in the opioid epidemic, we agreed to this deadline,” Thompson said in a press release.
On Monday, the city is scheduled to take other pharmaceutical companies to court, including Johnson & Johnson, McKesson and AmerisourceBergen (now Cencora). Officials expressed optimism about their chances in court, but hope to settle the case beforehand. Settlement negotiations are ongoing.
By settling with Walgreens, Baltimore continues to rake in money it would not have been able to obtain through other agreements. The Maryland Attorney General, in coordination with other states and cities, has reached agreements with many of these companies that would have paid Baltimore far less than it has previously.
Instead, the city decided to file independent lawsuits against the companies. That move, a risky but lucrative venture, has paid off. Official estimates suggest the city received more than three times what it would have been entitled to in the settlements with the state.
The windfall comes at a time of crisis for the city. As detailed in a series of articles in the Baltimore Banner and the New York Times, Baltimore has more overdose deaths than any other major American city — even more than most of Appalachia when the drug crisis was at its worst.
“We are proud of our efforts to bring these companies to justice over the past few years,” Scott said in a press release. “The reality is that fighting the opioid epidemic requires tremendous resources, and through this litigation, our outside counsel and legal team have begun to provide them. As we move closer to the start of trial, it is time to finish the work against the remaining defendants and use this money to support and expand the work we have already done to fight the opioid epidemic where it can have the most impact.”
When all the legal wrangling is over, there’s a good chance the city will have raised more than the $641 million it received in federal pandemic aid under the American Rescue Plan Act, officials said. Then it will have to spend the money.
Nearly two weeks ago, Scott signed an executive order setting out spending guidelines for the funds, which will go into a trust that the administration compares to a college endowment. The funds are to be spent over at least 15 years, with at least 5% allocated each year.
Spending decisions undergo several levels of review and final approval is given by the Mayor.
Community organizations, health care providers and all city agencies can apply for funds from the trust fund, with the first allocations expected in July at the start of the next budget cycle.
Although the proposed process is intended to be transparent and community-based, some of the money has been allocated in secret. Each of the city’s four settlements to date has included direct payments of $1 million to $5 million to various community health organizations. Officials have declined to explain how those groups were selected because it could harm ongoing settlement negotiations with other pharmaceutical companies.
The city’s coffers aren’t the only ones getting filled by this settlement. To take on the pharmaceutical giants, the city’s legal department hired Susman Godfrey, a private law firm known for winning difficult cases. The city has declined to release the engagement letter detailing Susman Godfrey’s agreement, but an email from the legal department indicates that the city is paying the firm a third of each settlement, except for the first settlement with Allergan, for which it received nearly half.
Under the agreement, Susman Godfrey is believed to have received more than $120 million. Agreements with private attorneys that pay one-third of the settlement or damages won in litigation are common practice in Maryland.
The second annual iMPACT Maryland conference on Oct. 1 will feature a discussion of The Banner and New York Times’ joint investigation into the city’s overdose crisis. More information and tickets are available. Here.
