Judge Advances San Francisco’s Opioid Lawsuit Against Big Pharma

This June 17, 2019, file photo shows 5-mg pills of Oxycodone. (AP Photo/Keith Srakocic)

SAN FRANCISCO (CN) — A federal judge on Thursday advanced a bellwether lawsuit seeking to hold dozens of prescription drug makers and distributors liable for the opioid crisis and problems it has caused in San Francisco.

U.S. District Judge Charles Breyer refused to dismiss claims that the companies violated state consumer protection laws by misleading doctors and consumers about harms associated with opioids and compliance with requirements to prevent prescriptions from leaking onto the black market.

However, Breyer dismissed racketeering and conspiracy claims against the pharmaceutical giants, finding their alleged misconduct was not adequately connected to harms, such as improperly discarded needles, that caused damage to city property.

San Francisco is seeking millions of dollars in damages from eight companies and their affiliates that “fraudulently” marketed opioids like OxyContin and five companies and their affiliates that distributed opioids while “failing to maintain effective controls” to flag suspicious orders and prevent the diversion of drugs to the black market.

The defendants include Endo Pharmaceuticals, McKesson, Cardinal Health, Walgreens and many others.

Claims against Purdue Pharma and its owners the Sackler family are stayed pending bankruptcy proceedings.

The case was transferred to San Francisco in February from a multidistrict case in Ohio so it could serve as a bellwether case to determine if cities can sue drug manufacturers and distributors for the impacts of the opioid crisis on local governments.

In a 100-page opinion, Breyer found the companies can be sued for creating a public nuisance and false advertising because they allegedly kept using misleading tactics to promote opioids, despite knowing the drugs were being diverted into the black market and creating a public hazard.

“The City identifies specific instances in which law enforcement sanctioned distributors for failing to maintain effective controls against diversion,” Breyer wrote, citing cases in which the Drug Enforcement Administration cited AmerisourceBergen’s distribution center in Orlando and Cardinal’s distribution center in Swedesboro for failing to maintain effective safeguards against diverted opioids.

“The City alleges that this conduct led to increased rates of overdose deaths and addiction in San Francisco,” Breyer wrote.

Breyer also rejected opioid manufacturers’ claims that they could not be sued for misrepresenting addiction risks because their promotions were aimed at physicians who are knowledgeable about the risks associated with strong painkillers.

The judge found claims that promotional campaigns were designed to deceive both physicians and patients were legally sufficient. The promotional efforts included paying doctors millions of dollars in travel accommodations, wining and dining, consulting fees and charitable contributions with the goal of increasing the number opioid prescriptions written for patients.

The city’s lawsuit claims the drug makers had “exclusive knowledge” about the highly addictive nature of its products but continued to promote them as safe and unlikely to lead to abuse.

“For example, the City alleges that Endo knew that its product, Opana ER, was widely abused, yet still marketed it as tamper resistant and abuse deterrent,” Breyer wrote.

The judge ruled that San Francisco can seek restitution from drug distributors for failing to report suspicious orders, which led to an oversupply of prescription opioids that increased profits for those companies.

“Because the [California Unfair Competition Law] permits restitution as a remedy for indirectly misappropriated funds, the City’s claim against Distributors for restitution may proceed,” Breyer wrote.

However, the judge dismissed claims that drug makers and distributors violated the Racketeering Influenced and Corrupt Organizations Act by scheming to deceive the public about opioids.

The Ninth Circuit established in its 2008 ruling in Canyon County v. Syngenta Seeds that local governments can only sue for RICO if the violations caused damage to property or a loss of money resulting from a business transaction, not for “government expenditures alone.”

The city said it has had to spend more money on naloxone, an emergency drug used to reverse the effects of an overdose and save lives, along with training non-first responders such as library staff to administer the drug. Breyer found those expenses could not form the basis of a RICO claim.

The city also claimed the increased use of opioids caused damage to city property, including repairs to city toilets where needles were improperly discarded. The city further contended that improperly discarded needles increased clean-up costs for city parking lots, a business enterprise that can form the basis of a RICO claim.

But Breyer found a lack of direct connection between the companies’ alleged misconduct and the actions of drug users that caused harms to the city.

“It involves too many links and depends on independent and intervening acts—including criminal conduct—by third and fourth parties,” Breyer wrote. “The City’s injuries are ‘surely attributable’ to drug users, not defendants.”

The judge dismissed the RICO claims against the companies with prejudice.

In a statement Thursday, the San Francisco City Attorney’s Office said it was pleased with Breyer’s decision to advance most claims in the lawsuit.

“This is a victory not only for San Franciscans, but also for victims of the opioid crisis across the country,” City Attorney’s Office spokesman John Coté said. “Local governments have been on the front lines of the opioid epidemic. We have been picking up the pieces of broken families, lost lives and shattered hopes for too long.”

Coté added the drug makers and distributors’ “deliberate deception” has created millions of addicts and led to hundreds of thousands of overdose deaths nationwide.

“We just fought off nine motions to dismiss from their army of lawyers, and now we will do everything in our power to hold these companies accountable for the harm they caused,” Coté said.

Attorneys for Endo Pharmaceuticals, McKesson, Cardinal Health, and Walgreens did not immediately return emails seeking comment Wednesday.

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