• Bloomberg


While some Johnson & Johnson investors were relieved that the company’s $572 million penalty for fueling Oklahoma’s opioid epidemic wasn’t as high as feared, lawyers for other U.S. states, cities and counties could hardly contain their glee.

That’s because the ruling by Oklahoma Judge Thad Balkman on Monday was the first affirmation in court of a high-risk legal strategy using public-nuisance laws to punish predatory drug marketing. More than 45 other states and 2,000 local governments are hoping to win billions of dollars in verdicts with the same arguments.

“Since all the other states and governments want to use their nuisance statutes against the opioid-makers and distributors, it’s not good news for the companies that this judge found it was a valid theory,” said Richard Ausness, a University of Kentucky law professor who teaches about product liability.

Balkman, who heard the case without a jury, ruled that J&J’s “misleading marketing” of its opioid-based painkillers created a public nuisance. The state had sought as much as $17.5 billion to fund a 30-year plan to address opioid addiction that’s wreaked havoc across the state. J&J, the world’s largest maker of health care products, vowed to appeal.

The public-nuisance theory will next be tested in October when the first federal cases targeting the marketing of opioid painkillers are set for a jury trial in Cleveland. Lawyers for municipalities Monday hailed Balkman’s ruling as progress in proving opioid-makers and distributors created a U.S. epidemic of addiction and overdoes.

“The ruling in favor of the State of Oklahoma’s public-nuisance claims confirms what communities have been saying for some time: the opioid epidemic significantly interfered with public health,” lawyers representing the cities and counties said in an emailed statement.

J&J’s lawyers challenged Oklahoma Attorney General Mike Hunter’s suit as a legally questionable bid to extend nuisance laws — which normally govern real-estate disputes or environmental cases — to police pharmaceutical sales.

“This judgment is a misapplication of public-nuisance law that has already been rejected by judges in other states,” Michael Ullmann, J&J’s general counsel, said in an emailed statement. “The unprecedented award for the state’s ‘abatement plan’ has sweeping ramifications for many industries and bears no relation to the company’s medicines or conduct.”

State attorneys general and local government lawyers accused opioid-makers including J&J and Endo International PLC, along with distributors such as McKesson Corp. and Cardinal Health Inc., of understating the risks of prescription painkillers and overstating their benefits, fueling an epidemic that’s killing more than 100 Americans a day. The distributors are accused of turning a blind eye to diversion of pills to boost profits.

The governments turned to the nuisance theory because it doesn’t require them to prove individual doctors were lured into overprescribing the opioid painkillers. Instead, they can use experts to show the companies’ marketing as a whole was deceptive and led to a jump in addictions and often-fatal overdoses.

Ausness, the Kentucky law professor, noted that Oklahoma’s nuisance statute was broadly written. States and local governments with more restrictive laws may find it more difficult to win opioid cases using a similar legal strategy, he said.

Balkman, who rejected numerous J&J requests to throw out the case, said the state’s evidence persuaded him the company’s marketing “in its multiple forms, was false and deceptive.” In particular, he cited J&J’s training of sales representatives to use discredited studies to tout opioids’ effectiveness and come up with ploys to downplay the painkillers’ risks.

Because the evidence showed J&J created a “temporary” nuisance, Balkman said he was limited in what he could award the state in reimbursement. The $572 million amounts to one year’s worth of what the state said it needed to beef up treatment and education programs.

But the amount of the award should be considered secondary, said Thomas Cooke, a business professor at Georgetown University in Washington. “This is a green light for cases that are pending” that rely on the public-nuisance theory, including the more than 2,000 consolidated before a federal judge in Cleveland, he said.

Lawyers for the two Ohio counties whose opioid claims are combined in the first test trial are likely to ask Cleveland jurors to award hundreds of millions of dollars in reimbursements for tax dollars pumped into hospital and policing budgets to deal with the costs of addictions and overdoses. Some analysts predict the companies will be forced to pay as much as $100 billion to resolve all the opioid suits.

“We’re in uncharted territory,” Patrick Trucchio, a pharmaceutical analyst at Berenberg Capital Markets, said in an interview. “We need to see how J&J’s appeals process plays out, but we should continue to expect big numbers. There’s nothing to say that any of the opioid players are out of the woods.”

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