Dan Clark article on Opioid Stewardship Act

March 29, 2024

Will New York have to refund money to opioid companies?

 A state appellate court heard arguments Friday in a case that could force the state to refund opioid companies millions of dollars.

There was a lot of attention paid to opioid addiction in New York about six years ago.

  • There’s still a lot now, but that was when the state was preparing to sue opioid companies over the addiction crisis.
  • Those lawsuits alone have resulted in settlements totaling $2.6 billion.

But there’s a different case working its way through the courts now based on a bill approved by the Legislature in 2018.

That was the Opioid Stewardship Act — a law that’s been the subject of litigation since it was signed by former Gov. Andrew CUOMO that year.

The parts of that law that are most relevant here:

  • The law required opioid companies that do business in New York to collectively pay $200 million to the state.
  • The amount each company had to pay was based on the share of opioids they sold in New York in 2017 and 2018.

In other words: The law required opioid companies to collectively pay $100 million for their share of that business in 2017, and another $100 million for their sales in 2018.

Opioid companies then sued in state court to try to strike down what remained of the law. That was in 2022.

They’ve had a two main arguments to have the law struck down:

  • They said that charging opioid companies for their activities in 2017 with a law approved in 2018 was unconstitutionally retroactive.
  • And they argued that if any part of the law was unconstitutional, the court should throw the whole thing out.

The opioid companies lost at the trial court level, and appealed.

That brings us to Friday, when the case was heard by the Third Department, Appellate Division in Albany.

Attorneys for the coalition of pharmaceutical companies — which includes big names like AmerisourceBergen and McKesson — made their case.

  • They used the same arguments, saying the appellate court should reverse the trial court’s decision.
  • They also want a refund of the $57.4 million in payments they made to the state for their 2017 activity; I couldn’t find the amount for their 2018 activity. 

“The surcharges, which are retroactive, violate due process under both the U.S. and the New York constitutions,” said Jonathan Massey, an attorney from Massey & Gail in Washington, D.C., who’s representing the companies.

Presiding Justice Elizabeth Garry pushed back on that point, saying other laws that enacted retroactive payments haven’t been struck down.

“There is case law that would define this as a relatively short period, from what I understand, and the forewarning is part of the analysis as well,” Garry said.

Massey argued that there was no forewarning because they didn’t know the law would pass in 2018 when they were doing business in 2017.

Frederick Brodie, an assistant solicitor general representing the state, argued that the companies got a heads-up on the law for at least the second year when it was proposed in January 2018. 

  • It wasn’t passed until April, when it was part of (yes!) the state budget.

“Plaintiffs had knowledge of the opioid tax for almost all of 2018,” Brodie argued. “The opioid tax was introduced in the governor’s proposed budget on Jan. 16, 2018.”

He also argued that the court could decide the case in a way that struck down the payments based on business activity in 2017, while keeping the 2018 payments.

  • Brodie used most of his time before the five-judge panel to argue that some parts of the law could be struck down while others could survive.

So, we’ll see where that one lands when the court makes its decision.