Estimating the Cost of the Opioid Epidemic to State and Local Governments

Estimating the Cost of the Opioid Epidemic to State and Local Governments

Numerous state and local governments are suing the makers and distributors of prescription opioids seeking to recover damages for alleged improper marketing and distribution of various prescription opioid medications.  In December of 2017, the U.S. Judicial Panel on Multidistrict Litigation transferred 46 of these cases to the Northern District of Ohio for coordinated and consolidated pretrial proceedings under Judge Dan A. Polster in In re: National Prescription Opiate Litigation (MDL No. 2804).  Although the plaintiffs are pursuing recovery under a variety of legal theories, plaintiffs are essentially alleging that (1) manufacturers misrepresented the benefits and risks of opioids and aggressively marketed them to physicians, and (2) distributors failed to monitor for and report suspicious orders of opioids.  (Plaintiffs variously allege claims for violations of the federal Controlled Substances Act and state analogues, RICO statutes, and consumer protection laws, as well as claims for public nuisance, negligence, negligent misrepresentation, fraud, and unjust enrichment.)  Initial efforts to settle the cases quickly were not successful and the cases are now scheduled for trial in 2019.

Some commentators have compared this situation to the lawsuits against the big tobacco companies that were ultimately resolved with the Master Settlement Agreement in 1998, through which states will receive a total of more than $200 billion over 25 years.  While the opioid cases bear some similarities to the tobacco lawsuit, there are also key differences.

One important element of the opioid cases, regardless of whether they are resolved by settlement trial, will be the ability of the plaintiff governments to quantify the impact of the opioid epidemic on them.  This article discusses key considerations for calculating the cost of the opioid epidemic to state and local governments.  Subsequent articles will delve into more detail regarding the specific programs and activities for which state and local governments might reasonably seek payment and will discuss potential methods for estimating such costs.

The Opioid Epidemic

By now, the high and rising rate of opioid use and overdose has become sufficiently well-publicized that references to the ‘opioid epidemic’ are well understood.  The U.S. Centers for Disease Control and Prevention (CDC) reported that there were 63,632 drug overdose deaths in the United States in 2016, about two-thirds of which were due to opioids (prescription and illicit).  While most of the recent increase in opioid overdose deaths is due to synthetic opioids (e.g., fentanyl), it has been shown that many users of illicit opioids began with prescription opioids.  The following figure from the CDC shows the increase in opioid overdose deaths since 2000, rising from a rate of about three per 100,000 residents in 2000, doubling to about six per 100,000 residents in 2006, and more than doubling again to a rate of over 13 per 100,000 residents in 2016, the most recent full year for which data is available.

Government Lawsuits

Over the last several years, numerous state and local governments have sued opioid manufacturers and distributors, seeking payment for past and future costs associated with the opioid epidemic.  The individual lawsuits do not all make the same claims or put forth the same legal theories, nor do they all target the same organizations.  The most common targets of the lawsuits are opioid manufacturers and distributors, with some plaintiffs also targeting pharmacies and doctors.  The most common accusation against opioid manufacturers is that they engaged in deceptive marketing practices, whereas opioid distributors were most frequently targeted for shirking their legal obligation to monitor for potential diversion.  (In the world of prescription drugs, ‘diversion’ refers to drugs being diverted to illicit purposes or misuse.)

The plaintiffs in these opioid cases are trying to take some lessons from the tobacco litigation, by starting with the approach that ultimately succeeded against big tobacco.  In what are described as the first and second waves of tobacco litigation, individuals filed suit against tobacco companies claiming that cigarettes were dangerous or addictive, respectively, and that the companies knew this.  In the third wave of tobacco litigation, states sued for past and future expenditures associated with treating individuals with smoking-related illnesses through state Medicaid programs.  In the opioid lawsuits, state and local governments are seeking compensation for direct costs that governments have already incurred and anticipate that they will incur due to prescription opioids.

Cost to State and Local Government

Numerous state and local government programs have the potential to be impacted by opioid misuse.  States might reasonably claim costs relating to health care programs, law enforcement, criminal justice, child protective services, and loss of tax revenue.  Possible costs related to state Medicaid programs include direct costs for opioids, treatment costs for individuals with opioid-related substance use disorder, and higher general health care costs for individuals with opioid-related substance use disorder.  Law enforcement and criminal justice costs at the state and local level would relate to marginal increases in costs associated with policing, courts, and jail/prison.  Local governments might also make claims relating to uncompensated care provided by public hospitals.  Other health care programs at state and local levels might also have incurred or be anticipated to incur opioid-related costs.

In addition to identifying the potential state and local programs that might have costs associated with the opioid epidemic, a state or local government will need to be able to justify the particular monetary claims being sought from the particular defendants, both in terms of their amount and distribution across the defendants.  As a first step, the total amount being sought by a state or local government will need to be calculated by: 1) analyzing all of the separate programs at the appropriate level; 2) determining the marginal costs attributable to the opioid epidemic; and 3) identifying some proportion of that amount caused by the alleged inappropriate behaviors by manufacturers and distributors.  If both manufacturers and distributors are being sued, then logic will need to be developed to assign some proportion of liability between the groups.  Previously existing analyses of the cost of the opioid epidemic should be used, if at all, only with careful review since they tend to include costs that are not borne directly by state and local governments.

The opioid epidemic has caused many deaths and imposed significant financial costs on the public.  State and local governments have brought numerous lawsuits against opioid manufacturers and distributors that are currently working their way through the courts.  These lawsuits represent a meaningful opportunity for state and local governments to obtain redress for real costs that they have incurred and will incur in the future due to the opioid epidemic.  Full redress, however, requires a full accounting of all of the impacts on public revenues and expenditures.

3 thoughts on “Estimating the Cost of the Opioid Epidemic to State and Local Governments”

  1. Another item worth quantifying applies not to abusers or overdoses but rather to long term Impacts to those taking their pain relieving medications as directed and receiving physical damages as a result; here thinking of potential liver damage caused by long term perscriptions of opioids, fentanyl etc. For instance I have been under care for back pain caused first by injury then two failed surgeries, the later of which I contracted discitus as a result. I had a further surgery giving me some relief but not enough to stop medications. My first surgery was in 2001 and I have been taking opioid pain relivers since then. No long term effects have appeared yet, though social, psychological have possibly occurred.

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