Staff recommends Council consider whether to sign on to the settlement agreements described below or to proceed with litigation against the Distributors and Janssen Pharmaceuticals. 

The State of Montana has been investigating and litigating opioid claims in state court for several years. Seven Montana local governments have also filed claims in the federal multidistrict litigation (MDL) in the Northern District of Ohio, Judge Polster presiding. Those seven local governments are Missoula, Missoula County, Great Falls, Cascade County, Gallatin County, Lake County, and Anaconda/Deer Lodge.

The City of Billings is eligible to receive payments from two separate Settlement Agreements with (1) the three major opioid Distributors (McKesson Corporation, Cardinal Health, Inc., and Amerisource Bergen) and (2) with Janssen Pharmaceuticals, Inc. and its parent company Johnson & Johnson, as part of two nationwide settlement agreements to resolve all opioid litigation brought by states and local political subdivisions.

The proposed settlements require the Distributors and Janssen to pay billions of dollars to abate the opioid epidemic. Specifically, the settlements require the Distributors to pay up to $21 billion over 18 years and Janssen to pay up to $5 billion over no more than 9 years, for a total of $26 billion. Of the settlement amount, approximately $22.7 billion is earmarked for use by participating states and subdivisions to remediate and abate the impacts of the opioid crisis.

The settlements provide for payments to States, Local Governments and other entities to provide for opioid abatement, attorney fees, a portion of litigating costs, and administrative burdens. Many States, including Montana, have decided to participate in this settlement process while others have chose not to participate. The Janssen and Distributor Settlement Agreements, which largely overlap, are available for review on the national settlement website at National Opioid Settlement (nationalopioidsettlement.com). Montana’s share of the settlement was determined by interstate allocation metrics based upon population and the intensity of opioid impacts in the state.  Again, although Montana stands to receive up to approximately $80 million, maximum payments require full local government participation.  

A Memorandum of Understanding (MOU) that the Attorney General has approved is attached. The purpose of the MOU is to determine governance; intrastate allocation between the State, Abatement regions, and Local Governments; attorney fees, and other administrative issues, such as effectuating the important requirement that the settlement monies be used only for approved opioid abatement strategies or programs. Montana’s seven litigating local governments are not likely to join the Settlement Agreements and the MOU. 

The settlements also contain injunctive relief provisions governing the opioid marketing, sale, and distribution practices at the heart of the states' and subdivisions' lawsuits and further require the Distributors to implement additional safeguards to prevent diversion of prescription opioids. 

In order to receive direct payments and benefits, the City of Billings needs to join the Settlement Agreements. Although the Settlement Agreements are complex, for present purposes it is important that you know the following:

• The monetary payments to the States depend on the level of local government participation: Montana and its Local Governments will receive up to $80 million in total payments (over a period of years) only if ALL fifty-six counties and Montana’s six largest cities by population join.  This is because the Settlement Agreements provide for bonus payments to each State as the level of local government participation goes up.
• January 2, 2022, is the Local Government Participation Deadline: According to the Settlement Agreements, local governments have until January 2, 2022, to join.  After that date, the States, including the State of Montana, have until January 17, 2022, to determine whether the level of local government participation is sufficient to proceed forward with the settlement process.

If Council decides to sign on to the Settlement Agreements/MOU, staff will register the City of Billings on the national settlement website in order to receive the two Distributor and Janssen sign-on forms for the Settlements electronically. Council will also need to sign on to the MOU.  The key points and principles of the MOU are:

• Funds will be allocated between the State and Local Governments with 15% to the State, 15% to local governments, and 70% to a Statewide Abatement Trust that is administered by a Trust Advisory Committee comprising equal representation from the State and local governments.
• 80% of the funds going into the Abatement Trust (which itself comprises 70% of the total abatement funds) shall be allocated for use by local governments. Consequently, at least 71% of the total settlement funds will be disbursed locally. 
• Local government participation in the Trust and Trust Council will be through Abatement Regions based primarily on the existing Department of Health and Human Services Health Planning regions. Exhibit A of the attached MOU.
• The allocation of funds for use by the Abatement Regions is based on the percentages shown in Exhibit B which are derived from population and opioid impact on those regions. The allocation for the City of Billings is approximately 9.13%
• Distribution of funds from the Abatement Trust will be reviewed and approved by the Trust Advisory Committee based on proposals submitted through the Abatement Regions or from the State. 
• The MOU also provides the Attorney General with the ability to develop abatement programs and strategies intended to encourage Local Governments, particularly rural areas, to pool their resources in support of the most cost-effective abatement programs and strategies.

The AG's office has requested a hard-copy signature page to the MOU rather than an electronic signature. However, to be clear, the two sign-on forms will be executed electronically on the settlement website.  Staff will be available to assist with this process. 

City Council may:

• Authorize the Mayor to execute all necessary documents to sign on to the MOU and the settlement agreements; 
• Not authorize the Mayor to sign on to the MOU and the settlement agreements.  If the City does not sign the MOU and the settlement agreements, it may pursue litigation in state or federal court against the Distributors and Janssen Pharmaceuticals. 

The proposed settlement with the Distributors provides for a maximum payment of approximately $21 billion dollars over the course of 18 years.  Of that total, a maximum of approximately $19 billion would be paid to participating states for division among the states and the political subdivisions within them.  The settlement provides for an allocation of .34% to the State of Montana, for a theoretical maximum of $65 million.  The terms of the MOU approved by Attorney General Knudsen provide for a division of the funds allocated to Montana, with 15% going directly to political subdivisions, 15% to the State, and 70% to an opioid abatement trust.  The settlement also includes an allocation for the political subdivisions within Montana, with 9.13% allocated to the City of Billings.  So, the theoretical maximum which would be paid directly to Billings pursuant to the settlement is approximately $900,000. Additionally, the MOU requires 80% of the funds in the abatement trust to be "allocated" for the political subdivisions according to the same division. However, it is not clear what discretion, if any, the City of Billings may have in terms of how its share of the funds in the trust would be spent.  The theoretical maximum allocated to the City of Billings from the trust would be $3.3 million dollars.  
 
The settlement with Janssen/Johnson & Johnson is structured in a very similar manner, with a maximum payout over the course of 5 - 9 years in the amount of $5 billion.  The divisions to Montana and its subdivisions are the same in both the Janssen and Distributor settlements.  Under the Janssen deal, the maximum payout to Montana is approximately $15 million, of which approximately $200,000 would be paid directly to Billings.  Billings share of the funds paid into the abatement trust pursuant to the Janssen settlement would be approximately $780,000.

One of the major drawbacks of the proposed settlements is that the payments described above will never be paid in full.  The settlement agreements provide for reductions in the payments based on a number of factors.  One of the primary factors influencing the amount of the reductions is the level of participation in the settlements by political subdivisions, and particularly political subdivisions which filed lawsuits prior to the settlement agreements.

Additionally, the reduced amounts which would be paid are stretched out over a number of years, up to 18 years for the Distributor settlement, and up to 9 years for the Janssen settlement.  In Montana, a number of the litigating political subdivisions have already indicated they do not intend to participate in the settlements.  Therefore, we can predict with a high degree of confidence that the total payout in Montana will be substantially reduced.  
 
Another factor influencing the total payments to be made under both agreements relates to future payments which may be made to non-participating subdivisions within the state.  In other words, the payments to subdivisions opting into the settlement could be reduced based on potential future recoveries by the subdivisions opting out.  

For all of these reasons, the amount a participating subdivision may receive over the course of several years is highly uncertain.  Again, and because of these reasons, some cities and counties in Montana will not be opting into the settlement and will instead proceed with lawsuits against these Defendants with the ultimate goal of achieving a better outcome for their citizens. 

Council should consider whether the theoretical award from the settlement agreements outweighs the risk of a pursuing litigation. If the City of Billings chooses to pursue litigation, there is a group of attorneys with technical expertise in this area with access to specialized experts that are willing to take this case on a contingency basis.  Therefore, there would be no cost of ongoing litigation to the City for attorney fees or expenses.