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How state governments should use opioid settlement funds

State leaders’ opioid epidemic response can effectively address the economic toll with strategic investment of opioid settlement funds.

In brief

  • Billions in opioid settlement funds are flowing to states, and public agencies will need to meet layered and complex stakeholder expectations.
  • Opioid abatement councils will be expected to operate with transparency and direct human and financial resources to programs that mitigate opioid overdose deaths.
  • States’ opioid epidemic responses may consider capabilities, data, technology and innovative solutions integrating social determinants of health.

The impact of the opioid epidemic goes beyond the rising death rates that fill the headlines, and government leadership is critical to lead the charge in addressing the opioid epidemic response.

Drug overdoses now claim more than 100,000 lives per year due primarily to the rise in synthetic opioids – a staggering figure. Analysis of public data suggests that as the presence of fentanyl increased, so too did death rates among Black, Hispanic and Native American populations. Opioid overdose death rates among these populations have grown at two to three times the rate of White Americans with no sign of slowing down.

Total drug overdose deaths and opioid overdose deaths by drug class¹, US

Source: National Center for Health Statistics, Centers for Disease Control and Prevention (CDC), Substance Abuse and Mental Health Services Administration (SAMHSA), EY-Parthenon analysis.

The loss of human life at this magnitude specifically associated with fatal opioid overdoses is an American tragedy. Other figures are additionally staggering, highlighting the breadth and depth of the epidemic, and how it negatively impacts American society, such as the dramatic reduction in labor force participation rate. Experts have tried to quantify the negative economic impact, and a report by the Joint Economic Committee reported to Congress in September 2022 estimates the economic effect to be as much as $1.5 trillion in 2020. Efforts to address the prescription opioid epidemic had success, but the battle has shifted due to illicit synthetic opioids entering the supply chain, and state and local governments must adopt a change in tactics to reduce the human, economic and societal toll that opioid overdoses are having on America.


Tens of billions in opioid settlement funds, which resolve litigation with opioid manufacturers, distributors and others, are starting to flow to state and local governments with the ambition of addressing opioid use disorder through prevention, treatment and recovery programming. Now that states are finalizing settlements and receiving the funds, government executives and state leaders have the resources to address the underlying factors and improve outcomes. Some, but not all, states have structured their opioids abatement advisory councils, legislative frameworks and prioritized strategies for prevention, treatment and recovery. States executives can demonstrate leadership in combating the opioid epidemic with three swift actions:


  1. Establish governance bodies with fiduciary responsibility to establish guidelines and controls for use of funds
  2. Set strategic priorities that incorporate the broader range of human, economic and societal impacts of the opioid epidemic, including of the social determinants of health
  3. Invest in developing capabilities and relationships across state and local agencies that will deliver value over the long term, including with private sector partners, to actualize these strategies through evidence-based interventions

Chapter 1

Meeting distribution requirements for opioid settlement funds

Clarify governance and fiduciary responsibility to direct funding that meets state and local needs.

States have discretion in how they prioritize prevention, treatment and recovery strategies in their opioid epidemic response.

States that are leading these efforts have set up independent governance bodies to establish strategic direction and objective measures for how and where opioids abatement dollars are directed. These bodies are composed of diverse stakeholders, including state government leaders, academics, community representatives and private sector experts.

The negotiated opioid settlement dollars come with approved uses following lessons learned from billions in tobacco settlements collected by states that critics say were not adequately directed to programs that reduce tobacco use through funded programs. In addition to meeting opioid settlement funds’ uses, metrics for success must be defined and measured to enable public trust in state opioids abatement initiatives. Whether it is through outcome-based budgeting, purpose-driven spending or another budgetary framework focused on programs and evidence-based decision-making, each state can take a tailored approach.

What states should do next: Establish or expand fiduciary management and grant tools to meet fund distribution requirements with clear tracking and reporting that results in public confidence. Ensure state and local government leaders are collaborating with community leaders and private sector experts to align opioid settlement fund distribution with evidence-based strategies that achieve prevention, treatment and recovery outcomes. Invest in data collection and analytics tools to measure investment impact and adjust as necessary to reduce direct and indirect effects of the opioid epidemic.


Chapter 2

Who is responsible for the opioid crisis in the local economy?

Set strategies that incorporate a broader range of human, economic and societal factors.

There are many evidence-based strategies in opioids abatement that can improve survival rates, including greater access to naloxone to reverse overdose deaths. But states must also consider strategic policies to address the epidemic’s effects on the economy and the underlying social barriers that directly and indirectly influence substance use disorder (SUD), including opioid use disorder (OUD), such as mental health services access and the social determinants of health (SDoH).

Opioid epidemic economic impact

Data does vary, but even the most conservative economic impact studies suggest the opioid crisis has a significant economic impact across the United States. An EY-Parthenon analysis of published studies shows that the US opioid epidemic erased more than $720 billion from the US economy on average in 2017-2018.¹ The economic impact from opioid use disorder and overdose deaths includes the costs borne by the health care and criminal justice systems, the loss of business productivity and the value of premature deaths, including an individuals’ lost lifetime earnings. In addition to the millions of workers who died during prime employment years or stopped working due to opioids, there are intangible costs, including reduced quality of life for families, communities and society at large, as a consequence of the epidemic.

Annual estimate of economic impact from the opioid epidemic (in $b)

Source: The Council of Economic Advisers, CDC, The White House, American Hospital Association, Society of Actuaries, Hospital Industry Data Institute analysis of CEA methods applied to 2017 data from the CDC, BEA, BLS and SAMHSA, American Action Forum

The opioid epidemic grew dramatically during the COVID-19 pandemic; personal mental health challenges, increases in substance abuse and overdose deaths also rose dramatically over that same time period. Recent analysis suggests that increased substance abuse during the pandemic is estimated to account for 9% to 26% of the decline in prime-age labor force participation between February 2020 and June 2021,² further reinforcing the need to address other factors and mitigate the impact of the opioid epidemic. This broad range represents the upper and lower bounds of the possible implications for labor force participation depending on the proportion of deaths from new opioid users compared to existing users. According to a report from the Joint Economic Committee of the US Congress in September 2022, the economic impact of the opioid epidemic rose 37% between 2017 and 2020 to nearly $1.5 trillion annually.

Opioid epidemic impact on marginalized populations

Illicit fentanyl entering US drug markets has most dramatically affected Black, Hispanic and Native American populations with serious and negative outcomes. While deaths increased in all populations during the pandemic, overdose deaths grew at disproportionately high rates in Black, Hispanic and Native American populations, according to a 2022 Statista report.

Historically, Black populations had less access to opioid prescriptions than White populations, which is believed to be due to inequities in health care system access and implicit bias in prescribing practices. While these behaviors resulted in fewer prescription opioid-associated deaths among Black people than White people, trends have reversed in recent years. Over the period 2017–2020, the death rate in Black people grew more than 100%, from roughly 13 to 26 per 100,000, surpassing the death rate of 25 deaths per 100,000 in the White population. Shockingly similar increases are observed in Hispanic (93%) and Native Americans (75%) over the same time period — for comparison, White deaths increased 30%.

Death rate involving fentanyl, per 100,000, by ethnicity

Source: Statista, Opioid use in the U.S.

Researchers from Boston Medical Center and Boston University School of Medicine cite a lack of access to overdose prevention and treatment resources as a likely cause of rising opioid overdose deaths in Black populations in some states.

Drug use generally, and opioid use specifically, is associated with the five SDoH domains: economic stability, education access and quality, health care access and quality, neighborhood and built environment, and social and community context. Strategies that impact SDoH disparities in marginalized populations are likely to have an outsized impact on OUD and death, in addition to reducing disparities, addressing social and health inequities, and improving quality and length of life for all individuals in these communities.

What states should do next: In partnership with impacted communities, explore policies and initiatives that incorporate considerations for marginalized groups. Explore opportunities to pool funding and resources that address overt opioids abatement needs and underlying SDoH within and among high-risk communities.


Chapter 3

Five funding priorities for states’ opioid epidemic responses

States should develop capabilities and relationships across state, local and private sector partners.

While the role state governments play now in opioid abatement is to rapidly address death and exposure to fentanyl and future iterations of deadly synthetic opioids, economic challenges and inequity should be longer-term objectives. As such, many states require investments that develop enhanced capabilities and relationships to effectively achieve these objectives in the longer-term.

Assessing data collection and analytics, existing drug-related capabilities and relationships across wide geographies will be important for current and future success. These assessments are independent of, but complementary to, the significant operational and fiduciary responsibilities associated with the opioid settlement funds, including reporting, distribution and establishing controls that minimize fraud, waste and abuse. Investing in capabilities and defining clear strategic priorities for use of abatement funds through direct involvement of state and local agencies, community-based organizations and other stakeholders will bring forward new ideas that will be necessary to tackle the opioid crisis. These efforts might also incorporate initiatives that address the economic impacts and support marginalized communities that are being differentially impacted in a way that creates a long-term framework for success.

State leaders can consider five priorities, based on evidence on effectiveness in prevention, treatment and recovery for OUD. These include:

  • Tackle poverty and support employment: A 1% increase in poverty and unemployment rates is associated with a 1.7% and 4.6% increase, respectively, in drug overdose death rates, according to a 2018 research brief from the U.S. Department of Health and Human Services. Employment programs for people in recovery can prevent recurrence of symptoms and increase labor force participation.
  • Address mental health components of addiction: Outpatient psychosocial and medication for OUD (methadone, buprenorphine or naltrexone) costs between 9%–47% less than the current average Medicare advantage health and pharmacy claims related to OUD patients, depending on the type of treatment used.³ Expanding access to treatment centers and other supportive services improves quality of life by addressing needs across the SDoH domains.
  • Improve child and family welfare: The rate of neonatal abstinence syndrome (NAS), fetal withdrawal from maternal drug use, increased 70% from 2010 to 2018, resulting in adverse neuro-cognitive, behavioral and developmental outcomes, as well as increased hospital costs. To improve outcomes, efforts are needed to reduce stigma around use of medication for OUD in pregnant individuals.
  • Break the cycle of incarceration: 24%–36% of opioid-dependent Americans cycle in and out of jail each year, with Black, Hispanic and Native American populations disproportionately represented in prisons. While 80% of the prison population experiences SUD, less than 10% receive proper treatment.⁴ Increasing access to medication and services for OUD in these settings improves life course outcomes for individuals.
  • Boost education outcomes: High drug mortality rates by county are associated with lower third grade student test scores, and opioids constituted more than 70% of the drug deaths for the period studied from 2009 to 2014, the Brookings Institute found. Research shows investment in prevention can yield improvements in four-year college completion and mental health outcomes, increase future earnings, and reduce costs to the criminal justice and health care systems.

What states should do next: Set objectives, communicate them externally and measure progress to enable adaptation over time as successes are realized. Develop relationships with community leaders and direct investments with longer-term outcomes. Align opioids abatement efforts with other initiatives that reduce disparity, health inequity and other socioeconomic inequalities to yield positive impact across multiple social and health domains.


Opioid abatement efforts by states that consider broader economic and societal impacts can prevent death, improve lives and deliver change in devastated communities. There are many evidence-based strategies that support prevention, treatment and recovery objectives. We believe through a few key examples, states’ investment in complementary areas that account for the SDoH domains can reap measurable and impactful results that are broader and more durable, resulting in stronger communities, economies and societies.

Nothing can or will make up for the devastating number of lives lost. However, with intentional planning, states can make sure that settlement dollars have the maximum possible impact and curtail the dramatic human and economic toll the opioid epidemic is having across the United States. As states and communities work to reduce opioid deaths, opioid settlement funds can make a difference if they finance flexible programs and interventions and if they are managed with transparency and accountability.

Thank you to Lydia Boussour and Bill Ding who contributed to this article.


In addressing the opioid epidemic response and opioid abatement, the state government role is significant now that opioid settlement funds are available. These dollars can be used for investing in programs and capabilities that can turn the tide against opioid use disorder over the next 15-plus years. With opioid settlement funds, investments should be directed to combat the devastating impact opioids have inflicted on individuals and their families, economies and marginalized communities. Through strategic planning, transparency and evidence-based funding, state and community leaders can save lives, change lives and improve economic output for the future.

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