Dec 22 (Reuters) - The three largest U.S. drug distributors announced on Wednesday an extension to a key Jan. 2 deadline for cities and counties to join a proposed $21 billion settlement resolving claims that the companies fueled the nation"s opioid epidemic. Plaintiffs" lawyers who negotiated the deal with McKesson Corp (MCK.N), AmerisourceBergen Corp (ABC.N) and Cardinal Health Inc (CAH.N) called the three-week extension a positive development that would allow some holdout states and their local governments to sign on. The new deadline is Jan. 26. More than 3,300 lawsuits largely by state and local governments have been filed seeking to hold those and other companies responsible for an opioid abuse crisis that led to hundreds of thousands of overdose deaths over two decades. The companies deny wrongdoing. The distributors said in September that 42 states, five territories and Washington, D.C., had agreed to participate in the global settlement. A similar number backed a related $5 billion deal with Johnson & Johnson (JNJ.N). About $10.7 billion of the overall $26 billion is tied to the extent that cities, town and counties participate, and local government councils have been voting in recent weeks to join and resolve their claims. Peter Mougey, a plaintiffs" lawyer involved in the settlement, said there had been a "huge groundswell of support" and that he expected nearly 80% of local governments that sued to be on board. But Mougey, a partner at Levin Papantonio, and Paul Geller, a lead negotiator at plaintiffs" law firm Robbins Geller Rudman & Dowd, said more time was needed to allow more states to join. New Mexico on Dec. 7 signed on, and Mougey said more are close. read more "A combination of additional states signing on along with the natural impact of the holidays - which are both positives - led the parties to recognize a short extension made sense," Geller said in a statement. Geller said he expected a similar deadline extension for J&J, which had no comment. AmerisourceBergen said it "remains optimistic that additional states and municipalities will sign on during the extension beyond the original deadline." (This story was refiled to add missing quote mark in eighth paragraph.) Reporting by Nate Raymond in Boston and Dania Nadeem in Bengaluru; Editing by Ramakrishnan M. and Peter Cooney