Best practices to prevent misuse of opioid settlement funds

To address the damages caused by the growing opioid epidemic, state and local governments filed thousands of lawsuits against opioid manufacturers, distributors, and retailers, accusing them of fueling the crisis through misleading marketing and inadequate oversight. In response, opioid manufacturers reached a $50 billion settlement with state and local governments, intended to help remediate damages caused. This money offered a once-in-a-generation opportunity to expand addiction treatment, prevention, and recovery services.  However, states have provided little transparency on how they are using these funds, and the limited disclosures available already reveal concerns.

Opioid settlement funds have already been used for concerts, law enforcement equipment, and budget backfilling, among other purposes. These uses fall short of the settlements’ intent to remediate the crisis. With billions still to be spent over the next decade, it is crucial to establish better financial controls and reporting structures for the use of these funds to ensure they are deployed transparently, efficiently, and in compliance with their legal restrictions to advance evidence-based interventions proven to save lives.

The opioid epidemic has claimed more than 800,000 lives since 1999. As the crisis intensified, policymakers and the public sought to identify its causes. State and local governments filed thousands of lawsuits against opioid manufacturers, distributors, and retailers, accusing them of fueling the epidemic through misleading marketing and inadequate oversight. These lawsuits ultimately led to the national settlement agreements.  More than a dozen companies that manufactured, distributed, or aided in the prescription of painkillers, including McKinsey, Johnson & Johnson, Walgreens, CVS, and Walmart, reached settlements totaling approximately $50 billion, to be distributed to various state and local governments over nearly two decades.

The settlements stipulate that funds must be used to support opioid prevention, treatment, and recovery efforts. However, since receiving the funds, many jurisdictions have not provided the transparency, accountability, and prioritization of evidence-based strategies that genuinely address the needs of those most impacted by the crisis. Each state receives a designated portion of the national settlement based on factors such as opioid-related deaths, the volume of opioids shipped, and population size, with funds then subdivided between state agencies and local jurisdictions according to negotiated formulas.

To guide spending, the National Opioid Settlement Agreement includes Exhibit E, which stipulates a non-exhaustive list of approved uses centered on prevention, treatment, and recovery from opioid addiction, and harm reduction programs. States must allocate at least 70% of settlement funds toward these opioid remediation efforts, and some have gone further by committing to use 100% of their funds accordingly. The remaining 30% is allocated as follows: up to 15% for administrative costs and up to 15% for any other purpose.

Core priorities for the use of these funds include developing prevention efforts through supporting different evidence-based education programs; expanding training and increasing access to naloxone, a life-saving opioid overdose reversal medication; increasing education around and the availability of medication-assisted treatment (MAT) such as methadone and buprenorphine or other opioid-related treatment; supporting syringe service programs that reduce the spread of HIV and other infectious diseases through clean syringe distribution; and investing in wraparound services that offer coordinated, comprehensive care for individuals in recovery. Other allowable uses involve peer recovery support, workforce development, care for pregnant and postpartum individuals, and programs addressing the needs of those in the criminal justice system. The strategies listed are evidence-informed and designed to respond to the drivers and consequences of the crisis directly.

While the settlement agreement outlines preferred uses with an emphasis on remediation, the guidelines leave significant room for interpretation—creating wiggle room for states and localities to circumvent evidence-based treatment entirely.

This is what has happened in New Jersey, where state investigators uncovered how the Township of Irvington exploited the flexibility of the guidelines to fund events that had little connection to harm reduction, addiction treatment, or public health.

A report from the New Jersey Office of the State Comptroller revealed that over $632,000 was spent on two “Opioid Awareness” concerts in 2023 and 2024. As reported, thousands were spent on “generators, an ice maker, popcorn machine, cotton candy machine, four flavors of shaved ice, a hot food display stand, and catered food.” These events included celebrity performers and DJ sets. One township employee, Antoine Richardson, received $368,500 in unaccounted payments and steered nearly $470,000 in contracts to businesses linked to himself and his wife. The report concluded that Irvington’s actions violated the intent of the settlement and referred the matter to several state agencies for further review.

There have been issues elsewhere in how the funds have been spent. Scott County, Indiana, used over $250,000 to pay salaries for health and emergency services staff, effectively freeing up their local budget to buy a new ambulance and build a financial cushion for the health department. This is achieved through supplantation, where new dollars are used to fund existing programs, thereby making more general fund revenues available for governments to spend as they wish. This practice is not explicitly prohibited in Exhibit E of the settlement fund agreements. Still, it serves as a workaround that can undermine the intended goal of building service capacity through these funds. A similar example occurred in New York, where advocates noted that the state shifted millions from its addiction agency’s base budget and replaced it with opioid settlement dollars—substituting existing funding rather than using the settlement funds to enhance care. Blair County, Pennsylvania, directed $320,000 toward a long-standing drug court, using the funds in part to cover salary shortfalls for probation officers and aides due to limited state grants and probation fee revenue, rather than investing in new or expanded services.

Other states have directed the money toward law enforcement. Southington, Connecticut, used $18,000 to buy cellphone-unlocking technology for police. Ohio County, Ohio, spent nearly $43,000 on new K-9 and EMT equipment. Michigan counties, including Kalamazoo and St. Clair, purchased jail body scanners, infrastructure that experts argue should be funded through general law enforcement budgets. In West Virginia, $364 million, which is more than half of the state’s total opioid settlement spending for the year, went to police vehicles, jail bills, and salaries, while just 6% supported treatment and recovery. Jackson County took this further by using 90% of its $566,000 allocation to expand a first responder training center, including building a shooting range.

Although the opioid settlements stipulate that funds should be used for specific opioid remediation purposes, they contain no binding requirements, enforcement mechanisms, or clawback provisions if jurisdictions misuse the money. Oversight is left entirely to state and local discretion. Each state executed its own Memorandum of Agreement (MOA) defining how funds are distributed and what reporting, if any, is required.

As much of these funds currently remain unspent, it is incumbent on state and local governments to enact better financial controls and reporting mechanisms to ensure money is used consistently with its designated purpose—remediating the effects of the opioid epidemic.

Uncommitted settlement funds across states

According to the Johns Hopkins Opioid Settlement Expenditures Tracker, based on currently available disclosures, at least one-third of total settlement funds, estimated at roughly $15 to $17 billion of the $50 billion in national opioid settlements, have not yet been committed for use.

The share of total funds committed varies significantly by state. The tracker estimates that many states have yet to move beyond minimal commitments, with large portions of settlement dollars—sometimes more than 75%—still awaiting direction. By contrast, a handful of states, such as Colorado, Washington, and Delaware, have committed most or all of their funds.

The true share of uncommitted funds is difficult to pin down. Most settlement agreements do not require states or localities to publicly disclose how they spend the funds awarded to them. Twelve states had initially pledged to be “100% transparent,” meaning they will report on every dollar of settlement funds and how it is used. Only a few have followed through.

Among the handful of states that provide accessible and detailed descriptions of their uses of the funds is the state of Minnesota, which has a dashboard allowing anyone to track what will be done with the $117 million awarded. The dashboard breaks spending down by county, outlining who received the money, for what purpose, whether the grantee is using an evidence-based program, and the outcome of this spending.

Other dashboards include those maintained by the states of Michigan, New York, and North Carolina. New Jersey and Indiana, instead, publish annual reports outlining county-level spending.

Lessons from the tobacco settlement

The 1998 Tobacco Master Settlement Agreement (MSA) is the closest precedent to today’s opioid settlements, serving as an important cautionary tale. The MSA was a deal between four major tobacco companies and 46 states (plus D.C. and American territories). In exchange for releasing the companies from future Medicaid lawsuits related to smoking-related illnesses, the firms agreed to modify their marketing practices and make annual payments to the states in perpetuity, tied to cigarette sales.

Although the MSA was intended to offset public health costs and fund smoking prevention, it placed no restrictions on how states used the money. Most legislatures diverted payments into general budgets, infrastructure, or debt service rather than public health.

According to a United States Government Accountability Office Report, from Fiscal Years 2000 through 2005, the 46 states party to the MSA received $52.6 billion in tobacco settlement payments. However, only 30% of the funds were allocated to health care, and another 3.5% to tobacco prevention. The rest was split between covering budget shortfalls (22%), debt service on securitized funds (5.4%), infrastructure (6%), education (5.5%), tax reductions (1%), and others.

States are still receiving these settlements. According to the Kaiser Family Foundation, states received $6.8 billion from the MSA in 2024. 

Several states securitized the future tobacco settlement cash streams, which means selling the right to receive years of cash flows for a smaller upfront amount, while also passing to bondholders the risk that the companies settled with may not honor the agreed-upon future payment streams, or that tobacco sales would be lower than expected.

This practice is already under discussion for opioid settlements. Some municipalities, such as the Wisconsin Counties Association, have considered securitizing their opioid settlement funds, which would enable them to capture upfront the payment stream that extends through 2038 at a discount.

Securitization is problematic because it trades decades of future remediation dollars for a one-time cash infusion at a steep discount. Governments forfeit long-term funding streams that could sustain treatment and prevention infrastructure. The tobacco experience showed that securitization left many states with little or no settlement revenue in later years, even as smoking-related harms persisted.

Local officials may also be tempted to invest opioid bond proceeds, anticipating that market returns will surpass debt service costs—an approach akin to pension obligation bonds, which carries significant risks.

The outcomes of the tobacco settlement provide clear lessons for the use of opioid settlement funds: Absent binding guardrails and rigorous transparency, both state and local governments face strong incentives to divert or front-load funds in ways that undermine their intended purpose.

Policy recommendations for strengthening opioid settlement spending

When governments are entrusted with funds to address the opioid crisis, they take on a moral obligation to act accordingly. That means investing in what works: expanded access to medication-assisted treatment, naloxone distribution and education, syringe service programs, recovery housing models, and other approaches rooted in evidence and outlined in Exhibit E, including the development of potentially novel treatments.

Misallocating these dollars undercuts both public health outcomes and fiscal responsibility. When rehabilitation-eligible interventions are underfunded, communities miss out on life-saving programs like MAT and harm reduction. Instead, overdose deaths rise, and criminal justice systems bear the cost of repeated recidivism. By contrast, well-targeted settlement spending has the potential to save lives, strengthen communities, and ease the burden on public systems.

Below are recommendations to ensure that the awarded funds are used effectively.

1. Discourage supplantation through clear spending principles

Supplantation, or using settlement funds to replace existing public health dollars, weakens the impact of these resources. State budget officials and attorneys general should issue clear guidance encouraging local governments to deploy settlement funds as a supplemental expansion of care rather than an alternate method of financing existing services.

2. Prioritize external providers for efficiency

Governments should prioritize contracting with external providers rather than providing harm reduction services themselves. Building new publicly operated service programs tends to be costly and slow, while specialized providers are likely to deliver evidence-based care more efficiently and at lower cost.

Partnering with external providers also reduces the risk of budget supplantation, ensuring settlement dollars fund new services rather than displace existing expenditures. Service providers who receive these funds should be held accountable for their use and required to provide an independent auditor’s report detailing the use of these funds if they exceed a minimum threshold. For instance, recipients of federal grants in excess of $750,000 in any year must complete a federal single audit to account for the use of those funds.

3. Prohibit securitization

States should consider adopting explicit bans on securitizing opioid settlement revenues—that is, selling the right to future payments in exchange for upfront cash.

While securitization may appear to offer immediate budget relief, the tobacco settlement experience has shown that it strips away long-term remediation funding, often resulting in communities losing access to dollars even as their needs persist. Prohibiting securitization ensures that settlement payments remain available over time to sustain treatment, prevention, and recovery infrastructure, rather than being consumed in a single budget cycle.

4. Support voluntary frameworks for evidence-based spending

State governments can offer spending guidelines that prioritize effective, research-based strategies such as medication-assisted treatment, naloxone access, syringe service programs, and recovery housing. These frameworks should be developed with input from people with lived experience and members of the affected community to ensure they reflect real needs and can be adapted to local contexts. Highlighting these approaches helps localities focus on interventions that directly reduce harm and improve recovery outcomes.

5. Increase spending transparency

Local governments should regularly publish clear and accessible data showing how settlement funds are spent and what goals they aim to achieve. This can be achieved through either interactive dashboards, such as those used by the state of Minnesota, or yearly reports, as seen in the states of New Jersey and Indiana.

6. Allocate a portion of funds to innovative and emerging treatments

To drive long-term progress in addiction care, state and local governments should dedicate a portion of opioid settlement funds to support the research, development, and piloting of innovative treatment modalities. This includes exploring the therapeutic potential of ibogaine, a psychedelic alkaloid showing promise in interrupting opioid dependence, and GLP-1 receptor agonists, initially developed for diabetes and weight loss, which are being studied for their ability to reduce drug cravings and compulsive use. While more clinical trials are needed, strategic investment in these areas can help expand the future treatment toolkit beyond traditional approaches. Prioritizing innovation ensures that settlements can remediate current harms and foster breakthroughs that reshape addiction care for the next generation.

7. Invite independent spending reviews

Localities can partner with independent institutions to review how funds are allocated and whether spending aligns with the original purpose of the settlements. These reviews help identify areas for improvement and add an extra layer of accountability without requiring new laws or regulations.

8. Include community voices in spending decisions

People affected by addiction should have a role in shaping how funds are used. Community input ensures that spending decisions reflect local needs and improve outcomes for those most directly impacted.

The opioid settlements present a real opportunity to reshape how states support addiction care. Real impact comes from honest reporting, directing funds toward new and innovative treatment options, and strengthening what already exists on the ground. Many harm reduction and recovery programs already serve their communities, sometimes without formal recognition or support. These funds can help legitimize and expand their reach while empowering new groups to fill gaps where services do not yet exist. When used this way, the money can build sustainable systems that save lives and restore trust. The choices made now will determine whether these funds drive lasting progress or fade into missed potential.

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Source: https://reason.org/commentary/best-practices-to-prevent-misuse-of-opioid-settlement-funds/