Minn. counties, cities face choice: Take opioid money or go it alone?

Letters went out to each county and city in Minnesota last week notifying local government leaders of a choice they'll soon have to make: Will they sign on to a massive national settlement with some of the richest companies accused of fueling the opioid epidemic?

In the past two decades, the public health crisis has cost Minnesota communities thousands of lives and millions of dollars. Agreeing to the proposed deal would mean an influx of money that could help pay for addiction recovery programs, law enforcement, child protection services or the many other expenses incurred because drugmakers and distributors saturated the country with a deadly flood of prescription pills.

"The need is endless. We can't fix things with all the money in the world," said state Rep. Dave Baker, R-Willmar, who helped craft Minnesota's landmark Opioid Epidemic Response Law after his son died from a drug overdose.

As communities strain to respond to a still increasing number of overdoses, Minnesota could receive up to $337 million over 18 years from pharmaceutical giant Johnson & Johnson and three major drug distributors. But the proposed settlement is structured so the state will receive less money if some counties and cities do not sign the agreement, opting instead to maintain the right to pursue litigation on their own.

As local leaders start to mull their options before the end-of-year deadline, discussions about how Minnesota should divvy up and spend its payout are ramping up. Attorney General Keith Ellison is convening a 20-person panel of public health experts, first responders and service providers to recommend how the state should allocate and distribute its settlement dollars.

"They — not attorneys or elected officials — are the people best positioned to figure out how these funds can help the greatest number of Minnesotans the fastest," he said in a statement.

The sweeping $26 billion settlement is a complex, unusual agreement that aims to avoid the pitfalls of the 1998 Big Tobacco settlement. Major cigarette companies agreed to dole out $246 billion to escape liability for harm caused by tobacco use, yet much of that money ended up patching state budget holes instead of funding anti-smoking campaigns or treatment programs.

With resulting skepticism that any winnings from opioid-related litigation would trickle down to their coffers, many local governments across the country — including 26 counties and seven cities in Minnesota — filed their own lawsuits against industry players.

Drug distributors Cardinal Health, AmerisourceBergen and McKesson have been accused of turning a blind eye for years as pharmacies ordered inordinate amounts of prescription pills, while Johnson & Johnson is accused of downplaying the addictive nature of opioids.

Some pharmaceutical companies are continuing to fight such accusations in court, while others settled only with state governments. This deal is an attempt by opioid defendants to achieve overall peace with local governments by resolving as many cases as possible. The proposed agreement would require distributors to submit to new monitoring requirements and specifies that the funds must go toward overdose prevention, addiction recovery, education and other services related to the epidemic.

News of the settlement, which was announced in July, came as the increasing spread of fentanyl and the isolation of the COVID-19 pandemic drove a record-breaking increase in drug overdose deaths in the United States, according to the Centers for Disease Control and Prevention.

Last year, Minnesota recorded 1,008 overdose deaths, a 27% increase from 2019. Julie Bauch, Hennepin County's opioid response coordinator, said data for the first half of 2021 have the county on track to surpass 2020's record-breaking number of overdose deaths — 164 fatalities occurred between January and June, 36 more than what the county saw during the same time frame in 2020.

"Things are bad, and they're getting worse," Bauch said. "We need a significant cash influx for us to be able to make a dent in what's going on."

Similar pleas from communities across the country have fueled calls for local governments to agree to the settlement. Minnesota and 41 other states officially joined the settlement in early September, while a handful of states opted out, seeking more money by going it alone.

The companies have said enough states have signed on for them to continue pursuing the deal. But if at a later date they think an insufficient number of counties and cities have signed on, more than 3,000 lawsuits may be sent back to their home courts, where trials could take years.

"This money could make a really big difference for us," said Tami Jo Lieberg, director of Kandiyohi Community Corrections, who said she is hoping settlement dollars can help fund a jail treatment program in the rural county west of the Twin Cities.

Minnesota counties are jockeying for a substantial portion of the state's allocation, arguing that their public health and social service infrastructures make them well-positioned to coordinate prevention efforts and assist those facing addiction.

Julie Ring, executive director of the Association of Minnesota Counties, said her group is looking to North Carolina's already approved allocation model as an example. Counties and large municipalities there received 80% of the state's settlement money.

The Minneapolis City Attorney's Office said in a statement that the city is working with officials from all levels of government "to ensure a fair and just distribution of any funds collected in settlements."

"Guiding these negotiations is a belief that funds distributed pursuant to settlements should be distributed directly to the agencies who are providing abatement services to those most impacted by the opioid crisis. Those agencies include the Minneapolis Department Health, the Minneapolis Police Department and the Minneapolis Fire Department."

Right now, any money the state receives from opioid-related settlements is funneled into its opioid epidemic response fund, which is managed by a 19-member citizen advisory council.

Half of the money in the fund, which also receives dollars from fees on drug manufacturers, is earmarked for counties and tribes to pay for child protection services.

The rest is supposed to be allocated to public and private service providers through grants, although last year the advisory council canceled its application process because of a revenue shortfall. A spokesperson for the state Department of Human Services said the council expects to distribute $4.9 million in grants this year; a request for proposals has not yet been issued.

As counties seek larger direct payments from the settlement, Ring said local officials are open to discussions about changing the structure of the response fund.

Though child protection costs skyrocketed due to the epidemic, many counties would prefer more flexibility when deciding how to spend money to address the crisis, she said.

Ellison is asking his expert panel to suggest an allocation model by the first week of November so that county boards and city councils have time to vote on the proposal.

Ring said she expects negotiators to come up with a plan that the most counties and cities will approve in order to maximize the settlement funds Minnesota receives.

"I think everybody has that shared interest," she said, "to do what's best for our state."

Katie Galioto • 612-673-4478