One Arizona Opioid agrmnt signed.pdf

OFFICE OF THE ATTORNEY GENERAL

Mark BrNovicH
State oF ARIZONA

ATTORNEY GENERAL

March 7, 2022

Dear Community Leaders,

I want to thank each of you again for your collaboration on the One Arizona Distribution
Agreement. Attached please find the fully executed agreement for your records.

On February 24, 2022, the Distributors and Johnson & Johnson provided notice that they are
proceeding with the settlements. In the coming months our office will file a complaint and consent
judgment to implement the agreements in Arizona. With your support we were able to maximize funds to

Arizona, totaling over half a billion dollars over the payment term of the settlements.

Next, I want to remind you of what follows in the settlement funding process. First, funds will be
sent from the Settlement Fund Administrator directly to Arizona counties in accordance with the One
Arizona Plan. These payments will include the funds due to the constituent cities and towns in that
county. Cities and towns will receive Lonel ateann ane air county in accordance with the One
Arizona Plan. Arizona can expect to receive the first pa he Distributors on or around April 2,

22.7 ayme j 1 ona with $10.5 million going to local governments.
The first payment a Tien & Johnson is abedated to rm made on July 1, 2022. The payment will
total $6.7 million to Arizona with $3.8 million going to local governments. The remaining 2022 annual
payments from the Distributors and Johnson & Johnson are scheduled to be made on July 15, 2022 and
will total $35.4 million to Arizona with $19.8 million going to local governments.

Again, thank you to each of you for your part in reaching this agreement, and we look forward to
continuing our collaboration and using these funds to address the opioid epidemic in our state.

Sincerely,

Mark Brnovich

2005 NortH Centrat Avenue, PHoenix, Arizona 85004 ® PHone 602.542.4266 © Fax 602.542.4085 © www.azaG.Gov

ONE ARIZONA DISTRIBUTION OF OPIOID SETTLEMENT FUNDS
AGREEMENT

General Principles

The people of the State of Arizona and Arizona communities have been harmed by the
opioid epidemic, which was caused by entities within the Pharmaceutical Supply Chain.

The State of Arizona, ex rel. Mark Brnovich, Attorney General (the “State”), and certain
Participating Local Governments are separately engaged in litigation seeking to hold the
Pharmaceutical Supply Chain Participants accountable for the damage they caused.

The State and the Participating Local Governments share a common desire to abate and
alleviate the impacts of the Pharmaceutical Supply Chain Participants’ misconduct
throughout the State of Arizona.

The State and the Participating Local Governments previously entered into the One
Arizona Opioid Settlement Memorandum of Understanding for the purpose of jointly
approaching Settlement negotiations with the Pharmaceutical Supply Chain Participants.

The State and the Participating Local Governments now enter into this One Arizona
Distribution of Opioid Settlement Funds Agreement (“Agreement”) to establish binding
terms for the distribution and spending of funds from Settlements with the Pharmaceutical
Supply Chain Participants.

A. Definitions

As used in this Agreement:

1:

“Approved Purpose(s)” shall mean those uses identified in the agreed Opioid Abatement
Strategies attached as Exhibit A.

“Contingency Fee Fund” shall mean a sub fund established in a Settlement for the purpose
of paying contingency fees, such as the Attorney Fee Fund described in Section I.V of the
Settlement with the Settling Distributors and the sub fund of the Attorney Fee Fund
described in Section II.D of the Settlement with J&J.!

“J&J” shall mean Johnson & Johnson, Janssen Pharmaceuticals, Inc., OrthoMcNeil-
Janssen Pharmaceuticals, Inc., and Janssen Pharmaceutica, Inc.

“Litigation” means existing or potential legal claims against Pharmaceutical Supply Chain
Participants seeking to hold them accountable for the damage caused by their misfeasance,
nonfeasance, and malfeasance relating to the unlawful manufacture, marketing, promotion,
distribution, or dispensing of prescription opioids.

' Text of both settlements available at https://nationalopioidsettlement.com.

“Opioid Funds” shall mean monetary amounts obtained through a Settlement as defined in
this Agreement.

“Participating Local Government(s)” shall mean all counties, cities, and towns within the
geographic boundaries of the State that have chosen to sign on to this Agreement and each
applicable Settlement. The Participating Local Governments may be referred to separately
in this Agreement as “Participating Counties” and “Participating Cities and Towns” (or
“Participating Cities or Towns,” as appropriate).

“Parties” shall mean the State and the Participating Local Governments.

“Pharmaceutical Supply Chain” shall mean the process and channels through which licit
opioids are manufactured, marketed, promoted, distributed, or dispensed.

“Pharmaceutical Supply Chain Participant” shall mean any entity that engages in or has
engaged in the manufacture, marketing, promotion, distribution, or dispensing of licit
opioids.

. “Settlement” shall mean the negotiated resolution of legal or equitable claims against a

Pharmaceutical Supply Chain Participant when that resolution has been jointly entered into
by the State and the Participating Local Government and approved as final by a court of
competent jurisdiction.

. “Settling Distributors” shall mean McKesson Corporation, Cardinal Health, Inc., and

AmerisourceBergen Corporation.

. “Trustee” shall mean either (1) an independent trustee who shall be responsible for the

ministerial task of releasing the Opioid Funds that are in trust as authorized herein and
accounting for all payments into or out of the trust, or (2) a settlement fund administrator,
in the event that the Settlement includes a fund administrator. In either case, the Trustee
will distribute funds in accordance with this Agreement.

B. Intrastate Regions

Is

The State of Arizona will be divided into regions, each of which will be referred to as a
“Region” and will consist of: (1) a single Participating County and all of its Participating
Cities and Towns; or (2) all of the Participating Cities and Towns within a non-
Participating County. If there is only one Participating City or Town within a non-
Participating County, that single Participating City or Town will still constitute a Region.
Two or more Regions may at their discretion form a group (“Multicounty Region”).
Regions that do not choose to form a Multicounty Region will be their own Region.
Participating Cities and Towns within a non-Participating County may not form a Region
with Participating Cities and Towns in another county.

The LG Share funds described in Section C(1) will be distributed to each Region according
to the percentages set forth in Exhibit B. The Regional allocation model uses three equally
weighted factors: (1) the amount of opioids shipped to the Region; (2) the number of opioid
deaths that occurred in that Region; and (3) the number of people who suffer opioid use
disorder in that Region. In the event any county does not participate in this Agreement, that

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county’s percentage share shall be reallocated proportionally amongst the Participating
Counties by applying this same methodology to only the Participating Counties.

3. In single-county Regions, that county’s health department will serve as the lead agency
responsible for distributing the LG Share funds. That health department, acting as the lead
agency, shall consult with the cities and towns in the county regarding distribution of the
LG Share funds.

4. For each Multicounty Region, an advisory council shall be formed from the Participating
Local Governments in the Multicounty Region to distribute the collective LG Share funds.
Each advisory council shall include at least three Participating Local Government
representatives, not all of whom may reside in the same county. Each advisory council
shall consult with the Participating Local Governments in the Multicounty Region
regarding distribution of the collective LG Share funds.

5. For each Region consisting of the Participating Cities and Towns within a non-
Participating County, an advisory council shall be formed from the Participating Cities and
Towns in the Region to distribute the LG Share funds. Each advisory council shall include
at least three representatives from the Participating Cities and Towns in the Region, or a
representative from each Participating City and Town if the Region consists of fewer than
three Participating Cities and Towns. In no event may more than one individual represent
the same city or town. To the extent any Participating Cities or Towns in the Region are
not represented on the advisory council, the advisory council shall consult with the non-
represented Participating Cities and Towns regarding distribution of the collective LG
Share funds.

C. Allocation of Settlement Proceeds

1. All Opioid Funds shall be divided with 44% to the State (“State Share”) and 56% to the
Participating Local Governments (“LG Share”).?

2. All Opioid Funds, except those allocated to payment of counsel and litigation expenses as
set forth in Section E, shall be utilized in a manner consistent with the Approved Purposes
definition. Compliance with this requirement shall be verified through reporting, as set out
in Section F.

3. Each LG Share will be distributed to each Region or Multicounty Region as set forth in
Section B(2). Participating Counties and their constituent Participating Cities and Towns
may distribute the funds allocated to the Region or Multicounty Region amongst
themselves in any manner they choose. If a county and its cities and towns cannot agree on
how to allocate the funds, the default allocation in Exhibit C will apply. The default
allocation formula uses historical federal data showing how each county and the cities and
towns within it have made opioids-related expenditures in the past. Ifa county or any cities
or towns within a Region or Multicounty Region do not sign on to this Agreement and each

* This Agreement assumes that any opioid settlement for Native American Tribes and Third-Party
Payors, including municipal insurance pools, will be dealt with separately.

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10.

Settlement, and if the Participating Local Governments in the Region or Multicounty
Region cannot agree on how to allocate the funds from that Settlement amongst
themselves, the funds shall be reallocated proportionally by applying this same
methodology to only the Participating Local Governments in the Region or Multicounty
Region.

If the LG Share for a given Participating Local Government is less than $500, then that
amount will instead be distributed to the Region or Multicounty Region in which the
Participating Local Government is located to allow practical application of the abatement
remedy. If the county did not sign on to the Settlement as defined herein, the funds will be
reallocated to the State Share.

The State Share shall be paid by check or wire transfer directly to the State through the
Trustee, who shall hold the funds in trust, or as otherwise required by a Settlement for the
benefit of the State, to be timely distributed as set forth in C(1) herein. The LG Share shall
be paid by check or wire transfer directly to the Regions or Multicounty Regions through
the Trustee, who shall hold the funds in trust, or as otherwise required by a Settlement for
the benefit of the Participating Local Governments, to be timely distributed as set forth in
B(2), C1), C(3), and C(4) herein.

The State Share shall be used only for (1) Approved Purposes within the State or (2) grants
to organizations for Approved Purposes within the State.

The LG Share shall be used only for (1) Approved Purposes by Participating Local
Governments within a Region or Multicounty Region or (2) grants to organizations for
Approved Purposes within a Region or Multicounty Region.

The State will endeavor to prioritize up to 30% of the State Share for opioid education and
advertising related to awareness, addiction, or treatment; Department of Corrections and
related prison and jail opioid uses; and opioid interdiction and abatement on Arizona’s
southern border, including grants to assist with the building, remodeling and/or operation
of centers for treatment, drug testing, medication-assisted treatment services, probation,
job training, and/or counseling services, among other programs.

If the federal Center for Medicare and Medicaid Services (“CMS”) disallows any federal
funding for the State’s Medicaid programs pursuant to 42 U.S.C. § 1396b as a consequence
of sums received pursuant to resolution of any Litigation with Pharmaceutical Supply
Chain Participants, or otherwise seeks to recover sums it regards as the federal share of any
Settlement, the amount recovered by CMS shall first be paid from the total amount of
Opioid Funds available to the Parties under that Settlement and the distribution to the State
and Participating Local Governments shall thereafter be made from the remaining funds.

The Parties acknowledge and agree that any Settlement may require Participating Local
Governments to release all their claims against the settling Pharmaceutical Supply Chain
Participants to receive Opioid Funds. The Parties further acknowledge and agree based on
the terms of any such national Settlement, a Participating Local Government will not
receive funds through this Agreement until it has complied with all requirements set forth

in that national Settlement to release its claims. This Agreement is not a promise by any
Party that any Settlement (including any Settlement resolved through bankruptcy) will be
finalized or executed.

D. Participation of Cities and Towns

hs

By signing on to the Agreement and any Settlement, a Participating County will receive
60% of its available LG Share for that Settlement when distribution under that Settlement
occurs. Any such Participating County will receive up to an additional 40% of its available
LG Share for that Settlement by securing the participation of its constituent cities and towns
as signatories to this Agreement and that Settlement when distribution under that
Settlement occurs. The sliding scale attached as Exhibit D will determine the share of funds
available to the Participating County.’

If a Participating County does not achieve 100% participation of its cities and towns within
the period of time required in a Settlement document for subdivision participation, the
remaining portions of the LG Share that were otherwise available to the Participating
County will be reallocated to (i) the State Share and (ii) the LG Share for the Participating
Counties which have achieved 100% participation of their cities and towns in accordance
with the percentages described in Sections B(2), C(1), and C(3), and set forth in Exhibits
Band C.

E. Payment of Counsel and Litigation Expenses

1.

The Parties anticipate that any Settlement will provide for the payment of all or a portion
of the fees and litigation expenses of certain state and local governments.

If the court in In Re: National Prescription Opiate Litigation, MDL No. 2804 (N.D. Ohio)
or if a Settlement establishes a common benefit fund or similar device to compensate
attorneys for services rendered and expenses incurred that have benefited plaintiffs
generally in the litigation (the “Common Benefit Fund”), and requires certain
governmental plaintiffs to pay a share of their recoveries from defendants into the Common
Benefit Fund as a “tax,” then the Participating Local Governments shall first seek to have
the settling defendants pay the “tax.” If the settling defendants do not agree to pay the
“tax,” then the “tax” shall be paid from the LG Share prior to allocation and distribution of
funds to the Participating Local Governments.’

3 Population allocation of cities and towns within counties will be derived from the population
data included in any national Settlement. If such data is not included in the respective national
Settlement, then population allocation will be determined from those cities and towns listed in
Exhibit C. The data in Exhibit C is derived from the U.S. Census Estimate (July 1, 2019).

‘ This paragraph shall not apply to the Settlement with the Settling Distributors or the Settlement
with J&J.

3.] Any governmental entity that seeks attorneys’ fees and expenses from the Litigation shall
seek those fees and expenses first from the national Settlement.’ In addition, the Parties

agree That the RAMitel asia ieteegmsnonts lL te soee cep element AED

4. In the event that any Settlement imposes additional limitations or obligations on the
payment of counsel and litigation expenses, those limitations and obligations take
precedence over this Agreement.

5. The Backstop Fund is to be used to compensate counsel for Participating Local
Governments that filed opioid lawsuits by September 1, 2020 (“Litigating Participating
Local Governments”). Payments out of the Backstop Fund shall be determined by a
committee consisting of one representative from each of the Litigating Participating Local
Governments (the “Opioid Fee and Expense Committee”).

6. The amount of the Backstop Fund shall be determined as follows: From any national
Settlement, the funds in the Backstop Fund shall equal 14.25% of the LG Share for that
Settlement. No portion of the State Share shall be used for the Backstop Fund or in any
other way to fund any Participating Local Government’s attorney’s fees and costs. If
required to do so by any Settlement, Participating Local Governments must report to the
national Settlement Fund Administrator regarding contributions to, or payments from, the
Backstop Fund.

7. The maximum percentage of any contingency fee agreement permitted for compensation
shall be 25% of the portion of the LG Share attributable to the Litigating Participating
Local Government that is a party to the contingency fee agreement, plus expenses
attributable to that Litigating Participating Local Government, unless a Settlement or other
court order imposes a lower limitation on contingency fees. Under no circumstances may
counsel collect more for its work on behalf of a Litigating Participating Local Government
than it would under its contingency agreement with that Litigating Participating Local
Government.

8. Payments to counsel for Participating Local Governments shall be made from the Backstop
Fund in the same percentages and over the same period of time as the national Contingency
Fee Fund for each settlement. The Attorneys’ Fees and Costs schedule for the Settling
Distributors is listed in Exhibit R §(ID(S)(1) of the Settlement with the Settling

5 The State retained outside counsel in the Purdue litigation and if it is unable to secure payment
of attorneys’ fees and expenses from the bankruptcy proceedings in an amount sufficient to
compensate outside counsel consistent with the terms of the State’s contract with that outside
counsel, any remaining attorneys’ fees and expenses related to the representation of the State will
first be paid directly from the total amount of Opioid Funds available to the Parties under that
Settlement, up to the agreed amount in the outside counsel contract, and the distribution to the
State and Participating Local Governments shall thereafter be made from the remaining funds.

Distributors.° The Attorneys’ Fees and Costs schedule for J&J is listed in Exhibit R
§(ID)(A)(1) of the Settlement with J&J.’ For future Settlements with other defendants in the
Pharmaceutical Supply Chain, any necessary payments to counsel for Participating Local
Governments shall be made from the Backstop Fund in the same percentages and over the
same periods of time as the fee funds for those Settlements, if applicable, subject to the
limitations set forth in this Agreement set form in paragraph E(7) above.

Any funds remaining in the Backstop Fund in excess of the amounts needed to cover
private counsel’s representation agreements shall revert to the Participating Local
Governments according to the percentages set forth in Exhibits B and C, to be used for
Approved Purposes as set forth herein and in Exhibit A.

F. Compliance Reporting and Accountability

—

Ls

If the State and Participating Local Governments use a Trustee for purposes of distributing
funds pursuant to any Settlement, the Trustee shall be requested to provide timely an up-
to-date accounting of payments into or out of any trust established to hold such funds and/or
its subaccounts upon written request of the State or a Participating Local Government.

The State, Regions, and Participating Local Governments may object to an allocation or
expenditure of Opioid Funds solely on the basis that the allocation or expenditure at issue
(1) is inconsistent with provision C(1) hereof with respect to the amount of the State Share
or LG Share; (2) is inconsistent with an agreed-upon allocation, or the default allocations
in Exhibits B and C, as contemplated by Section C(3); or (3) violates the limitations set
forth in F(3) with respect to compensation of the Trustee. The objector shall have the right
to bring that objection within two years of the date of its discovery to a superior court in
Maricopa County, Arizona.

In the event that the State and Participating Local Governments use a Trustee,
compensation for Trustee’s expenses of fund administration may be paid out of the Opioid
Funds for reasonable expenses; provided that, reasonable expenses do not exceed the
administrative expenses allowed under the terms of the relevant Settlement.

./ The Parties shall maintain, for a period of at least five years, records of abatement

expenditures and. documents underlying those expenditures, so that it can be verified that
funds are being or have been utilized in a manner consistent with the Approved Purposes
definition. This requirement supersedes any shorter period of time specified in any
applicable document retention or destruction policy.

At least annually, by July 31 of each year, each Region or Multicounty Region shall provide

to the State a report detailing for the preceding fiscal year (1) the amount of the LG Share
received by each Participating Local Government within the Region or Multicounty
Region, (2) the allocation of any awards approved (listing the recipient, the amount
awarded, the program to be funded, and disbursement terms), and (3) the amounts

® Text of settlement available at https://nationalopioidsettlement.com.

7 Text of settlement available at https://nationalopioidsettlement.com.

7

6.

di approved allocations. In order to facilitate this reporting, each Participating
within a Region or Multicounty Region

shall provide information.
Aaepsaiminai dt heencomodine cblioniianar a delegate(s) selected by the Region or
Multicounty Region to provide its annual report to the State. Any Participating Local
Government shall also comply with any reporting requirements imposed by any
Settlement.

No later than September 30 of each year, the State shall publish on its website a report
detailing for the preceding fiscal year (1) the amount of the State Share received, (2) the
allocation of any awards approved (listing the recipient, the amount awarded, the program
to be funded, and disbursement terms), and (3) the amounts disbursed on approved
allocations. In addition, the State shall publish on its website the reports described in F(5)
above. The State shall also comply with any reporting requirements imposed by any
Settlement.

If it appears to the State, a Region, or a Multicounty Region that the State or another
Region or Multicounty Region is using or has used Settlement funds for non-Approved
Purposes, the State, Region, or Multicounty Region may on written request seek and
obtain the documentation underlying the report(s) described in F(5) or F(6), as applicable,
including documentation described in F(4). The State, Region, or Multicounty Region
receiving such request shall have 14 days to provide the requested information. The
requesting party and the State, Region, or Multicounty Region receiving such request
may extend the time period for compliance with the request only upon mutual agreement.

Following a request made pursuant to F(7) and when it appears that LG Share funds are
being or have been spent on non-Approved Purposes, the State may seek and obtain in an
action in a court of competent jurisdiction in Maricopa County, Arizona an injunction
prohibiting the Region or Multicounty Region from spending LG Share funds on non-
Approved Purposes and requiring the Region or Multicounty Region to return the monies
that it spent on non-Approved Purposes after notice as is required by the rules of civil
procedure. So long as the action is pending, distribution of LG Share funds to the Region
or Multicounty Region temporarily will be suspended. Once the action is resolved, the
suspended payments will resume, less any amounts that were ordered returned but have
not been returned by the time the action is resolved.

Following a request made pursuant to F(7) and when it appears to at least eight
Participating Counties that have signed on to this Agreement and a subsequent Settlement
that the State Share funds are being or have been spent on non-Approved Purposes, the
Participating Counties may seek and obtain in an action in a superior court of Maricopa
County, Arizona an injunction prohibiting the State from spending State Share funds on
non-Approved Purposes and requiring the State to return the monies it spent on non-
Approved Purposes after notice as is required by the rules of civil procedure. So long as
the action is pending, distribution of State Share funds to the State temporarily will be
suspended. Once the action is resolved, the suspended payments will resume, less any
monies that were ordered returned but have not been returned by the time the action is
resolved.

10. In an action brought pursuant to F(8) or F(9), attorney’s fees and costs shall not be

recoverable.

G. Settlement Negotiations

1.

The State and the Participating Local Governments agree to inform each other in advance
of any negotiations relating to an Arizona-only settlement with a Pharmaceutical Supply
Chain Participant that includes both the State and the Participating Local Governments and
shall provide each other the opportunity to participate in all such negotiations.

The State and the Participating Local Governments further agree to keep each other
reasonably informed of all other global settlement negotiations with Pharmaceutical
Supply Chain Participants. Neither this provision, nor any other, shall be construed to state
or imply that either the State or the Participating Local Governments (collectively, the
“Arizona Parties”) are unauthorized to engage in settlement negotiations with
Pharmaceutical Supply Chain Participants without prior consent or contemporaneous
participation of the other, or that either party is entitled to participate as an active or direct
participant in settlement negotiations with the other. Rather, while the State’s and the
Participating Local Government’s efforts to achieve worthwhile settlements are to be
collaborative, incremental stages need not be so.

The State or any Participating Local Government may withdraw from coordinated
Settlement discussions detailed in this Section upon 10 business days’ written notice to the
other Arizona Parties and counsel for any affected Pharmaceutical Supply Chain
Participant. The withdrawal of any Arizona Party releases the remaining Arizona Parties
from the restrictions and obligations in this Section.

The obligations in this Section shall not affect any Party’s right to proceed with trial or,
within 30 days of the date upon which a trial involving that Party’s claims against a specific
Pharmaceutical Supply Chain Participant is scheduled to begin, reach a case-specific
resolution with that particular Pharmaceutical Supply Chain Participant.

H. Amendments

1,

The Parties agree to make such amendments as necessary to implement the intent of this
Agreement.

One Arizona Distribution t Opioid Settlement Funds Agreement ACCEPTED by the undersigned

day of Mark ¢ , 2022.

ARIZONA ATT. GENERAL

Mark Brnovich

and executed this

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