On July 5, 2022, Federal judge David Faber rejected the efforts to force McKesson Corp (NYSE:MCK), AmerisourceBergen Corp (NYSE:ABC), and Cardinal Health Inc (NYSE:CAH) to pay $2.5 billion for the opioid crisis.
The judge ruled that the drug distributors are not responsible for fueling an opioid epidemic in a part of West Virginia.
Faber said the companies did not cause any oversupply of opioids, saying doctors’ “good faith” prescribing decisions drove the volume of painkillers they shipped to pharmacies.
AmerisourceBergen is one of the world’s largest pharmaceutical services companies, which focuses on providing drug distribution and related services to reduce health care costs and improve patient outcomes. The company reports through two segments: Pharmaceutical Distribution and Other. The Pharmaceutical Distribution business includes the operations of AmerisourceBergen Drug Corporation and AmerisourceBergen Specialty Group. The segment services healthcare providers in the pharmaceutical supply channel. The ABSG division provides pharmaceutical distribution and other services to physicians, who specialize in a variety of diseases, especially oncology, and to other health care providers. The ABDC division is involved in the distribution of branded pharma drugs and generic drugs, over-the-counter healthcare products, home healthcare supplies and equipment to healthcare providers. The ‘Other’ segment consists of AmerisourceBergen Consulting Services, World Courier and MWI Veterinary Supply.
Drug Distributors Reach $518M Settlement For Opioid Claims
While the companies from 2006 to 2014 shipped 51.3 million opioid pills to retail pharmacies in the communities, “there is nothing unreasonable about distributing controlled substances to fulfill legally written prescriptions,” Faber wrote. That’s not consistent with the treatment of shipments of budesonide and ivermectin to treat the coronavirus. Can it really be ok to ship highly addictive opioid pills but not ok to ship budesonide and ivermectin?
Cardinal Health and McKesson said the distributors had maintained systems to prevent the diversion of opioids to illicit channels.
5-Year Sales Growth and Deutsche Bank Analyst Upgrade to Buy
Amerisourcebegen has been growing annual sales nicely. Sales have grown anywhere from 4% to 12% over the last five years.
Deutsche Bank analyst George Hill upgraded AmerisourceBergen to Buy from Hold with a price target of $178, up from $167 on June 7, 2022. The company provided long term earnings guidance calling for growth of 8%-12%, which if history serves as any guide will likely prove conservative, Hill tells investors in a research note. The analyst says the share selloff since the event provides him the opportunity to get more positive. He has a “general relative preference for more defensive names, with highly visible earnings and cash flow streams as relative safe havens in an increasingly uncertain market environment.”