Johnson & Johnson has offered to pay $4 billion to settle all claims accusing the company of helping fuel the U.S. opioid epidemic, as part of a potentially larger deal involving drugmakers and distributors that could top $20 billion.

J&J’s overture came on the heels of a proposal by distributors McKesson Corp., Cardinal Health Inc. and AmerisourceBergen Corp. to pay $18 billion to wipe out all opioid suits against those companies, according to people familiar with the proposal. The Wall Street Journal first reported the distributors’ offer Tuesday. The money would be paid out in annual $1 billion increments, according to the people, who asked not to be identified because the negotiations are private.

J&J and the distributors–which deliver the majority of prescription medications to U.S. pharmacies–made the proposal in talks with a group of state attorneys general, the people said. The proposals came on the eve of the first federal trial in Cleveland over responsibility for the public-health crisis tied to opioids.

Shares of J&J gained 2.2% at 10:38 a.m. in New York on Wednesday, while McKesson shares rose 7.4%, Cardinal rose 5.7% and AmerisourceBergen gained 6.4%.

Teva Pharmaceutical Industries Ltd., another drug manufacturer targeted in the nationwide litigation, offered to give away more than $15 billion in generic drugs, including those that help fight opioid overdoses, to resolve all of its cases, said the people. That agreement would run over 10 years, the people said.

Israel-based Teva’s shares rose 6.3% in New York on news of the settlement proposal. Teva’s bonds were among the top performers in the U.S. high-yield market on Wednesday, according to Trace bond trading data. The company’s 6% unsecured bonds rose more than 1.5 cents on the dollar to around 91.5.

Other opioid manufacturers implicated in the federal trial, including Mallinckrodt and Endo, also rose in the wake of the news.

Deal Implications

If all the proposals are accepted, the Cleveland trial likely will be put off given that the three distributors and Teva are the main defendants, the people said. In the trial, two counties are seeking reimbursement for the hundreds of millions in tax dollars spent on the fallout from opioid addictions and overdoses.

“As we’ve stated previously, we remain open to viable options to resolve these cases, including through settlement,” Ernie Knewitz, a J&J spokesman, said in an emailed statement.

U.S.-based Teva spokeswoman Kelley Dougherty declined to comment on the proposed deal. AmerisourceBergen spokesman Gabriel Weissman and Brandi Martin, a Cardinal Health spokeswoman, also declined to comment. McKesson spokeswoman Sunny Rodriguez didn’t respond to requests for comment.

Samantha Fisher, a spokeswoman for Tennessee Attorney Herbert Slatery III, didn’t respond to an emailed request for comment, sent after regular business hours. Slatery is one of the leaders of the negotiations.

It’s the first time J&J has put serious money on the table to end its opioid liability, the people said. The drugmaker agreed earlier this month to pay $20.4 million to two Ohio counties to avoid a federal trial, but that didn’t extend to any other opioid claim. Some analysts have said it may take as much as $150 billion to resolve all the opioid cases on file.

“It’s very rare for J&J to do anything else other than litigate these kinds of cases to the bitter end,” said Carl Tobias, a University of Richmond law professor who teaches about mass torts. “I think investors are going to be very happy they are talking global settlement.”

Tobias said an Oklahoma judge’s decision to hit J&J with $572 million in damages over its sales of opioid painkillers in that state may have sent J&J an unmistakable signal. That judge acknowledged Tuesday that he made a $107 million error in his damages ruling and cut the award to $420 million.

“That ruling may have showed them that no matter where they try those cases, they are going to have trouble persuading judges and juries they shouldn’t be on the hook for the costs of the opioid crisis,” Tobias said.

The distributors’ latest proposal is $8 billion higher than the $10 billion offer they made in August. The National Association of Attorneys General, the group sponsoring talks on behalf of more than 35 states, countered with a demand for $45 billion at the time.

The drug distributors generate large amounts of cash that could be used to pay a settlement. In its 2019 fiscal year, San Francisco-based McKesson generated $4.04 billion from operations, according to data compiled by Bloomberg. In fiscal 2018, Cardinal brought in $2.77 billion and AmerisourceBergen $1.41 billion.

States, cities and counties claim opioid makers, including J&J and Teva, downplayed the painkillers’ health risks and oversold their benefits through hyper-aggressive marketing campaigns. Distributors, considered to have the deeper pockets by plaintiffs’ lawyers, are accused of ignoring red flags about misuse of the painkillers and illegally flooding states with pills.

For example, one pharmacy in Kermit, West Virginia — population 400 — received almost 5 million doses from McKesson between 2005 and 2006, records show. About 30 miles (50 kilometers) from Kermit, the company shipped more than 5.8 million doses to a pharmacy in Mount Gay — population 1,800 — between 2006 and 2014. Another 2.3 million doses went to a pharmacy three miles away.

McKesson, Cardinal Health and AmerisourceBergen, along with other distributors, shipped a total of 76 billion pain pills over a six-year period starting in 2006, according to the U.S. Drug Enforcement Agency. The companies deny the governments’ allegations and have advanced dozens of legal and factual defenses, saying they complied with all state and federal laws.

Teva has been grappling with billions in debt as well as thousands of opioid suits over its generic painkillers. Teva’s 2015 acquisition of Allergan Plc’s generic business for $40.5 billion pushed the company’s debt load from $10 billion to $35 billion.

Chief Executive Officer Kare Schultz, who stepped into his role in late 2017, is trying to right a company hurt by falling margins on generic drugs and rapidly declining sales in its best-selling Copaxone multiple-sclerosis drug. Last year, the drugmaker cut its net debt by almost $1 billion to $28.4 billion.

Teva officials have told the attorneys generas’ lawyers that the company’s debt load leaves little free cash flow for an opioid settlement, the people said. That’s why it’s offering access to free Narcan, an overdose drug, the people said. In April, the U.S. Food and Drug Administration approved Teva’s request to start selling a generic version of Narcan, a nasal spray version of the opioid-overdose reversal agent Naxalone.

In August, Teva officials set aside $646 million to help pay legal expenses related to its alleged role in the abuse of the addictive painkillers linked to tens of thousands American deaths annually. Those funds weren’t devoted to paying settlements.

Teva’s bid to use the drugs-for-dismissal model to resolve its opioid liability may indicate the company could face bankruptcy if the proposal gets turned down, said Elizabeth Burch, a University of Georgia law professor who teaches about product-liability law.

“I guess free drugs are better than nothing, but it’s not perfect,” Burch said in an interview. “The real question is whether the local governments want to keep this company out of bankruptcy by accepting this offer.”