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U.S. states that claim that Johnson & Johnson violated consumer protection laws should mediate their dispute with a unit of the drugmaker separately from individuals who claim that Johnson & Johnson talc products cause cancer, a Bankruptcy Judge Michael Kaplan said yesterday, Reuters reported. The subsidiary, LTL Management LLC, was formed in October to resolve thousands of lawsuits against J&J in bankruptcy court. Judge Kaplan approved the controversial strategy in February, allowing J&J to assign the lawsuits to LTL and then place LTL in bankruptcy. J&J maintains that its baby powder and talc products are safe and asbestos-free, and it has argued that the bankruptcy case is the fairest and most efficient way to resolve the 38,000 lawsuits alleging that the products cause cancer. In March, Judge Kaplan ordered LTL and talc plaintiffs to begin mediation on a potential settlement of the cancer claims. The attorneys general of 40 states sought to join the mediation, saying that no settlement can succeed without the states' input. The states have asserted claims far in excess of the $2 billion that J&J initially set aside for a future bankruptcy settlement. The magnitude of those claims could allow the states to crowd out other stakeholders during negotiations to resolve LTL's bankruptcy. Judge Kaplan said during a court hearing yesterday that the states' claims should be mediated separately and that he intends to appoint a mediator for those claims by May 24. The new mediator will be able to work with the talc victim mediators toward a comprehensive bankruptcy settlement, Kaplan said. Talc plaintiffs have argued that the bankruptcy filing was an abuse of the legal system, and they are appealing Kaplan's decision to allow the case to remain in bankruptcy court.

Washington has reached a $518 million settlement with drug distributors McKesson Corp, AmerisourceBergen Corp and Cardinal Health, ending a months-long trial over the companies' alleged role in fueling the opioid epidemic in the state, McKesson announced yesterday, Reuters reported. Washington opted out of a $26 billion nationwide opioid settlement involving the three drug distributors and Johnson & Johnson. It would have received up to $417.9 million from McKesson, Cardinal Health and AmerisourceBergen under that settlement, which was finalized in February. The state had accused the drug distributors of failing to prevent prescription pills from being diverted for illegal use. It had sought $38.2 billion to fund treatment. The distributors, who deny wrongdoing, said the settlement would provide meaningful relief to communities impacted by the opioid epidemic in the United States. Opioid overdoses have caused more than 500,000 deaths in the United States over the past two decades, according to the U.S. Centers for Disease Control and Prevention.

Lenders to KKR & Co.’s Envision Healthcare are considering litigation after the physician-staffing company moved roughly half its value beyond their grasp to secure a fresh source of financing, WSJ Pro Bankruptcy reported. Centerbridge Partners LP and Angelo Gordon & Co. led the first-lien financing deal, which moved an estimated $2.5 billion in collateral away from most of Envision’s existing lenders, the people familiar said. The term lenders, which met to consider legal options on Monday, said the deal came at their expense as the first-lien debt was mostly provided by third-party financial institutions that had little existing credit exposure to Envision. Envision said on Friday that it would borrow up to $1.3 billion in first-lien loans and $1.3 billion in second-lien loans that would help repurchase existing debt and reduce the company’s total indebtedness by roughly $600 million. The new borrowing is backed by AmSurg Corp., an ambulatory services unit that made up around half of Envision’s earnings in 2021, according to people familiar with the matter. Lenders to the company previously had collateral rights on AmSurg as part of their collateral package before the liens were released and roughly 80% of the subsidiary moved to a new affiliate. Lenders yesterday explored potential legal remedies against the company with law firm Kasowitz Benson Torres LLP. The original lenders allege that the transaction may not be allowed under the company’s debt documents. The lenders also questioned whether the company is still allowed to carry the same amount of outstanding debt in the remaining company after the assets are moved.

A federal appeals court on Friday weighed a multibillion-dollar settlement offer by the Sackler family members who own Purdue Pharma LP, questioning whether Congress has authorized a key feature of the drugmaker’s bankruptcy plan that would end civil opioid litigation against them, WSJ Pro Bankruptcy reported. A three-judge panel for the Second U.S. Circuit Court of Appeals questioned lawyers who crafted the proposed settlement, which offers the Sacklers broad legal protections through Purdue’s chapter 11 plan even though they haven’t filed personal bankruptcy. The deal is broadly supported by state attorneys general, opioid victims and other Purdue creditors but is being challenged by the Justice Department’s bankruptcy watchdog. The appeals court could cement the bankruptcy plan or scuttle it. In December, a federal judge in Manhattan threw out the proposed deal that would have extinguished civil suits against the Sacklers in exchange for roughly $4.5 billion from the family, which was opposed at the time by a handful of state attorneys general. While the appeal was pending, the Sacklers won unanimous support from state authorities for a revised settlement worth up to $6 billion.

Billions of dollars in aid not only guaranteed that uninsured Covid patients would not face medical bills during the pandemic but also offered a lifeline for financially stressed institutions that provide extensive uncompensated care for the poor, the New York Times reported. The infusion of aid is ending at a time when hospitalizations from Covid are receding, but as safety-net providers are facing tremendous unmet needs from patients who have delayed care for chronic conditions and other health problems even more than usual during the pandemic. “Their margins are slim to begin with,” Beth Feldpush, the senior vice president for policy and advocacy at America’s Essential Hospitals, which represents safety-net hospitals, said of the institutions. She added that some were already having a “more difficult time bouncing back operationally and financially.” Nashville General has seen an average of just one Covid patient a week recently. But its doctors and nurses say that a wide range of health problems that worsened during the pandemic are now overwhelming the hospital. Dr. Eric Neff, an orthopedic surgeon, said patients were afraid to visit the hospital during much of the pandemic and often had trouble finding transportation when they did. The consequences were dire: People waited six months to seek care for a broken wrist or ignored a torn rotator cuff, making it harder for him to fix their injuries. The crisis of the uninsured is especially acute in Tennessee, which has one of the highest rates of hospital closures in the country and is among a dozen states that have chosen not to expand Medicaid to cover more low-income adults under the Affordable Care Act. Roughly 300,000 people in the state fall in the so-called coverage gap, meaning they are ineligible for either Medicaid or discounted health insurance under the Affordable Care Act despite having little to no income.

A Hess Corp. unit filed for bankruptcy to resolve asbestos-injury claims stemming from an oil refinery the company used to own in St. Croix in the U.S. Virgin Islands, WSJ Pro Bankruptcy reported. Honx Inc., previously known as Hess Oil New York Corp., filed for chapter 11 bankruptcy to drive a settlement of personal-injury lawsuits stemming from alleged exposure to asbestos, silica and other toxic substances, court papers say. There are roughly 580 cases pending, including a potentially consequential trial set to begin next week. The energy company has faced asbestos litigation for decades from contractors and employees who worked at the St. Croix oil refinery, known from its 1966 opening through 1998 as Hovic, when it was owned solely by Hess, and later as Hovensa and then Limetree Bay. The lawsuits had been “relatively dormant, with no trials scheduled” in the Virgin Islands until July 2021, when lawmakers there allowed people older than 65 to request an expedited trial date within 180 days, according to court papers filed by the Honx subsidiary. The first of these preference trials is scheduled to begin next week, court papers say.

A reorganization plan for Eagle Senior Living will reduce the company’s debt by approximately $40 million and promises $28 million in new financing, according to the operator’s attorney. The U.S. Bankruptcy Court for the District of Delaware approved the plan Wednesday, McKnight's Senior Living reported. The Wilmington, Del.-based company operates independent living, assisted living and memory care communities in Alabama, Colorado, Florida, Minnesota, Ohio, Tennessee and Wisconsin. Eagle initiated a voluntary chapter 11 process in January in a move to strengthen its financial structure and provide flexibility to make necessary capital improvements. Parent company American Eagle Lifecare Corp. and management company Greenbrier Senior Living were not included in the filing. “The debt restructuring caused the company significant debt relief,” said attorney David Gordon of Polsinelli, adding that the Eagle began restructuring negotiations 11 months ahead of the Jan. 14 Chapter 11 filing. The company’s bond debt is broken into three tranches, he said. The A tranche was $171 million, the B was $36 million and the C was $24 million. The A bond debt will be reissued at the original $171 million, but with lower interest rates and amortization to push the payments into the future for the time being, the attorney said. The interest rate was reduced to 5%, with interest-only for payments for the first four years. The maturity of the debt has been extended to 35 years.

A California doctor was sentenced today to 93 months in prison for defrauding Medicare, re-packaging single-use catheters for re-use on patients, and submitting false declarations in a bankruptcy proceeding, according to a DOJ press release. According to court documents, Donald Woo Lee recruited Medicare beneficiaries to his clinics, falsely diagnosed the beneficiaries, and provided the beneficiaries with medically unnecessary procedures. Lee billed these unnecessary procedures to Medicare using an inappropriate code in order to obtain a higher reimbursement, a practice known as “upcoding.” In addition, the evidence showed that Lee re-packaged used, contaminated catheters for re-use on patients. These catheters had been cleared by the Food and Drug Administration (FDA) for marketing as single-use only and the re-use of these devices put patients at risk of infection and other bodily injury. Lee submitted claims of approximately $12 million to Medicare for the vein ablation procedures he performed, and received $4.5 million as a result. In October 2019, Lee was convicted after a five-day trial, when a jury found him guilty of seven counts of health care fraud and one count of adulteration of a medical device. Lee also pleaded guilty on March 2, 2020, to one count of submitting false declarations in a bankruptcy proceeding. In addition to the term of imprisonment, Lee was sentenced to serve three years of supervised release and ordered to pay more than $4.5 million in restitution to Medicare.

The top executive at McKinsey & Company, appearing on Wednesday for the first time before Congress to answer for the consulting firm’s role in fanning the opioid crisis, came under sharp criticism from Democratic lawmakers, the New York Times reported. Bob Sternfels, McKinsey’s managing partner, testifying remotely to the House Committee on Oversight and Reform, apologized for McKinsey’s work in helping drive sales at opioid makers. He said that the firm “failed to recognize the broader context of what was going on in society around us.” But Mr. Sternfels did not cede ground on the main topic of the hearing: whether McKinsey’s simultaneously advising opioid makers and their regulator, the Food and Drug Administration, posed a conflict of interest. On that front, he insisted, McKinsey had been “transparent.” “McKinsey did not — did not — serve both the F.D.A. and Purdue on opioid-related matters,” Mr. Sternfels told the committee. “As both McKinsey and the F.D.A. have made clear, our work for the F.D.A. focused on administrative and operational topics including improvements to organizational structure, business processes and technology.” To some Democratic members, Mr. Sternfels’ words rang hollow. “Your apologies feel empty and insincere,” said Rep. Ayanna Pressley (D-Mass.). McKinsey had worked with Purdue, Johnson & Johnson and other opioid makers to identify doctors who were heavy prescribers of painkillers, resulting in highly addictive drugs finding their way to some of the most vulnerable people in America. The work for Purdue began in 2004 and continued for 15 years as opioid-related deaths surged.