New York to pay $200K in attorneys' fees to opioid surcharge challenger

(Reuters) - New York will pay $200,000 in attorneys’ fees to a trade group for generic drugmakers that successfully challenged part of the state’s Opioid Stewardship Act.

Manhattan-based U.S. District Judge Katherine Polk Failla on Friday approved the fee award negotiated by the state and the Association for Accessible Medicines (AAM), represented by Matthew Rowen of Kirkland & Ellis.

The 2018 Opioid Stewardship Act established a plan to defray New York’s cost of dealing with opioid addictions by collecting $600 million, over a six-year period, from opioid makers and distributors. But AAM argued the law was unconstitutional because it blocked the companies from passing the cost along to consumers. Failla agreed with AAM in December 2018, stopping the entire law from going into effect.

The state dropped the “pass-through prohibition” in 2019, but successfully appealed Failla’s ruling that the rest of the law was unconstitutional. The U.S. Supreme Court refused to review the state’s appellate win last October.

Two weeks later, Failla ruled that since the appeal had not addressed the pass-through prohibition, the association and two other challengers were entitled to attorneys’ fees for successfully opposing it.

The other challengers were SpecGx, which is a subsidiary of generic drugmaker Mallinckrodt; and the Healthcare Distribution Alliance, a trade group for opioid distributors.

SpecGx's counsel at Ropes & Gray notified Failla on Feb. 8 that they are negotiating a separate fee award from the state and plan to submit it next month. The company filed for bankruptcy protection in Delaware in October 2020 along with Mallinckrodt, whose plan of reorganization – which includes $1.7 billion to settle thousands of opioid-liability lawsuits nationwide -- was approved on Feb. 3.

No request for attorneys’ fees appears on the case docket for the Healthcare Distribution Alliance, which is represented by attorneys at McDermott Will & Emery. The Alliance’s members include McKesson Corp, AmerisourceBergen, and Cardinal Health, which have jointly proposed settling state- and local-government opioid claims for up to $21 billion.

Attorneys for the parties did not immediately respond to requests for comment on Friday.

The case is Association for Accessible Medicines v. Letitia James, as Attorney General of New York, U.S. District Court for the Southern District of New York No. 18-8180 (associated with SpecGx LLC v. James, No. 18-9830; and Healthcare Distribution Alliance v. James, No. 18-6168).

For AAM: Matthew Rowen of Kirkland & Ellis

For James: Seth Farber and James Hershler of the New York State OAG

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