Second of two parts. Read part 1 here.
Localities across Virginia are being offered a 25% financial incentive to follow the “Gold Standard” restrictions when spending the money they receive directly from opioid settlements.
The extra money is being offered by the new Virginia Opioid Abatement Authority (OAA), whose board members want to make sure the money is used as intended – to fund programs and efforts that help stem the opioid epidemic that has ravaged the state.
Between 2007 and 2021, 14,548 Virginians died as a result of opioid overdoses, according to the Virginia Department of Health. The final numbers aren’t in yet for 2022, but there were an additional 1,041 fatal opioid overdoses over the first six months.
In 2022, the state’s 133 counties and cities, which each signed off on the opioid agreements, received three direct payments because of national settlements stemming from litigation against opioid manufacturers and drug distributors for their role in the opioid epidemic.
The first settlement was for more than $13 million from McKinsey, a consulting/marketing company; the second with three distributors, McKesson, Cardinal Health and AmerisourceBergen, may reach $21 billion; and the third with opioid manufacturer Janssen Pharmaceuticals, a division of Johnson & Johnson, is expected to total a maximum $5 billion.
More settlements are in the works and together all are expected to result in a total of about $1 billion for Virginia over the next 16 years, according to the state Attorney General’s Office.
Under the state’s settlement distribution agreement, 30% of the money will go directly to counties and cities based on each locality’s population, share of overdose deaths and other factors, 55% to the Abatement Authority, and 15% to the commonwealth.
That means the authority is expected to control a total of about $550 million.
Of the 55% of the settlement money that will go to the authority, 15% will go to cities and counties, 35% will go to cooperative projects involving multiple cities and/or counties, 15% will go to state agencies and 35% are unrestricted funds, which can be used in other ways to support abatement projects such as the “Gold Standard” financial incentive, and to pay administrative costs.
The authority begins accepting applications for the first round of settlement grants on Jan. 19. Over the next year, the authority has the ability to award as much as $50 million in grants.
The money channeled through the authority comes with many more restrictions than the direct money, and the authority wants counties and cities to voluntarily apply those same standards to the money they receive directly, according to Tony McDowell, the authority’s executive director.
Every dollar that comes through the authority must be spent only on opioid abatement efforts.
“There’s no exception to that,” McDowell said.
Those restrictions were approved by the Virginia General Assembly and go above what is required by the settlements. They have been dubbed the “Gold Standard” by McDowell, who said he wants to “make it clear that Virginia’s statutory limitations on the use of OAA funds represent the highest and strictest level of requirements (when compared to what any of the settling companies are requiring).”
The money can only be used to fund efforts that treat, prevent or reduce opioid use disorder or the misuse of opioids through evidence-based methods, programs or strategies, according to the authority’s incentive policy on its website.
Money obtained through the authority also can’t be used to “supplant” funding for an existing program and it can’t be used for indirect costs. Recipients must also agree to provide the authority with information about implementation of the effort and allow monitoring and review to ensure compliance.
Before counties and cities receive any money, they must let the authority know how the money will be used and how they will measure performance, McDowell said.
On the other hand, the restrictions on the direct money received by localities are fewer and vague. Each settlement is different. Under the distributors settlement, for counties and cities that had been litigating on their own, 85% of the funds must be spent on opioid abatement efforts and 15% may be used for non-abatement purposes. But any use other than abatement is “disfavored” and would have to be reported to the settlement administrator, the settling companies and the public.
The abatement programs that are allowed are also much broader for the direct money, he said.
The 25% incentive is being offered to encourage cities and counties to use all the money they receive for remediation and abatement.
Sen. Todd Pillion, R-Washington County, who chairs the authority board, said its members came up with the incentive because it’s in the commonwealth’s best interests that all settlement money be spent appropriately and as intended.
The authority’s incentive policy, approved in October, states that “for each fiscal year that a participating city or county agrees to use and report their Direct Distribution funds according to the same standards they are required to use and report their OAA Distribution funds (i.e., the Gold Standard), the Board agrees to increase that city or county’s OAA Distribution by 25% above the base amount for that same fiscal year.”
So far, response to the incentive from local officials has been positive, McDowell said.
Washington County Administrator Jason Berry said he’s definitely interested in the incentive, which he called a “nice bonus.”
He said he hopes to learn more about it during a Virginia Association of Counties event this week in Richmond.
He said the county will likely go for the incentive because “there’s no reason not to have good standards and accountability for public funds, plus it’s a good way to leverage more dollars.”
Wythe County Administrator Stephen Bear said his county would also like to take advantage of the authority’s incentive offer.
Danville also plans to go for the additional 25%, according to a spokesperson for the city.
Pittsylvania County officials are evaluating the incentive offer, according to a county spokesperson.
Lynchburg officials have not made a decision about the incentive, according to Carrie Dungan, the city’s director of communications and public engagement.
McDowell emphasized that the authority wants to make the application process for OAA money flexible for localities and one reason is many haven’t determined how to use the direct money or the money they might get through the authority.
The process is complicated, and the decisions counties and cities must make are important, he said.
Each city and county is eligible to receive a specific amount of OAA funding. If they decide not to apply this year, the money will be held for them, McDowell added. So, they have until 2025 to determine how they will spend the money and to apply for it.
“I think that this funding is giving cities and counties a fresh look at what they can do to help people that are struggling with opioid use disorder and what they can do to prevent people from getting hooked on these drugs in the first place,” he said.
“I think in some cases, it will take a year or two for them to put together a good plan. We’d rather help them put their plan together and then fund it than give them money and tell them they have to spend it by a certain day or they lose it, because that just leads to waste.”