Comptroller-led council to distribute more than $1 billion to fight opioid crisis

by | Feb 14, 2023 | Litigation & Local Counsel, Regulatory Risk Analysis and Compliance

Texas is expected to receive an estimated $1.6 billion over the course of 18 years from settlement agreements with pharmaceutical companies and others involved in the opioid crisis. To administer and distribute these settlement funds, the Texas Legislature created the Texas Opioid Abatement Fund Council. Under state law, 15% of the settlement funds will be appropriated by the Texas Legislature to state agencies, 15% will be distributed to counties and cities, and the remaining 70% distributed by the council. Although the council is not accepting grant applications yet, organizations are encouraged to submit information to the council about their opioid abatement programs and strategies.

How much money is there to be distributed, and where does it come from?

In July 2021, a $26 billion settlement was reached between a bipartisan group of attorneys general and three major pharmaceutical distributors—Cardinal, McKesson, and AmerisourceBergen.

Settlement agreements were later reached between the State of Texas and opioid manufacturer Johnson & Johnson, opioid marketing consultant McKinsey, and pharmaceutical companies Endo and Teva.

Texas is estimated to receive about $1.6 billion over the course of 18 years from these six companies through the settlement agreements.

“It is a significant amount of money that’s come into the State of Texas that will be used to fight the opioid . . . epidemic that we’ve had in this state,” said Texas Comptroller Glenn Hegar. “It will go a long way.”

Who decides where the money will be distributed?

The Texas Legislature passed SB 1827 in 2021, outlining how opioid settlement funds will be administered and distributed. SB 1827 is codified in Subtitle R, Chapter 403 of the Texas Government Code.[1]

Money obtained under the “statewide opioid settlement agreement”[2] will be split 15/85 between: (1) an opioid abatement account and (2) an opioid abatement trust fund.

Opioid abatement account

The opioid abatement account is a dedicated account in the general revenue fund that is administered by the comptroller.[3]

The opioid abatement account contains:

  • 15% of the money obtained under the statewide opioid settlement agreement;
  • money received by the state from any other source resulting directly or indirectly from an opioid-related lawsuit, other than money distributed to a political subdivision of the state in accordance with the terms of a settlement agreement or judgment;
  • money appropriated or transferred to the account by the Texas Legislature;
  • gifts and grants contributed to the account; and
  • earnings on the principal of the account.

Money in the opioid abatement account can only be appropriated (by the Texas Legislature) “to a state agency for the abatement of opioid-related harms.”

Opioid abatement trust fund

The opioid abatement trust fund is a trust fund, outside the state treasury, that is administered by the Texas Treasury Safekeeping Trust Company.[4] The opioid abatement account contains:

  • 85% of the money obtained under the statewide opioid settlement agreement; and
  • interest, dividends, and other income of the fund.

The trust company is required to allocate the 85% from the statewide opioid settlement agreement as follows:

  • 15% of the money from the settlement must be distributed to counties and cities “to address opioid-related harms in those communities;”
  • of the remaining 70% from the settlement: (i) $5 million must be distributed to the to the Texas Access to Justice Foundation, to provide legal services to indigent persons and children impacted by opioid use; and (ii) the remainder of that 70% must be distributed to the Texas Opioid Abatement Fund Council.

As Comptroller Hegar has explained, there are essentially three buckets for the opioid settlement funds: “70% of it’s going to come to the council to make a decision. 15% of it is going to be up to the legislature to decide how they want to spend those dollars. And then 15% of it is going to the local cities and counties that were part of this litigation.”

Texas Opioid Abatement Fund Council

The Texas Opioid Abatement Fund Council was established in 2021 by the Texas Legislature and tasked with developing “evidence-based opioid abatement strategies” and an allocation methodology to distribute funds, including a grant program.[5]

The council is comprised of 14 appointed members, including the comptroller (or his or her designee), who is also the presiding member. The council is administratively attached to the comptroller’s office, which provides the staff and facilities necessary to assist the council.

As mentioned above, the council receives 70% of the money obtained from a statewide opioid settlement agreement (after the $5 million distribution to the Texas Access to Justice Foundation). Of the funds it receives, the council is required to allocate:

  • 1% to the comptroller for administration costs;
  • 15% to hospital districts; and
  • the remaining money based on the opioid abatement strategy developed by the council under Tex. Gov’t Code § 403.509.

The council is required to report annually to the Texas Legislature, detailing all expenditures made by the council during the prior fiscal year.[6]

As of October 2022, the council had received around $100 million in funds. In November 2022, the council made its first transfer of funding in the amount of $5 million to the Texas Access to Justice Foundation.

According to the comptroller’s website, as of early February 2023, “Staff for the Opioid Abatement Fund Council is presently engaging in fact gathering about opioid abatement programs and strategies that may fit within the scope of the Council’s work. Organizations are encouraged to submit information about your organization’s opioid abatement programs and strategies for informational purposes only.”

On February 15, 2023, the council met to consider publication of rules to implement the grant program.

[1] Tex. Gov’t Code §§ 403.501-403.511.

[2] “Statewide opioid settlement agreement” means “all settlement agreements and related documents entered into by this state through the attorney general, political subdivisions that have brought a civil action for an opioid-related harm claim against an opioid manufacturer, distributor, or retailer, and opioid manufacturers, distributors, or retailers relating to illegal conduct in the marketing, promotion, sale, distribution, and dispensation of opioids that provide relief for this state and political subdivisions of this state.” Tex. Gov’t Code § 403.501(5).

[3] Tex. Gov’t Code § 403.505.

[4] Tex. Gov’t Code §§ 403.501(6); 403.506.

[5] Tex. Gov’t Code § 403.509.

[6] Tex. Gov’t Code § 403.502.

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