New York law closes opioid settlement loophole

ALBANY, N.Y. (NEXSTAR) — New York Governor Kathy Hochul signed legislation on Friday to ensure that billions in opioid settlement money gets spent on addiction treatment, prevention, and recovery efforts. Effective immediately, bill S6757/A8459 closes a technical loophole in the state’s Mental Hygiene Law that could have diverted that money into the state’s general fund.

Attorney General Letitia James secured over $3 billion from companies that fueled the opioid crisis, and this law applies not just to those funds, but to any future agreements, too. The law dedicates a major portion of one such settlement for the to the Opioid Settlement Fund, keeping up to $250 million earmarked that came from Purdue Pharma and the Sackler family.

The state’s Opioid Settlement Fund, managed by the Comptroller and the Commissioner of the Department of Taxation and Finance, spends on new programs like public health education, harm reduction initiatives, and housing for people in recovery. The law that initially created the Opioid Settlement Fund specified that it’s supposed to be in addition to existing, ongoing funding for addiction services, not for maintaining current projects or filling budget gaps.

Democratic State Senator Nathalia Fernandez, Chair of the Alcoholism and Substance Use Disorders Committee, and Democratic Assemblymember Michaelle Solages, Chair of the New York State Black, Puerto Rican, Hispanic and Asian Legislative Caucus, co-sponsored the legislation. Its changes to mental health laws include:

• Preventing local governments from suing a company again if the Attorney General already included that company in any statewide opioid settlement since June 2021. Any local-government-lawsuit filed after June 2019 against such companies automatically gets “extinguished.”
• Expanding the definition of “Statewide Opioid Settlement Agreements” to include settlements and releases related to any party involved in the prescription drug marketing, supply, and payment chain related to the “manufacture, promotion, dispensing, sale, overutilization and/or distribution of opioid products.” The previous language referred more narrowly to “certain opioid manufacturers, distributors, dispensers, consultants, chain pharmacies, related entities, and/or the New York subdivisions.” Now, settlements with all entities—including the Purdue Pharma/Sackler family agreement—are included.

That narrow definition represented a potential loophole, according to supporters, where money from large, complex settlements could be considered “uncovered” and diverted to the state’s general fund instead. That’s the state’s primary account, used to collect most tax revenue and pay for government overhead, salaries, and operating expenses. Unlike a dedicated account—like the Opioid Settlement Fund—the general fund can fund almost any service or function.

In a press release, Fernandez said, “We are guaranteeing accountability and making sure these hard-fought dollars are used to prevent overdose, expand treatment, and support recovery efforts across the state.”

And, “This law delivers the clarity and accountability needed to get resources into the hands of providers and communities on the front lines of this epidemic,” Solages said.

“No amount of money can bring back those we lost to the opioid epidemic, but by supporting abatement programs we can save lives and move forward,” James added in her written statement.

When the state receives settlement money, about 37% flows into the Opioid Settlement Fund. The Office of Addiction Services and Supports oversees this portion while considering recommendations from the Opioid Settlement Advisory Board, whose members are appointed by elected state leaders.

That board has argued that spending should reflect local overdose rates and the demographics of the hardest-hit regions of the state. Between May 2023 and May 2024, 6,200 New Yorkers died from an overdose, disproportionately among Black and Latino communities. Of those, 3,046 deaths occurred in New York City.