Major pharma companies that are fending off billions of dollars in claims from state and local governments over their role in the opioid crisis are considering minimizing their liability through an obscure legal mechanism known as "third-party release."

Johnson & Johnson, Endo International and some other major drug-makers and distributors are considering joining the bankruptcy of Purdue Pharma LLP.

Purdue, which has been targeted by lawsuits over its signature product, Oxycontin, filed for Chapter 11 bankruptcy last month and has floated an offer of $10-12 billion to settle all of its lawsuits.

The drug-makers would help fund Purdue's settlement as part of an agreement that would resolve their liabilities.

Such a strategy is not unprecedented. Honda agreed last year to pay into a settlement fund set up by Takata, an airbag manufacturer that was forced into bankruptcy due to defective airbags that it provided to automakers, including Honda. Similarly, Walmart freed itself of liability by paying into a settlement fund related to faulty gas cans provided to it by Blitz USA, which declared bankruptcy.

Not all jurisdictions in the U.S. allow third-party release. They are recognized in the state of New York, where Purdue has filed for bankruptcy.

The amounts that individual drug-makers may pay into Pharma's settlement fund remain unclear.

On Tuesday, Johnson & Johnson announced a $20 million settlement with the state of Ohio over opioids. A month earlier, a judge in Oklahoma ordered the company to pay $572 over the damage inflicted by its products in the state. The company is appealing that judgment.

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Pharma looks to 'third-party release' to reduce opioid liability

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