- Five pharmaceutical companies reached a $261 million settlement to avoid a lawsuit that accused them of contributing to the opioid crisis.
- The settlements were reached around midnight Monday, just hours before the trial was set to begin.
- The immediate trial was averted, but these companies—as well as Johnson & Johnson—are not free of the larger case, which is a consolidation of more than 2,500 lawsuits from various state and local governments.
New Settlements Avert Immediate Trial
Five companies involved in a massive federal opioid lawsuit settled with two Ohio counties early Monday morning, paying $261 million dollars to avert the first trial in a larger case.
These settlements do not prevent the full trial, but they do delay it significantly. The portion of the trial scheduled to begin Monday would have involved both Cuyahoga and Summit counties and would have been known as a “bellwether trial,” a beginning trial examining a smaller portion of the larger case.
The outcome of it would have then been used to anticipate the results of the larger case, which is a consolidation of more than 2,500 lawsuits lodged by cities, counties, tribes, and states. It accuses the companies of contributing to the opioid crisis.
Companies originally involved in the lawsuit include AmerisourceBergen, Cardinal Health, and McKesson—which are known as the “Big Three” drug distributors in the country. Walgreens, Teva Pharmaceuticals, Purdue, and Johnson & Johnson were also named.
Between midnight and 1:00 a.m., the “Big Three” averted the first of the trials by agreeing to pay a combined $215 million to Ohio’s Cuyahoga and Summit counties. Teva additionally reached an agreement to pay $20 million in cash and another $25 million in suboxone, which is a drug used to treat opioid addiction.
Additionally, Henry Schein Medical agreed to pay $1.25 million.
“If this was a war, today was supposed to be D-Day, where we engage the enemy and storm the beach,” Paul Farrell Jr., an attorney for the two counties, told NPR. “So, last night at 11:50 p.m., the defendants retired from the field and decided to settle this particular skirmish rather than fight.”
Previously, the lone judge presiding over the cases encouraged both sides to reach settlements in order to prevent a potentially lengthy and bitter trial, meaning victims of the opioid crisis would begin to start seeing money sooner.
Notably, Walgreens did not reach any settlements, but its trial has now been delayed for up to six months, provided the pharmacy doesn’t end up reaching a settlement of its own beforehand.
As for that larger trial involving the other 2,500 lawsuits, those are still scheduled to begin early next year if these companies fail to reach additional settlements.
The case has been closely scrutinized as a potentially precedent-setting trial; however, by settling, these companies prevent a landmark decision by the federal government that could serve as a legal litmus test for holding opioid companies accountable.
Purdue and Johnson & Johnson Settle
Purdue was the first pharmaceutical company listed in the trial to settle, notably reaching a global agreement of $12 billion.
Purdue then filed for Chapter 11 bankruptcy, which is still pending and will eventually be expected to form a new company that will continue manufacturing the painkiller OxyContin. The new company is expected to also donate addiction treatment and overdose reversal drugs.
The owners of Purdue were also expected to pay no less than $3 billion and up to $4.5 billion of the grand total, though some state attorneys generals said the fine did not account for the damages they’ve seen their states.
“These people are among the most responsible for the trail of death and destruction the opioid epidemic has left in its wake,” North Carolina AG Josh Stein said in a promise to go directly after the Sacklers.
On Oct. 1, Johnson & Johnson reached a settlement for $20.4 million dollars for Cuyahoga and Summit counties.
Johnson & Johnson Loses Oklahoma Trial
In August, Johnson & Johnson became the first pharmaceutical company to lose a case holding it responsible for the opioid crisis.
The case, which is lost to the state of Oklahoma, was considered a precedent among experts, though Johnson & Johnson has appealed it to the state’s Supreme Court.
At the time, Johnson & Johnson had been ordered to pay $572 million, but that number was later brought down by $107 million after a miscalculation by Judge Thad Balkman. Balkman said the number could continue to change before he gives his final order.
Short-Sellers Lost $1.9 Billion From Second GameStop Squeeze
- Short-sellers betting against GameStop’s success lost $664 million Wednesday, followed by $1.19 billion on Thursday.
- The losses come as share prices for the video game retailer surged for the second time this year.
- Short-sellers have lost $10.75 billion in GameStop stock year-to-date.
Short-Sellers Lose $1.9 Billion
Short-sellers have lost $1.85 billion in GameStop stock following the second buying surge of the video game retailer.
The outcome is similar to what happened in January when investors caused short-sellers to lose billions by driving up GameStop’s share price. At the time, it even resulted in one short-selling hedge fund receiving a nearly $3 billion bailout.
The reason why short-sellers keep losing money when GameStop’s share price soars is that the entire process of short-selling requires them to bet against a company’s success.
That can be done for any number of reasons, but usually, people short-sell a stock because they believe a company will fail or that its share price will go down. If either of those two outcomes occurs, the short-seller makes money; however, if the share price goes up, the seller is left with a climbing bill that, in theory, has no limit.
In the later hours of trading on Wednesday, GameStop’s stock began to surge for the second time this year (thanks in part to the image of a McDonald’s ice cream cone). In fact, it jumped from around $50 a share to $90 a share in just 90 minutes.
That same day, short-sellers posted $664 million in losses, according to the analytics firm S3 Partners. By Thursday, S3 said they posted another $1.19 billion in losses.
Friday afternoon marked the first time since Thursday that share prices for GameStop have fallen below $100.
Short-sellers have lost $10.75 billion in GameStop stock year-to-date.
Can Investors Save GameStop?
It’s no secret that GameStop has been failing for years.
GameStop, along with other former brick-and-mortar giants, has faltered to the behemoth that has become online shopping. While other companies have been able to adapt, that’s proved more challenging for GameStop, in part because gamers can now buy titles directly from their consoles.
That said, some see GameStop’s recent situation in the stock market as a golden opportunity for the company to rebrand itself. Many investors poured money into GameStop to inflict substantial wounds on hedge fund short-sellers and others simply shelled out cash in the hopes of getting rich quickly, but many also found themselves contributing to GameStop out of love for the company.
Investors on the subReddit WallStreetBets, which has largely been credited with driving GameStop’s volatility this year, affectionately refer to investor and newly-minted GameStop board member Ryan Cohen as “Papa Cohen.” In fact, many on the message board believe he has the vision to save the retailer.
Notable short-seller Citron Research even suggested Thursday that GameStop should buy online the gambling firm Esports Entertainment Group.
In a tweet, Citron Research said such a move “is obvious and easy to justify stock price.”
GameStop Shares Surge Again After Investor Posts Image of McDonald’s Ice Cream Cone
- GameStop share prices surged from around $50 midday Wednesday to $170 Thursday morning in pre-market trading, marking the company’s second massive share spike in 2020.
- Some attributed the recent spike to an image of a McDonald’s ice cream cone tweeted by GameStop investor and board member Ryan Cohen.
- Many have interpreted the image as a cryptic call to action since it seems connected to the “meme stocks” frenzy that first drove GameStop’s stock rise last month.
- While it’s unclear how much of an effect this image actually had on investors, other factors have also been attributed to the rise, including the alleged forced resignation of GameStop’s Chief Financial Officer.
GameStock’s Second Wave
Game Stop is seeing yet another major surge in its stock prices this year. During the last few hours of trading Wednesday evening, share prices for the video game retailer jumped from under $50 to above $90.
That price soared as high as $170 in pre-market trading Thursday morning.
Stocks like AMC and Koss have also seen notable spikes over the past 24 hours, though both have been much smaller in scale.
The Ice Cream Cone
Details about what exactly is driving this latest stock price increase are unclear, though different speculations are already circulating.
Outlets like CNBC have partially attributed the spike to the reported forced resignation of GameStop’s Chief Financial Officer, Jim Bell.
Others have attributed the surge to a photo of a McDonald’s ice cream cone, of all things. While such an explanation may seem out-of-left-field, it’s heavily connected to the “meme stocks” frenzy that first drove GameStop’s meteoric rise last month.
In January, GameStop share prices soared to unprecedented highs as a group of Redditors on the message board WallStreetBets encouraged each other to stuff their money into the stock.
Though GameStop as a business has been failing for years, that was precisely why those Redditors were so keen on the stock. Many wanted to support the company simply because they like it and have a nostalgic attachment to it. Others also wanted to make certain Wall Street hedge funds pay for betting on GameStop’s failure.
Notably, the ice cream photo was shared by Ryan Cohen, a GameStop investor who — as of the start of this year — also sits on the company’s board of directors.
A number of people on WallStreetBets refer to him as “Papa Cohen,” and many hold the belief that he has the vision to transform GameStop into a profitable online business. As a result, many have interpreted this tweet as a cryptic call-to-action.
As a reporter for The Verge noted, a number of factors are likely playing a role here, including Bell’s ousting, Cohen’s ice cream tweet, and a Congressional testimony last week from Reddit user Roaring Kitty.
Kitty, whose real name is Keith Gill, is an investor who’s largely been credited with helping to drive the meme-stock frenzy. In fact, this past Friday, Gill also bought an additional 50,000 shares of GameStop.
Criticism Against Free-To-Trade Apps
On Wednesday, American investor Charlie Munger blamed free-to-trade apps like Robinhood for the current meme stock frenzy, calling it “a culture which encourages as much gambling in stocks by people who have the mindset of racetrack bettors… It’s a dirty way of making money.”
In a statement made on Thursday, a Robinhood spokesperson refuted Munger’s characterization, saying, “To suggest that new investors have a ‘mindset of racetrack bettors’ is disappointing and elitist.”
Facebook Blocks News in Australia Over Proposed Media Compensation Law
- Australian leaders condemned Facebook on Thursday after it blocked all Australians from sharing domestic and international news on the platform and prevented all global users from sharing news by Australian publishers.
- Facebook also wiped the pages of state health departments and emergency services that provide resources amid the pandemic and the ongoing fire season, though it later restored those systems.
- The move comes as Australia prepares to pass a law that would require large tech companies to pay media organizations for content that appears on their platforms.
- Facebook and Google have long fought against the legislation, but Google shifted its stance Thursday, saying it entered a three-year agreement to pay Rupert Murdoch’s News Corp. for its content.
Facebook Escalates Battle With Australia
Facebook took the unprecedented step Thursday of blocking news access on the platform in Australia – a drastic escalation of a battle over a proposed regulatory law in the country.
Under the legislation, which is expected to pass in the next week, tech giants would be required to negotiate compensation with news organizations for the content that appears on their platforms.
Those who support the law argue that traditional media organizations have been steadily declining while big companies like Facebook and Google, which have become major distributors of news, continue to make billions of dollars from digital advertising. As a result, proponents believe that these companies have a responsibility to help support news organizations whose content they profit off of by driving traffic to the sites.
Facebook and Google, however, have fought hard against the law. They have said it is unworkable for a number of reasons and claimed it would incentivize the news organizations to jack up prices during negotiations.
Now that is all but certain Australia will approve the law soon, Facebook has reinforced its opposition efforts. Not only does Facebook’s current ban block Australians from sharing both domestic and international news sources on the platform, but it also prevents all Australian publishers from being seen on Facebook everywhere else in the world.
The ban also goes beyond the news. According to reports, pages for state health departments were also wiped clean just three days before the launch of a nationwide COVID-19 vaccination program. Emergency services were also taken out, including the Bureau of Meteorology, which has been providing essential weather data in the middle of fire season.
Pages for nonprofits and charities were also taken away, meanwhile, groups dedicated to spreading conspiracy theories about vaccines, 5G, Bill Gates, and the end of the world remained up.
Facebook, for its part, blamed the disappearances on the proposed legislation.
“As the law does not provide clear guidance on the definition of news content, we have taken a broad definition in order to respect the law as drafted,” a spokesperson told reporters, though the company eventually agreed to revive the public service pages.
Facebook Slammed By Politicians
Facebook’s decision to ban all news in Australia — especially the blocking of essential service accounts — sparked outrage from leaders in the country.
Many politicians condemned Facebook for preventing access to health information in a pandemic and censoring news.
“The fact that there are organizations like state health departments, fire and emergency services… who have had their Facebook pages blocked, that’s a public safety issue,” Communications Minister Paul Fletcher told the Associated Press.
Prime Minister Scott Morrison also took aim at Facebook in a post on the platform.
“Facebook’s actions to unfriend Australia today, cutting off essential information services on health and emergency services, were as arrogant as they were disappointing,” he said. “These actions will only confirm the concerns that an increasing number of countries are expressing about the behavior of BigTech companies who think they are bigger than governments and that the rules should not apply to them.”
Morrison went on to say that the government would not back down and urged Facebook to work constructively with them like Google, which has taken the opposite approach.
Google Strikes Deal With Rupert Murdoch’s News Corp.
Shortly before Facebook imposed its block, Google announced that it had made a three-year agreement to pay Rupert Murdoch’s News Corp. for its content in Australia as well as the U.S. and the U.K.
The search engine — which just a weeks ago threatened to make its products unavailable in Australia over the proposed law— has since changed its mind and instead struck several multimillion-dollar deals with other Australian publishers.
While many praised Google for its approach, some media watchdog groups are worried that these deals will only further the ability of large tech companies make news organizations beholden to them.
Others have also expressed concern over Google’s deal with Murdoch, who has been lobbying the Australian government to push tech companies to pay news organizations for years, and who The New York Times described as “quite cozy with Australia’s conservative government.”
At the same time, other industry leaders have said this will be a net good for journalism and likely a model for other countries, including Microsoft, whose president wrote a blog post last week arguing that the U.S. should enact similar legislation.