Virginia's $1.1 Billion Opioid Settlement: How It's Being Spent

Understanding the Opioid Settlements and Their Impact

Virginia is set to receive over $1 billion in funding for opioid abatement efforts over the next 15 years. This money comes from national settlements against various companies that were allegedly involved in fueling the U.S. opioid epidemic. These settlements are not only significant for Virginia but also for cities across the country that have taken part in opioid lawsuits. For instance, Hampton and Newport News recently joined the nationwide Purdue Pharma settlement agreement, which includes a $7.4 billion payout that will be shared among thousands of municipalities.

The purpose of these settlements is to address the widespread impact of the opioid crisis, including treatment and prevention programs. However, the rules governing how the funds are spent vary depending on the recipient. Here’s a closer look at where the money is coming from and how it's being managed.

The Origins of the Opioid Crisis

Between 1999 and 2023, more than 800,000 people died from opioid overdoses in the United States, according to the Centers for Disease Control and Prevention. The crisis has unfolded in three waves: the first was driven by the aggressive marketing and overprescription of prescription opioids, followed by a surge in heroin use as people became addicted to prescription drugs. The third wave saw a dramatic rise in synthetic opioids like fentanyl, which have been particularly deadly.

As the crisis escalated, lawsuits were filed against pharmaceutical companies and drug distributors. By 2017, over 3,000 lawsuits had been filed by states and cities nationwide. These cases were consolidated into the National Prescription Opiate Litigation, with a single judge overseeing the process. Companies involved in the litigation were required to settle individually, with states needing at least an 85% approval rating from their localities before signing on.

Major Opioid Settlements

Several major settlements have been reached, with some of the largest involving:

• McKinsey, a marketing and consulting firm, which settled for $650 million in December after partnering with Purdue Pharma.
• Mckesson, Cardinal Health, and AmerisourceBergen, the three largest drug distributors in the U.S., which collectively settled for up to $21 billion over 18 years.
• Janssen Pharmaceutical did not settle ongoing litigation but committed up to $5 billion toward the Nationwide Opioid Settlement Agreement in 2022.
• Teva agreed to pay up to $3.34 billion over 13 years, along with either $1.2 billion worth of Narcan or $240 million in cash.
• Allergan agreed to pay up to $2 billion over seven years.
• CVS and Walgreens each agreed to pay significant sums—$4.9 billion and $5.5 billion respectively—over 10 and 15 years.
• Walmart committed to paying up to $2.75 billion within six years in 2023.

Virginia’s Opioid Abatement Efforts

Virginia is expected to receive over $1.1 billion through fiscal year 2042 from these settlements. Nearly a third of this amount goes directly to cities and counties that were plaintiffs, while 15% is allocated to the state for distribution by the General Assembly. The remaining 55% flows through the Opioid Abatement Authority, established in 2021 to manage and distribute the funds.

The authority has already received around $180 million and has awarded roughly $110 million in grants to localities across the state. According to Executive Director Tony McDowell, there are two main ways cities can access the funds: direct payments and competitive grants. Cities must apply for these funds, and the competitive grants offer larger amounts for regional projects.

Local Use of Funds

Newport News, for example, has received approximately $1.8 million in direct payments, which has been used for substance use counseling and medications in the city jail, mental health docket operations, and support for mobile medication units and peer recovery programs. The authority has also expanded grant requirements to include mental health conditions and other addictions that often co-occur with opioid misuse.

However, there are concerns about how some localities might spend the money. McDowell noted that while most companies don’t require detailed reporting, the authority has implemented its own guardrails. Localities receiving funds must submit spending reports, and those that commit to using the money solely for approved purposes can receive a 25% increase in available funds.

Nearly 70 localities, including Norfolk, Hampton, Newport News, and Virginia Beach, have opted into the program. On the Peninsula, Hampton and Newport News have received over $100,000 in additional gold standard funds, in addition to individual awards.

The Ongoing Challenge

Despite the influx of funds, the opioid crisis remains a pressing issue. Fatal opioid overdoses have decreased since peaking at over 2,200 in 2021, with 1,221 deaths reported last year. Preliminary data for the first quarter of this year shows 226 overdose-related deaths. In Hampton Roads, over 600 residents died from overdoses in 2022, with fentanyl involved in about 80% of cases. Newport News has been particularly hard-hit, with a 114% increase in Black residents dying from opioid overdoses between 2019 and 2023.

The Opioid Abatement Authority continues to work with localities to ensure the funds are used effectively, encouraging them to act quickly to avoid losing money that could be returned to the state. McDowell emphasized the importance of collaboration and resource-sharing to maximize the impact of these settlements.