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APPROVE AN AGREEMENT FOR PROFESSIONAL SERVICES WITH COMMUNITY MEDICAL CENTERS OF STOCKTON TO UTILIZE FUNDS RECEIVED THROUGH THE NATIONAL OPIOID SETTLEMENT AGREEMENTS
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Approving findings pursuant to Stockton Municipal Code section 3.68.070 in support of an exception to the competitive bidding process.
2. Awarding a Professional Services Contract to Community Medical Centers (CMC) of Stockton, CA in the Not-to-Exceed amount of $4,500,000 for three years to utilize funds received through the National Opioid Settlement in order to remediate and provide activities that end, reduce, and/or lessen the effects of the opioid epidemic in communities.
3. Authorizing the City Manager to accept and appropriate all funds allocated to the City of Stockton under the Opioid Settlement Agreement Funds.
It is also recommended that the City Manager, or designee, be authorized to take appropriate actions to carry out the purpose and intent of this resolution.
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Summary
California has joined multiple national lawsuits against manufacturers, distributors, and other entities responsible for aiding the opioid epidemic. As a result, the City of Stockton has received funds from opioid judgments and anticipates receiving funds from future judgments. The City is scheduled to receive settlement funds through payments based on an allocated percentage of National Opioid Settlement funds directed to the State of California. Opioid Settlement Agreement (OSA) allocations must be utilized for substance use prevention, intervention, harm reduction, treatment, and recovery services in communities, as prescribed in the program guidelines.
Funds allocated to the City of Stockton from California’s opioid settlements will be distributed into one of two sub-funds: 1) Abatement Account Funds, to use for future opioid remediation, and 2) California Subdivision Funds, to use for future opioid remediation activities and to reimburse past opioid-related expenses.
The City intends to contract with Community Medical Centers (CMC) for a three-year term to utilize up to $4.5 Million of funding received by the City of Stockton through the California Opioid Settlements. In alignment with the California Department of Health Care Services approved uses of funds for High Impact Abatement Activities, CMC will utilize funding to expand the existing Substance Use Disorder (SUD) treatment infrastructure delivered through the CMC Respite Center, to include providing withdrawal care and residential treatment in a community-based setting for individuals experiencing uncomfortable withdrawal symptoms deemed mild to moderate for sub-acute level of care. The program will prioritize prevention, intervention, harm reduction, assessment, treatment, recovery services, service support, and aftercare delivery to impacted community members.
Compensation to CMC under this agreement is restricted to Opioid Settlement funds and is subject to availability of these funds during the contractual term. The City’s agreement with CMC is the first anticipated initiative for usage of OSA funds. It is the City’s intent to explore other allowable uses of funds with additional community partners, following the initial agreement term.
DISCUSSION
Background
California has joined multiple national lawsuits against manufacturers, distributors, and other entities responsible for aiding the opioid epidemic. Local jurisdictions have received funds from opioid judgments, and it is anticipated that allocations from future settlements will be received. Each state’s share of the funding has been determined by agreement among the states using a formula that considers the impact of the opioid crisis on the state - the number of overdose deaths, the number of residents with SUD, and the number of opioids prescribed - and the population of the state.
On July 21, 2021, a $26 billion offer to settle was made by opioid manufacturer Janssen Pharmaceuticals (“Janssen”), which is a parent company of Johnson & Johnson; and the “big three” distributors - McKesson, AmerisourceBergen and Cardinal Health (“Distributors”)- to resolve their liabilities in over 3,000 opioid crisis-related lawsuits nationwide. It is estimated that California will receive approximately $2.05 billion from the Janssen and Distributors Settlement Agreements through the year 2038. The Janssen and Distributors settlements provide substantial funds for the abatement of the opioid epidemic in California and require that the companies change the way they conduct their business.
On July 9, 2023, five additional pending settlements were announced. The pharmacies CVS, Walgreens, and Walmart (“Pharmacies”), and the manufacturers Allergan and Teva Pharmaceuticals, together proposed settling on $17.3 billion to address their roles in the opioid crisis, of which California’s share could potentially be $1.8 billion. The agreements with CVS, Walgreens, and Walmart are the first multistate settlements to hold chain pharmacies accountable for their failure to intervene in prescription abuse and drug diversion. The Pharmacies settlements are expected to provide substantial funds for the abatement of the opioid epidemic in California and will require changes in the way that the Pharmacies conduct their business. Settlements build on the existing framework that states and subdivisions have created through the other opioid settlements.
In February 2022, Mallinckrodt Pharmaceuticals (“Mallinckrodt”), a generic opioid manufacturer, confirmed that the company was filing for bankruptcy and reached an agreement to address its opioid litigation with multiple states, including California. The agreement stipulates that $1.6 billion will be provided to states to use for opioid abatement, with approximately $14.7 million of those funds awarded to California. In early 2023, cities and counties in California received the first round of payments from Mallinckrodt. Additional bankruptcies from other opioid manufacturers, including with Endo Pharmaceuticals and Purdue Pharmaceuticals L.P., are still pending.
Funds received from all of California’s opioid settlements will be distributed as follows:
• 15 percent allocated to the State of California to use for future opioid remediation activities (California State Fund).
• 70 percent allocated to cities and counties to use for future opioid remediation activities via the Abatement Account Fund.
• 15 percent allocated to cities and counties who filed original lawsuits against opioid defendants, to use for future opioid remediation activities and to reimburse past opioid-related expenses, via the California Subdivision Fund.
California cities and counties receiving OSA allocations must utilize funds for substance use prevention, intervention, harm reduction, treatment, and recovery services in communities. Abatement Accounts funding must be used for responses that qualify under California’s High Impact Abatement Activities (HIAA), as defined by the California Department of Health Care Services (DHCS). Within this HIAA List of Opioid Remediation Uses are both “Core Strategies” and “Approved Uses” (Attachment A). In their role as Plaintiff Subdivisions, localities must utilize California Subdivision Accounts to fund future opioid remediation projects and reimburse past opioid-related expenses, and the Plaintiff Subdivisions must ensure compliance with annual reporting requirements to DHCS.
Although funding is expected to be received from at least eight separate settlements (e.g., Janssen, Distributors, Teva, etc.), the total funding amount during the three-year contractual term is unknown. Attachment B shows Payment Information reflected on the DHCS website, tabled by settlement types, estimated distribution periods, and links to formal Agreements. Exact percentages provided to cities and counties will be based on the percentage schedules found in the relevant Agreements. For example, Stockton receives a weighted allocation percentage of 0.3256176 percent from both the Janssen and Distributors Settlements - the weighted allocation percentage constitutes 0.313 percent of the Abatement Account Fund and 0.383 percent from the Subdivision Fund.
Due to pending settlements with five additional entities, the total amount of funding allocated for the City of Stockton cannot be specified with absolute certainty at this time, however, based on previous allocations to the City, it is reasonably anticipated that $4,500,000 of funding may be distributed during the three-year term. All services provided under this contract are subject to availability of funding received through the California OSA (Exhibit 1 to the Resolution).
Present Situation
In July 2022, City Council approved by motion (2022-07-26-1503) an Agreement for Professional Services with Community Medical Centers (CMC) to establish outreach, crisis intervention and support for community well-being under American Rescue Plan Act funds. In November 2022, CMC launched the Mobile Crisis Intervention Response, a pilot project that dispatches a mental health clinician and support team as an alternative response to non-emergency calls in Stockton. At its inception, the Mobile Response Team (MRT) operated on a limited schedule while the project was being built out. In April 2023, the MRT increased operations, currently responding to direct calls and referrals on a 7-day-per-week schedule for 15 hours each day. Monthly data reflects a consistent uptick in calls for service.
A primary objective of the pilot project is to ensure ongoing patient engagement that supports stabilization, rehabilitation, and sustainable outcomes through access to Care Team programs such as the CMC Respite Center and Medication Assisted Treatment (MAT) and CMC Substance Use Disorder (SUD) Outpatient Services. CMC’s existing outreach and community well-being efforts through the MRT critically align with DHCS requirements for using opioid abatement funding, as shown in the HIAA/Attachment A:
1. Core Strategy: MEDICATION-ASSISTED TREATMENT (“MAT”) DISTRIBUTION AND OTHER OPIOID-RELATED TREATMENT
i) Expand availability of treatment for Opioid Use Disorder (OUD) and any co-occurring SUD or Mental Health (MH) condition through evidence-based or evidence-informed programs and strategies.
ii) Provide treatment and recovery support services such as residential and inpatient treatment, intensive outpatient treatment, outpatient therapy or counseling, and recovery housing, that allow or integrate medication and with other support services.
2. Core Strategy: EXPANSION OF HAND-OFF PROGRAMS AND RECOVERY SERVICES
i) Expand warm hand-off services to transition to recovery services.
ii) Broaden scope of recovery services to include co-occurring SUD or MH conditions.
iii) Provide comprehensive wrap-around services to individuals in recovery, including aftercare direct services and referrals or assistance to obtain housing, transportation, job placement/training, and childcare.
As a primary stakeholder in mental and behavioral health care throughout the community, CMC is foundationally positioned to provide comprehensive treatment and whole-person centered services with OSA funds allocated to the City of Stockton. CMC will utilize funds to expand the existing SUD treatment infrastructure delivered within the CMC Respite Center. The Respite Center will provide withdrawal care and residential SUD treatment at a cost of $300 per bed, per day, in a community-based setting for individuals experiencing withdrawal symptoms deemed mild to moderate for sub-acute level of care. Secondarily, CMC will provide Aftercare Recovery, which includes counseling, transition and resource connection, outpatient treatment support and transportation assistance. Additionally, CMC will incorporate approved Program objectives which include expanding treatment availability through evidence-based programs and strategies; wraparound service support and case management; and collaboration with local partners, such as the San Joaquin County Opioid Safety Coalition, to develop a coordinated and transparent process for opioid reduction and prevention.
The CMC Respite Center is one of California’s three SUD treatment facilities that is operated by a Federally Qualified Health Center (FQHC). The FQHC designation requires that a medically-underserved population receives comprehensive services, all individuals are treated regardless of income, and the organization maintains an ongoing quality assurance program. The Respite Center fills a much-needed gap in the Stockton area as long-term SUD treatment facilities often require patients to be sober for up to two weeks. The Respite Center provides such gap coverage, which allows intermediate short-term placement for withdrawal. Thus, only at the Respite Center can a patient detoxify for up to 14 days while receiving services including group and individual counseling and medical treatment. Clients can access services through any “door” - individuals can voluntarily seek services, they can be referred, or they can be brought by a family member. This nexus with the crisis intervention pilot project ensures that residents already being served by the Care Link team can be connected with the next levels of wraparound support and don’t get overlooked in a bureaucratic transition between agencies. The uniqueness of the scope of CMC’s Respite Center and aftercare services qualifies Community Medical Centers as a Single Available Source for this contract.
Findings
Pursuant to Stockton Municipal Code section 3.68.070, Council may approve findings which support and justify an exception to the competitive bidding process. The following findings support such an exception:
1. The City does not have sufficient expertise or staff resources to utilize funds through the National Opioid Settlement with direct activities that prevent and remediate the opioid epidemic.
2. Use of the Single Available Source procurement is appropriate for this Professional Services Contract because the Contractor scope is unique among local entities in providing intermediate “gap coverage” or short-term placement for withdrawal to clients in a residential treatment setting. CMC is exclusive in providing bridge services to address all phases of care with SUD. Additionally, CMC’s designation as an FQHC ensures equity of services, and maintains an ongoing quality assurance program.
3. In utilizing OSA funds, Community Medical Centers will leverage efforts underway provided through the existing Crisis Intervention and Community Well-Being pilot project to expand SUD treatment and will connect clients with aftercare delivery and comprehensive wraparound support.
FINANCIAL SUMMARY
Payments to the City of Stockton will be distributed either yearly or periodically when front-ended, extending through the year 2031 for Janssen and 2040 for Distributors. As of October 2023, Settlement front-ended payments in the amount of $1,033,410.08 have been distributed to Stockton through the Janssen and Distributors entities, as Abatement and Subdivision sub-funds. A Settlement in the amount of $28,283.15 has been received through the Mallinckrodt bankruptcy payment. Future Pharmacies Settlement payments are anticipated. All OSA payments are housed in State Settlement Payments revenue accounts and are separately tracked and reported as Abatement or Subdivision funds by entity (e.g., Janssen, Distributors), along with interest accrual. This action authorizes the appropriation of revenues received and corresponding expenditure budgets, amending the City’s Annual Budget. Services provided under the CMC contract are subject to availability from the California Opioid Settlement Agreement funds. This contract is not intended to be funded from any other account.
Based on payments received so far, staff anticipate an amount of up to $4.5 million will be received and available to fund a three-year Professional Services Contract to Community Medical Centers to utilize for opioid prevention and reduction activities, and program and service expansion of the Substance Use Disorder Respite Center. CMC will receive funding only from the National Opioid Settlement Funds, and the City will not provide funding from any other funding source under this agreement. There is no impact to the General Fund, or any other unrestricted fund, from this action.
Attachment A - Final Settlement Agreement: List of Opioid Remediation Uses
Attachment B - California Department of Health Care Services Payment Information