Millions of Consumers and Thousands of New York Small Businesses Overpaid $2 Billion in Premiums Borne from the Opioid Crisis
Department of Financial Services Will Use Authority Over New York's Insurance Industry to Ensure All Necessary Fines Are Imposed Against Key Industry Players and New Yorkers Receive Restitution
DFS Will Hold Hearings Across the State to Shed Light on Issue
Part of Governor Cuomo's Ongoing, Aggressive, Multi-Pronged Efforts to Keep New Yorkers Safe from National Opioid Epidemic
Governor Cuomo: "The opioid scandal, the opioid scheme, is as diabolical, as brazen, as obnoxious, and as offensive as anything I have seen. They knew what they were doing. This was not accidental. It was purposeful and it was an industry wide conspiracy They're not going to get away with it."
Earlier today, Governor Andrew M. Cuomo announced the Department of Financial Services is taking action against the opioid manufacturers, distributors and pharmacy benefit managers to secure $2 billion for New York consumers who have shouldered the cost of the ongoing opioid epidemic in the form of higher insurance premiums.
AUDIO of the Governor's comments is available here.
PHOTOS of the event are available on the Governor's Flickr page.
A rush transcript of the Governor's comments is available below:
Good afternoon and thank you for being here. For those of you who do not know. I am joined with to my right Dr. Howard Zucker, the Commissioner of the state Department of Public Health. To my left, Linda Lacewell Superintendent of the Department of Financial Services.
I have been in government in multiple capacities. I was the Department of Housing and Urban Development Secretary and Assistant Secretary for eight years. I was Attorney General. I have been Governor. I have seen a number of schemes, a number of frauds. I thought I had seen it all.
The worst frauds are those frauds that go beyond individual harm to institutionalized systemic fraud. Student loan industry fraud, where banks were working in cahoots with schools all across the country. The housing fraud in 2007 where banks were pushing bad housing paper. Tobacco fraud, settled in 1998, where the tobacco companies systematically knew they were selling a product that caused cancer and didn't say anything.
The opioid scandal, the opioid scheme, is as diabolical, as brazen, as obnoxious and as offensive as anything I have seen. They knew what they were doing. This was not accidental. It was purposeful and it was an industry wide conspiracy. The more evidence comes out, the clearer that is. It was the manufacturers of the product who knew exactly how addictive it was. It was the distributors. It was the retailers. In some cases literally primary care physicians were also involved.
The damage has been immeasurable. Nationwide they estimate over 400,000 lives lost over the past decade - 400,000. New York State last year had 3,000 deaths from opioids. That's three times what it was in 2010. Nine thousand emergency room visits and that is despite all the efforts that we have taken on the state side. And we have Dr. Zucker here. I believe we have the most aggressive program to combat opioids in the country.
Primary drugs: OxyContin, Hydrocodone, Oxycodone. Major manufacturers: Perdue, Johnson & Johnson, the Sackler family that has made billions of dollars from this product. And what is even more disturbing is the companies knew. The companies knew. 2007, Perdue officials plead guilty to a criminal charge that they misled regulators about suspicious activity from distributors. That was 2007 - that was 12 years ago. Perdue officials pled guilty, so they knew. Now the drug companies will say, "Heroin and fentanyl cause more deaths." They're right - heroin and fentanyl cause more deaths. What they don't tell you is that 80 percent of the people who are on heroin say they became addicted from prescription pain medication.
Besides the human cost, the economic cost is devastating. They estimate $78 billion per year for health care, Medicaid and related costs from this opioid scourge. We have to make sure that the drug industry does not get away with it - they have made billions and billions of dollars from this. The Department of Justice did a settlement with a company called McKesson, which was the largest settlement and fine for a distributor - $150 million. Sounds like a lot of money, doesn't it - $150 million? Until you find out they turned around and gave their CEO a $159 million retirement package. So the drug companies have not been called to task and they have to be. Now, the States' Attorneys General are pursuing claims on behalf of the states, primarily the Medicaid cost from the state. We run a Medicaid program and our health costs have gone up because of Medicaid, and the State AGs are bringing those suits. Attorney General Tish James is bringing suit on behalf of the State of New York - she's doing a very good job.
Today, we want to open up another legal front against the drug companies and the entire conspiracy, because it's the drug companies, it's the distributors, it's the retailers. Second, the legal front will be that these companies defrauded the insurance companies, the health insurance companies, and health insurance companies had billions of dollars in additional costs as a result of the fraud caused by the drug companies. Which means what? Which means health insurance companies were paying these prescriptions. They were then paying for the refill of the prescription. They were then paying for the emergency room when the person overdosed. They were paying for the treatment facility when the person went into treatment. All those costs, those health insurance costs, get paid ultimately by who? By you.
That's who pays the costs. The problem in the financial services sets the rate for health insurance companies and health insurance companies will come in and say, "Well here are my costs." And a large piece of those costs were due to this opioid scourge. That cost gets built into the health insurance premium that you pay. And the legal case that the Department of Financial Services is bringing is these insurance companies, health insurances companies, were defrauded to the tune of billions of dollars. It was an industry-wide conspiracy. Those costs were then factored into the health insurance rate that consumers all across the state pay. So that is going to be a second legal front against these big pharmaceutical companies. And yes, the state AG's case, we're being very aggressive on that. I spoke with the Attorney General on that this morning. We have billions of dollars in damages on Medicaid. The people of the state have also paid billions more in health insurance premiums because these health insurance companies had to pay these inflated costs.
And at the end of the day, these big pharmaceutical companies have made billions and billions of dollars. And they have bought off the system. They hire every lobbyist in Washington D.C. and every lobbyist in every state capitol. And they've gotten away with it. Not for one year, or two years, or five years. They've gotten away with it for decades. Just think about that - 2007, Perdue Pharmaceutical officials pleaded guilty. 2007, twelve years ago. They all knew what they were putting out there was highly addictive, and that, frankly, was their business model. Get that first prescription filled. They'll come back for more. Because it was highly addictive and they knew it. And it's cost thousands of human lives and billions of dollars. And they're not going to get away with it. They're not going to get away with it.
This is the State of New York. You're not going to trample our rights. You're not going to frighten us. You're not going to intimidate us. You're not going to out-lawyer us. We're going to make sure justice is done and these drug companies are not going to get away with murder. And that's just what they're trying to do, get away with murder, because people died.