CVS and Walgreens hit with more opioid-related lawsuits—a newly approved pain pill could help them turn the page

The news: The US Department of Justice (DOJ) recently sued CVS and Walgreens, alleging that both companies dispensed unlawful prescriptions for controlled substances like opioids and sought reimbursement for the medications from federal healthcare programs.

The DOJ also alleged the companies violated the Controlled Substances Act and the False Claims Act.

Zooming out: The opioid epidemic has plagued the US. Nearly 727,000 people died from an opioid overdose from 1999 to 2022, according to the CDC.

A number of players that have either manufactured, dispensed, or marketed opioids have also faced consequences.

• The Sackler family and Purdue Pharma—makers of the addictive opioid painkiller OxyContin—recently reached a $7.4 billion settlement with a coalition of 15 states for their role in the epidemic. The settlement bars the family from selling opioids in the US and ends its control of Purdue.
• CVS, Walgreens, and Rite Aid have also settled with states and cities across the US to resolve claims brought against them for their roles in the crisis.
• And Publicis Health, part of ad agency titan Publicis Groupe, agreed to pay $350 million for its role in marketing opioids. Publicis executed on Purdue’s “Evolve to Excellence” strategy, which flooded doctors who prescribed the most OxyContin with marketing and sales outreach. The strategy was developed by McKinsey (who also settled with the DOJ for $650 million).

Yes, but: Americans are still in pain—over 80 million people are prescribed medication for acute pain in the US each year—and they need non-habit-forming treatments that can address it.

Vertex Pharmaceuticals’ recently FDA-approved non-opioid painkiller could help fill this void. The drug, Journavx, is the first new pain medicine to be approved by the FDA in over two decades, and is used for the treatment of moderate to severe acute pain. Whereas opioids trigger the brain’s reward centers in a way that feeds addiction, Journavx works by blocking pain signals at their origin.

Early returns from the market indicate that Wall Street sees a viable investment opportunity at hand. Journavx is expected to generate $100 million in sales this year, growing to over $1 billion annually in 2028, per FactSet data cited by The Wall Street Journal. News of the drug’s approval sent Vertex shares jumping nearly 7% as of this writing.

Our take: Retail pharmacies and drugmakers will be the major beneficiaries of Journavx’s FDA approval.

For retail pharmacies, there will be a non-opioid painkiller to dispense without the same liabilities and risks that come with filling prescriptions for opioids.

For drugmakers, there is an emerging market for non-opioid pain management medications to tap into, which could become the new standard of care.

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