Many states are currently implementing administrative structures and processes to disburse current and future payments from settlements with opioid manufacturers, distributors, and retailers for actions contributing to the current opioid epidemic. Although more than 3,000 state and local governments have participated in opioid-related suits, the largest source of funding has resulted from a $26 billion settlement that 46 states agreed to with Johnson & Johnson (J&J), AmerisourceBergen, Cardinal Health, and McKesson in July 2021.
Settlement funds awarded through the “National Settlement” do not include separate settlements between J&J and major distributors and non-participating states, nor do they include previously decided or ongoing litigation with other manufacturers, pharmacy retailers, or the consulting firm McKinsey. In addition to their settlement with states and localities, J&J and the three major distributors have agreed to a separate $590 million settlement with native tribes and tribal health organizations (THOs), which experienced some of the highest rates of overdose through the opioid crisis. State and local lawsuits against major opioid distributors, manufacturers, and retailers continue to wind their ways through the courts, with varying levels of funding being awarded to states. On November 2, CVS, Walgreens, and Walmart agreed to a $13.8 billion settlement to resolve lawsuits with state, local, and tribal governments. Overall, it is estimated that more than $50 billion will be awarded to states and localities as a result of opioid-related settlement agreements.
To understand common challenges and promising practices for state leaders in opioid settlement planning and spending, NASHP is engaging key state leaders across the country to understand the structure and status of their current opioid settlement planning activities. NASHP is also analyzing governing materials and entities such as state legislation, opioid settlement agreements and spending plans, advisory committees, and other entities charged with disbursing state funding, as referenced in NASHP’s tracker. With many states still establishing processes and administrative structures to guide settlement spending, understanding key responsibilities outlined in settlement agreements and how different states have approached planning can help support states in promoting greater transparency, coordination, and efficacy of opioid settlement spending.
Requirements for Opioid Settlement Spending in the National Settlement Agreement
As part of the agreements negotiated between J&J, opioid distributors, and state attorneys general, the National Settlement outlines terms for states and localities receiving opioid settlement funds, including allocations and uses of settlement funds. Although states and localities have significant leeway in crafting individual approaches to settlement allocation, planning, and disbursement, key settlement provisions and requirements driving state planning include:
- Funding timeline and allocation across states: Payments will be made to states in multiple installments over an 18-year period using a formula that includes overall population, overdose deaths, quantity of opioids delivered, and the prevalence of substance use disorder.
- Funding allocation within states: The settlement agreement creates a default allocation to subdivisions within states, with 15% allocated to the State Fund, 70% to the Abatement Accounts Fund, and 15% to the Subdivision Fund. Individual states may change this allocation through a qualifying agreement, statute, or statutory trust.
- Allowable uses of funding: At least 70% of funding awarded to states and localities must be spent on “opioid remediation efforts” defined in the settlement agreement as “Care, treatment, and other programs and expenditures (including reimbursement for past such programs or expenditures except where this Agreement restricts the use of funds solely to future Opioid Remediation) designed to (1) address the misuse and abuse of opioid products, (2) treat or mitigate opioid use or related disorders, or (3) mitigate other alleged effects of, including on those injured as a result of, the opioid epidemic.”
- Advisory Committees: Each state is required to establish an Opioid Settlement Remediation Advisory Committee to provide input and recommendations for remediation spending from the state’s Abatement Accounts Fund.
- Required reporting of settlement spending: Participants are required to report to the Settlement Fund Administrator any spending that does not directly address opioid spending, such as attorneys’ fees, investigation costs, litigation costs, or administrative costs. Other reporting structures are allowable through the settlement.
Key Components of State Opioid Settlement Planning and Spending
With the first funds from the national settlement flowing to states as of July 2022, almost every state has published formal agreements, processes, and guidelines for how it will allocate opioid settlement funds. While non-participating states are not bound by the terms of the national settlement, many have developed their own processes and agreements for spending funds from opioid-related lawsuits, and many spending agreements and process developed by participating states are also intended to apply to funds received from future settlements.
Each state has developed unique process and administrative structures for allocating funding across state and local entities, identifying abatement needs, obtaining input from the public and experts, providing guidance on priorities and spending activities, and promoting transparency around the use of funds. In addition to including requirements in memoranda of understanding and legislation that settlement funds not supplant existing funding, states are also continuing to develop strategies for how to align settlement funding with existing state plans, efforts, and federal resources allocated to states through existing funding streams such as State Opioid Response grants, Substance Abuse Prevention and Treatment Block Grants, and other federal funding.
Although these structures and processes are still in development in many states, there are a number of common components and approaches for guiding planning and spending activities across state and local partners. These components include:
Creation of Legal Frameworks for Allocating Settlement Funding, Responsibility, and Oversight
Based on differing legal authorities in each state, states have taken a number of paths for establishing plans for settlement allocation and spending authority, including legislation, executive orders, or agreements between states and political subdivisions. Thirty-five states enacted legislation that sets up spending structures for opioid settlement funds. Forty states have published memoranda of understanding or agreement in partnership with localities who will receive opioid settlement funds. These agreements define roles, relationships among participating entities, reporting structures, and how the funds are divided among state, local, and other entities. These legal frameworks may also create or designate entities charged with distributing statewide funds. Although a minority of legal frameworks allocate funding to specific entities, generally state agreements divide funding allocations among the following entities:
- The “State Share:” Settlement funding awarded directly to the state, with final spending authority residing with legislative appropriation, attorneys general, the Department of Health, or the state agencies responsible for substance use services.
- The “Local Share:” Settlement funding allocated directly to participating political subdivisions, including participating cities and counties. Local entities may be required to report spending but retain authority for spending decisions.
- The statewide “Abatement Fund:” Many states create a statewide “abatement fund,” to distribute funding across the state. While the abatement fund may be administered by a state agency, a number of legal frameworks create a single entity or trust charged with disbursing funding. For example, Ohio’s One Ohio MOU calls for the creation of a 501(c)(3) foundation to control 55% of its settlement funding, and Montana’s MOU places 70% of the state’s total funds in a private, non-profit trust.
For an overview of the funding allocations across these entities in each state, see NASHP’s tracker.
Creation or Designation of Advisory Committees
States are required by the national settlement to designate an advisory committee or similar entity to give input on spending decisions from their statewide Abatement Accounts Funds, with the settlement specifying that these groups must have formal guidelines for both composition and process, equal state and local representation, a process for receiving input from subdivisions and from the public, and a process through which the appropriate state agencies will consider their recommendations. Thirty-three states have formed or officially called for advisory committees to make recommendations for the spending of the state share of their opioid settlement funds. In some cases, these advisory committees oversee both a set-aside fund and the state share of settlement dollars.
Nineteen states have advisory committees that will provide non-binding recommendations for the spending of settlement dollars to the entity with spending authority: the head of human services, the legislature, the attorney general, or the governor. Those states are Alabama, Alaska, Colorado, Georgia, Hawaii, Idaho, Illinois, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New York, Rhode Island, Utah, and Vermont.
Fourteen states have advisory committees that will directly disburse or award grants from their settlement funds, including Connecticut, Delaware, Kansas, Kentucky, Maine, Montana, Ohio, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Virginia, and West Virginia.
Advisory committees have a variety of membership requirements, although many of them include representation from elected official appointees, people with lived experience, their families, and substance use providers. By including a diversity of representation in advisory committees, states are seeking to ensure that people receiving services, their family members, and communities can influence how settlement dollars will be spent and can advocate for plans and programs that will meet their unique needs, as well as collaborating on outcome and evaluation measurements that are meaningful to individuals as well as communities. Several states explicitly require the representation of lived experience on their advisory committees, not only people who have experienced substance use disorders themselves, but also family members, law enforcement staff who have experienced opioid-related harm, and representatives of the recovery community. Those states are Colorado, Maine, Massachusetts, Montana, Oregon, Texas, and Virginia.
Coordination across State Agencies, Localities, and Stakeholders
States are taking different approaches to supporting coordination across state, local, and community entities allocated or awarded settlement funding dollars through a state administered process. For example, Vermont began its opioid settlement process with a lengthy education period of advisory group members. State staff provided reports and narratives about current spending and programs related to the opioid epidemic with the goal of avoiding duplication of effort for work that was already funded and underway. Indiana’s state staff are engaging in direct conversations with local governments and regional partners, including their association of counties, hospital and sheriffs’ association, rural health association, council of community centers, largest hospital systems, and existing coalitions that address the intersection of mental health and criminal justice.
Promoting Public Input and Transparency
The funds from the opioid settlements are a large pool of money flowing into a historically underfunded system, and as many states learned from the tobacco settlement, the substantial sum brings the potential for spending on things that have little to do with opioid treatment, prevention, or recovery. While the settlement terms, state agreements, and state legislation all attempt to mitigate this potential for misspending of funds, states are also implementing many opportunities for public input and transparency to ensure compliance with the settlements’ requirement that the dollars go towards programs and investments that directly address the impacts of the opioid epidemic.
States’ advisory councils are open for public participation, and several states are actively engaging local governments and communities in conversations about how those entities would like the settlement funds to be spent. Wisconsin has held listening sessions, both regionally and statewide, as well as offering an online survey to solicit input on how the state share of opioid settlement funding should be spent. New Jersey created a portal for input from citizens, offering questions in multiple languages.
To support improved transparency of opioid settlement spending, twenty-nine states have reporting requirements in their memoranda of agreements. Some states, like New Hampshire, will require narrative reports from recipients of state opioid settlement funds. Other states will require key performance indicators from recipients of state and local opioid settlement funds. North Carolina is promoting transparency of settlement spending by requiring that participating local governments report their settlement spending annually through an online portal created by the state, and those reports will be shared on public-facing dashboards.
Next Steps
States are in different stages in establishing administrative structures, convening advisory committees, and planning for disbursing initial rounds of opioid settlement funding. More information about spending will emerge in the coming months, as advisory committees and task forces further shape each state’s priorities and approach.
National experts have developed numerous resources for prioritizing opioid settlement funding. The Legislative Analysis and Public Policy Association has developed model legislation for creating dedicated funds for substance use disorder abatement. RAND, Johns Hopkins University, the Legal Action Center and others have also provided recommendations and resources for opioid settlement priorities such as investing in evidence-based practices, investing in prevention, treatment, recovery, and promoting harm reduction. Given the need to coordinate activities across multiple groups and the complex landscape of current efforts and investments to address the opioid crisis, a critical challenge is to ensure that time-limited opioid settlement funding can support — rather than supplant — existing efforts and make lasting investments in prevention and treatment infrastructure.
Over the next year, NASHP will continue to track developments across states in allocating opioid settlement dollars and will also engage key state leaders to identify where investments are made and their potential impact.
Acknowledgments: The National Academy for State Health Policy is providing this piece with the ongoing support of the Foundation for Opioid Response Efforts (FORE) and wishes to thank Project Officer Ken Shatzkes and FORE President Karen Scott for their continued guidance and direction.
