On July 21, 2021 AmerisourceBergen (NYSE: ABC), Cardinal Health (NYSE: CAH) and McKesson (NYSE: MCK) reported that they have negotiated a comprehensive proposed settlement agreement which, if all conditions are satisfied, would result in the settlement of a substantial majority of opioid lawsuits filed by state and local governmental entities (Press release, Cardinal Health, JUL 21, 2021, View Source [SID1234585008]).

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While the companies strongly dispute the allegations made in these lawsuits, they believe the proposed settlement agreement and settlement process it establishes, which is outlined below, are important steps toward achieving broad resolution of governmental opioid claims and delivering meaningful relief to communities across the United States. The companies remain deeply concerned about the impact the opioid epidemic is having on individuals, families, and communities across the nation and are committed to being part of the solution.

The proposed settlement agreement is the result of years of negotiation with state attorneys general and representatives of the subdivisions. If the proposed settlement agreement and settlement process leads to final settlement through the process outlined below, it would collectively provide thousands of communities across the United States up to approximately $21 billion over 18 years. It would also establish a clearinghouse that consolidates data from all three distributors, which will be available to the settling states to use as part of their anti-diversion efforts.

Subject to certain future milestones described below and the level of participation, the companies would be responsible for up to the following contributions, payable over 18 years:

AmerisourceBergen: $6.4 billion
Cardinal Health: $6.4 billion
McKesson: $7.9 billion
The proposed settlement agreement would become binding only if all conditions outlined below are satisfied:

Approval of State and
Territorial Participation

For the next 30 days, all U.S. States, territories and Washington DC will have the opportunity to join the settlement, except West Virginia which settled previously with the companies. After the conclusion of the state sign-on period, each company will independently determine whether a sufficient number of states have joined to warrant continuing with the political subdivision sign-on period.

Approval of Political
Subdivision Participation

If the distributors decide that sufficient states have joined, each participating state will continue to offer its political subdivisions, including those that have not sued, the opportunity to participate in the settlement for an additional 120-day period. After the conclusion of the political subdivision sign-on period, each company will independently determine whether a sufficient number of states and a sufficient number of political subdivisions have joined for the settlement to proceed to implementation.

If the conditions are satisfied, the settlement would become effective 60 days after the distributors determine that there is sufficient participation to proceed. During this 60-day period, the participating states and the distributors would cooperate to obtain consent judgments in each participating state embodying the terms of the settlement. The companies will make their first annual settlement payment into escrow on or before September 30, 2021, and the payment will be disbursed following the effective date, or returned to distributors if the settlement does not become effective.

If, however, a settlement cannot be finalized and plaintiffs instead choose to pursue their claims in court, the companies will continue to assert their strong legal defenses in pending litigation.

This settlement process only addresses the claims of U.S. state attorneys general and political subdivisions in participating states. The West Virginia subdivisions and Native American tribes are not part of this settlement process.