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Wall Street's fear of an opioids settlement

Data: Money.net; Chart: Axios Visuals

The stock prices of AmerisourceBergen, Cardinal Health and McKesson plummeted yesterday after Bloomberg reported the drug distributors made an opening offer of $10 billion to settle their portion of the national opioids lawsuit.

Between the lines: That figure was a lot higher than Wall Street had expected for those companies, indicating that other defendants — including opioid manufacturers — likely would pay tens of billions of dollars to avoid going to trial.

The intrigue: The investment bank Barclays held an investor lunch in June to size up how much drug distributors could pay to settle allegations they were negligent in the shipping and monitoring of potent painkillers — allegations that have since been tied to newly released federal data.

  • A legal expert at the lunch pegged the drug wholesalers' liabilities between $1 billion and $2 billion, far below their reported initial offer and the $45 billion counter-offer from states.
  • "This may be just the starting point for negotiations, which suggests the actual liability could be higher," Barclays analysts warned Tuesday.

The bottom line: Millions of people have suffered from the opioid epidemic, and the litigation is so complex that a deal is far from certain. But the early numbers show that while a settlement would not bankrupt the major drug distributors, it's not an immaterial amount either.

  • "Even if paid out over multiple decades, it's a potentially meaningful drag," analysts at Robert W. Baird & Co. wrote.