8-KOther EventsExhibits & Filings

CARDINAL HEALTH INC 8-K Report, Corporate Update (Jul 22, 2021)

Filed July 22, 2021For Securities:CAH

Summary

Cardinal Health, Inc. (CAH) announced on July 21, 2021, a significant development in its ongoing opioid litigation. The company, along with two other national pharmaceutical distributors, has negotiated a proposed settlement agreement aimed at resolving the vast majority of opioid lawsuits filed by state and local governmental entities. This proposed settlement includes a substantial cash component, with Cardinal Health anticipating a payment of up to approximately $6.374 billion, to be paid primarily over 18 years, contingent on broad participation from states and political subdivisions. While this agreement represents a substantial step towards resolving these long-standing legal challenges, it is subject to several critical conditions and approvals. These include independent board approvals from the distributors, a sign-on period for states, and subsequent agreement from a sufficient number of states and political subdivisions. Negotiations are ongoing with West Virginia subdivisions and Native American tribes, who are not part of this proposed broader settlement. The company expects to record a pre-tax charge of approximately $140 million for the quarter ended June 30, 2021, related to opioid litigation.

Key Highlights

  • 1Cardinal Health and two other national distributors have negotiated a proposed settlement agreement to resolve the majority of state and local governmental opioid lawsuits.
  • 2The proposed settlement includes a cash component where Cardinal Health would pay up to approximately $6.374 billion, largely over an 18-year period.
  • 3The settlement's effectiveness is contingent upon multiple conditions, including board approvals and sufficient participation from states and political subdivisions.
  • 4West Virginia subdivisions and Native American tribes are not included in this proposed settlement and are subject to separate negotiations.
  • 5The agreement mandates injunctive relief concerning controlled substance anti-diversion programs, including governance, personnel training, customer due diligence, and ordering limits.
  • 6Cardinal Health expects to record a pre-tax charge of approximately $140 million for the three months ended June 30, 2021, related to opioid litigation.
  • 7A monitor will oversee compliance with anti-diversion provisions for five years, and a third-party clearinghouse will be funded for ten years.

Frequently Asked Questions

Under the proposed settlement, Cardinal Health would pay up to approximately $6.374 billion. The majority of this amount would be paid over 18 years. The exact payment amount will depend on factors like participation rates of states and political subdivisions, and state actions to foreclose lawsuits by political subdivisions.

No, this proposed agreement is designed to resolve the "vast majority" of opioid lawsuits filed by state and local governmental entities. However, lawsuits and negotiations with West Virginia subdivisions and Native American tribes are separate and not part of this settlement process. The settlement also does not contemplate participation by non-governmental or individual entities.

The settlement is subject to several critical conditions. These include independent board approvals from Cardinal Health and the other two distributors, a sign-on period for states to agree to the framework, and subsequently, a determination that a sufficient number of states and political subdivisions have agreed to the terms. There are also provisions for states to determine sufficient political subdivision participation.

The agreement includes significant injunctive relief provisions focused on enhancing anti-diversion programs for controlled substances. These provisions cover governance, independence and training of personnel, customer due diligence, ordering limits for certain products, and suspicious order monitoring. A monitor will oversee compliance for five years, and a third-party clearinghouse will be funded by the distributors for ten years.