States ask pharma giants for $26.4B over opioid crisis: WSJ

Yahoo Finance’s Alexis Keenan joins The First Trade with Alexis Christoforous and Brian Sozzi to discuss U.S. states ask to pharmaceutical giants, including AmerisourceBergen, Cardinal Health, Johnson & Johnson and McKesson Corporation, for approximately $2.5 trillion dollars to cover some of the damage caused by the opioid crisis.

Video Transcript

BRIAN SOZZI: All right, states are asking pharmaceutical giants, including McKesson, AmerisourceBergen, and Cardinal Health to pay around $26.4 billion to cover some of the damage caused by the opioid crisis. Yahoo Finance's Alexis Keenan joins us now. Alexis?

ALEXIS KEENAN: Hey, Brian. Now that report is coming from "The Wall Street Journal." These are state attorneys general who they say are making a demand for that $26.4 billion from those opioid distributors that you mentioned-- McKesson, AmerisourceBergen, Cardinal Health-- looking for $21.1 billion from those companies, along with manufacturer JNJ at $5.3 billion that made some of the opioid supply, though the distributors represent most of the distribution of opioid products in the US.

Now these settlement talks, they've been ongoing for well over a year, but reportedly stalled because of court delays due to COVID-19, not being able to keep the courts going. These US states, they are among, though, 3,000 or so government plaintiffs against opioid manufacturers, distributors, also drugstores. They are plaintiffs along with counties, cities, localities across the country that have all sued. But these talks specifically reported by "The Wall Street Journal," they relate to these four particular defendants.

ALEXIS CHRISTOFOROUS: Alexis, I know there were a new round of trial dates announced. Do you think that we can expect a settlement to be reached before these ever actually make it to trial?

ALEXIS KEENAN: Well, that's kind of the idea. And the judge that's overseeing the multi-district litigation in Ohio, where the cases are consolidated just for the point of getting all the pretrial activity under control and kind of a more efficient way to handle the cases, he has certainly pushed for a settlement. And every time a trial date is set, it definitely spurs some settlement talks. Now these companies that "The Wall Street Journal" reported on, they rejected-- they had offered, actually, an $18 billion settlement to 21 states back in February. The states rejected that one.

But look, New York's trial, that one was delayed. It was supposed to happen in March. But due to the coronavirus, that's been delayed. But upcoming are Ohio and West Virginia, two states that were hit really hard by the opioid epidemic and still are hit quite hard. Their trial is now set for October. So we certainly should see some activity.

BRIAN SOZZI: Alexis, this could be a pretty big financial hit. $26.4 billion is no chump change. I mean, McKesson, AmerisourceBergen, and Cardinal Health, they have good-- pretty decent financial statements. But that would sure take a chunk out of the bottom line.

ALEXIS KEENAN: A huge chunk. And among those, JNJ, of course, the big dog there with a market cap of $392 billion, the others between $15 and $25 billion for the distributors there. But what was really interesting is yesterday New York's attorney general filed in a separate case. And that is the bankruptcy proceeding that's happening in the Southern District in New York for Purdue Pharma. And, of course, because of their bankruptcy, they're kind of extracted from these other litigations that are still ongoing and it's being handled in the bankruptcy court.

In that filing, the US states across the country with the exception of Oklahoma, they said that they had totaled the amount of just the financial damages, the financial costs that this epidemic has made between 1999, when they say it started, until 2018. And they put that number of financial damages at $2.5 trillion. So we're not with a B anymore for billion.