Businesses are pitching local governments to give them money from the national opioid settlement; Ky. advisers say to go slow

Photo: SafeRx makes locking pill bottles (left) with a four-digit code to store medications. The BolaWrap device (top right), which aims to help law enforcement detain people without the use of force, shoots a 7½-foot Kevlar tether more than a dozen feet through the air until it wraps around a person’s limbs or torso. Deterra pouches (bottom right) deactivate unwanted pills so they can’t be misused even if fished out of the trash. (CARING CLOSURES INTERNATIONAL; WRAP TECHNOLOGIES; VERDE ENVIRONMENTAL TECHNOLOGIES)

Information for this story was also gathered by Kentucky Health News.

By Aneri Pattani, KFF Health News, Republished from Kentucky Health News

The pitches are bold and arriving fast: Invest opioid settlement dollars in a lasso-like device to help police detain people without Tasers or pepper spray. Pour money into psychedelics, electrical stimulation devices, and other experimental treatments for addiction.

Opioid manufacturers and distributors are paying more than $54 billion in restitution to settle lawsuits about their role in the overdose epidemic, with little oversight on how the money is spent. KFF Health News and Kentucky Health News are tracking how state and local governments use or misuse the cash.

The marketing pitches land daily in the inboxes of state and local officials in charge of distributing money from the settlements in opioid lawsuits over the next two decades or more. Kentucky is getting $900 million, split evenly between the state and local governments.

The money is coming from an array of companies that made, sold, or distributed prescription painkillers, including Johnson & Johnson, AmerisourceBergen and Walgreens. Thousands of state and local governments sued the companies for aggressively promoting and distributing opioid medications, fueling an epidemic that progressed to heroin and fentanyl and has killed more than half a million Americans. The settlement money, arriving over nearly two decades, is meant to remediate the effects of that corporate behavior.

But as the dollars land in government coffers — more than $4.3 billion as of early November — a swarm of private, public, nonprofit, and for-profit entities are eyeing the gold rush. Some people fear that corporations, in particular — with their flashy products, robust marketing budgets, and hunger for profits — will now gobble up the windfall meant to rectify it.

“They see a cash cow,” said JK Costello, director of behavioral health consulting for the Steadman Group, a firm that is being paid to help local governments administer the settlements in Colorado, Kansas, Oregon, and Virginia. “Everyone is interested.”

Officials of the Kentucky Association of Counties and the Kentucky League of Cities told Kentucky Health News that they are advising cities and counties to rush to spend the funds, because they don’t expire and might be used more effectively if they are allowed to accumulate.

Morgain Patterson, the cities league’s law director, said it is encouraging the state’s 149 eligible cities to form partnerships “to build more of an infrastructure” for things like job training for people in recovery. She noted that Ashland, which is getting about $100,000 a year from settlements, issued a request for proposals from people and groups interested in the funds.

Tim Sturgill, general counsel for the counties association, said it has hired a new employee, starting Jan. 4, who will help county officials understand both what they can and should do with the money.

The key to deciding how to spend the settlement money, public-health and policy experts told KFF Health News, is to critically evaluate products or services to see if they are necessary, evidence-based, and sustainable, instead of flocking to companies with the best marketing. Otherwise, “you end up with lots of shiny objects,” Costello said. And, ultimately, failure to do due diligence could leave some jurisdictions holding an empty bag.

Van Ingram, executive director of Kentucky’s Office of Drug Control Policy and former police chief in Maysville, told League of Cities writer Jeff Moreland that local governments need to be cautious.

“I think they need to put the brakes on, and I think you can’t get too much stakeholder input,” Ingram said. “We need to be hearing from our public health departments; we need to be hearing from any treatment providers we have in the area. We need to hear from people who are in recovery now and find out what barriers they are facing. It’s time to do a community inventory of recovery capital and look at the things you have in place, but more importantly, the things you don’t have in place.”

Ingram added, “I’m encouraging community leaders to develop a five- to 10-year plan. This money is spread out over 18 years, and you’ve got to have a direction you want to go in and a plan you want to meet. We’ve got one shot at this, and then it’s gone. I think it’s incumbent upon the state and communities to spend these dollars wisely.”

KFF Health News obtained emails in eight states that show health departments, sheriffs’ offices, and councils overseeing settlement funds are receiving a similar deluge of messages. In the emails, marketing specialists offer phone calls, informational presentations, and meetings with their companies.

In 2022, North Carolina lawmakers allotted $1.85 million of settlement funds for a pilot project using the first FDA-approved app for opioid use disorder, developed by Pear Therapeutics. There were high hopes the app would help people stay in treatment longer. But less than a year later, Pear filed for bankruptcy.

The state hadn’t paid the company yet, so the money isn’t lost, according to the North Carolina Department of Health and Human Services. But the department and lawmakers have not decided what to do with those dollars next.

$1 million for drug-disposal pouches

Jason Sundby, CEO of Verde Environmental Technologies, said the Deterra pouches his company sells are a low-cost way to prevent expensive addictions.

Customers place their unused medications in a Deterra pouch and add water, deactivating the drugs before tossing them, ensuring they cannot be used even if fished out of the trash. A medium Deterra pouch costs $3.89 and holds 45 pills.

The goal is to “get these drugs out of people’s homes before they can be misused, diverted, and people start down the path of needing treatment or naloxone or emergency room visits,” Sundby said.

Sundby’s company ran an ad about spending settlement dollars on its product in a National Association of Counties newsletter and featured similar information online.The Deterra website prominently features opioid settlement funds as a potential funding stream to purchase drug disposal pouches. Several other companies have taken similar approaches, urging consumers to consider applying opioid settlement funds to their products.

It may be paying off. Deterra is set to receive $1 million in settlement funds from the health department in Delaware County, Pennsylvania, and $12,000 from the sheriff in Henry County, Iowa. The company also has partnerships with St. Croix and Milwaukee counties in Wisconsin, and is working on a deal in Connecticut.

Several other companies with similar products have also used their product sites to urge jurisdictions to consider the settlements as a funding stream — and they’re seeing early success.

DisposeRx makes a drug-deactivation product — its version costs about a dollar each — and received $144,000 in South Carolina for mailing 134,000 disposal packets to a program that educated high school football players, coaches, and parents about addiction.

SafeRx makes $3 pill bottles with a locking code to store medications and was awarded $189,000 by South Carolina’s opioid settlement council to work with the Greenville County Sheriff’s Office and local prevention groups. It also won smaller awards from Weld and Custer counties in Colorado.

None of the companies said they are dependent on opioid settlements to sustain their business long-term. But the funds provide a temporary boost. In a 2022 presentation to prospective investors, SafeRx called the opioid settlements a “growth catalyst.”

Critics of such investments say the products are not worthwhile. Today’s crisis of fatal overdoses is largely driven by illicit fentanyl. Even if studies suggest the companies’ products make people more likely to safely store and dispose of medications, that’s unlikely to stem the record levels of deaths seen in recent years.

“The plausible mechanism by which they would even be able to reduce overdose is a mystery because prescription medications are not driving overdose,” said Tricia Christensen, policy director with the nonprofit Community Education Group, which is tracking settlement spending across Appalachia.

Safe storage and disposal can be accomplished with a locking cabinet and toilet, she said. The FDA lists opioids on its flush list for disposal and says there is no evidence that low levels of the medicines that end up in rivers harm human health.

Milton Cohen, CEO of SafeRx’s parent company, Caring Closures International, said keeping prescription medicines secure addresses the root of the epidemic. Fentanyl kills, but often where people start, “where water is coming into the boat still, is the medicine cabinet,” he said. “We can bail all we want, but the right thing to do is to plug the hole first.”

SafeRx has been awarded $189,000 in opioid settlement funds in South Carolina to work with the Greenville County sheriff and local prevention groups.

Products to secure and dispose of drugs also provide an opportunity for education and destigmatization, said Melissa Lyon, director of Pennsylvania’s Delaware County Health Department. The county plans to mail Deterra pouches and postcards about preventing addiction to three-quarters of its residents.

“The Deterra pouch is to me a direct correlation” to the overprescribing that came from pharmaceutical companies’ aggressive marketing, Lyon said. Since the settlement money is to compensate for that, “this is a good use of the funds.”

Law-enforcement that the Justice League would envy

Other businesses making pitches for settlement funds have a less clear relationship to opioids.

Wrap Technologies creates tools for law enforcement to reduce lethal uses of force. Its chief product, the BolaWrap, shoots a 7½-foot Kevlar tether more than a dozen feet through the air until it wraps around a person’s limbs or torso — almost like Wonder Woman’s Lasso of Truth.

Terry Nichols, director of business development for the company, said the BolaWrap can be used as an alternative to Tasers or pepper spray when officers need to detain someone experiencing a mental-health crisis or committing crimes related to their addiction, like burglary.

“If you want to be more humane in the way you treat people in substance use disorder and crisis, this is an option,” he said.

The company posts body camera footage of officers using BolaWrap on YouTube and says that out of 192 field reports of its use, about 75% of situations were resolved without additional use of force.

When officers de-escalate situations, people are less likely to end up in jail, Nichols said. And diverting people from the criminal justice system is among the suggested investments in opioid settlement agreements.

That argument convinced the city of Brownwood, Texas, where Nichols was police chief until 2019. It has spent about $15,000 of opioid settlement funds to buy nine BolaWrap devices.

After Brownwood’s purchase, Wrap Technologies issued a press release that did not mention Nichols but quoted Kevin Mullins encouraging more law-enforcement agencies to “take the opportunity afforded by the opioid-settlement funds to empower their officers.” The company has also sent a two-page document to police departments explaining how settlement funds can be used to buy BolaWraps.

Language from that document appeared nearly word-for-word in a briefing sheet given to Brownwood City Council before the BolaWrap purchase, listing “Chief Terry Nichols (Ret.)” as the company contact. The council voted unanimously for the buy.

BolaWrap’s process hasn’t been as smooth elsewhere. In Hawthorne, California, the police department planned to buy 80 BolaWraps using opioid-settlement funds. After it paid its first installment of about $25,000 in June, the state Department of Health Care Services informed it that the BolaWrap is not an allowable use of these dollars.

Sturgill said he hasn’t heard of any Kentucky counties buying BolaWraps.

Patterson said some local governments have spent money to increase local addiction treatment and recovery programs, and the league is advising its cities that they sign a memorandum of understanding with such providers to fully document how the funds are being used.

She said that if a local government spends settlement money on things not mentioned in the settlement agreements or state law, it is required to report that to the state attorney general, who oversees settlement spending in Kentucky.

How are your local governments spending their settlement money, or planning to spend it?

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KFF Health News is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KFF Health News is one of the three major operating programs at KFF. KFF is an endowed nonprofit organization providing information on health issues to the nation.

Kentucky Health News is an independent news service of the Institute for Rural Journalism and Community Issues, based in the School of Journalism and Media at the University of Kentucky, with support from the Foundation for a Healthy Kentucky.