DHHR joins McGraw in opposing feds' stance on Purdue Pharma settlement

John O'Brien Jun. 12, 2007, 2:00pm




CHARLESTON, W. Va. - The West Virginia Department of Health and Human Resources has decided to back up Attorney General Darrell McGraw during the state's battle with federal Medicaid officials, claiming it was never entitled to any of the disputed funds from a settlement.

Meanwhile, the watchdog group Citizens Against Lawsuit Abuse says the DHHR and McGraw have their stories mixed up.

Either way, it's now the federal Centers for Medicare and Medicaid Services' turn to respond in the ongoing saga that began with McGraw's 2001 lawsuit against Purdue Pharma, manufacturer of the prescription drug OxyContin. McGraw argued the drug's addiction capabilities were misrepresented and put a strain on the state's Medicaid system.

"The final (settlement) order specially delineates who the monies are for and how they are to be spent," wrote Leonard Kelley of the DHHR's Bureau for Medical Services. "Importantly, the Medicaid program is excluded from the settlement."

The CMS had written the DHHR May 15, inquiring about the location of funds it believes it is owed and threatening to withhold federal payments to the state Medicaid program. The federal government provides 73 cents of every dollar spent on Medicaid in the state.

The settlement with Purdue Pharma was reached in 2004, when Purdue Pharma gave $10 million to settle the suit brought by McGraw on behalf of the DHHR and two other state agencies. Instead of turning the money over to any of the agencies he represented or the state Legislature, McGraw kept the money and appropriated it himself.

Controversy started when he gave $500,000 for a pharmacy school at the University of Charleston.

In February, Chief Deputy Attorney General Fran Hughes promised the Legislature that McGraw's office would stop appropriating the settlement funds on its own. She also said the money was not given to the DHHR because then the CMS could claim its share -- "We have arranged a methodology that has prevented the federal government from coming back and seizing money," Hughes said.

Hughes previously served as general counsel for Human Services Management, a national consulting firm specializing in Medicaid financing

After the promise, though, McGraw continued to hand out money. More than $1 million went mostly to day report centers that are checkpoints for non-violent convicts.

Since the CMS wrote the DHHR, McGraw has handed out $170,000. When asked if McGraw's action constituted Medicaid fraud, Mary Kahn, spokesperson for the CMS, responded, "We are currently discussing this issue with the state. I am not able to expand on that comment right now as there is no outcome to these discussions."

The DHHR, in its letter, cited the settlement agreement to support its stance.

"The settlement was based upon the damages suffered by all the citizens of West Virginia as opposed to any particular state agency," the letter says. "The Final Order reflects the intentions of the parties in reaching the settlement, specifically, on page 2 of the Order which states in part that: '...Purdue shall pay the sum of $10 million dollars to the Consumer Protection Fund... which funds shall be placed in trust and used by the Attorney General in support of the general welfare of the people of West Virginia in the following areas only: (1) Accredited continuing medical education programs directed at the use, abuse and diversion of prescription drugs; (2) Law enforcement training, education and funding relating to abuse and diversion of prescription drugs; and (3) Community-based drug and diversion education programs.'"

CALA President Steve Cohen says the DHHR's response doesn't add up, mostly because the DHHR is now claiming it did not pay for OxyContin prescriptions that were not medically necessary. DHHR's lawsuit read, "as a result of the excessive and unnecessary prescriptions of OxyContin, Medicaid recipients in the State of West Virginia have been inappropriately and unnecessarily prescripbed OxyContin, and the State and the (DHHR) have incurred excessive and unnecessary expenses as a result thereof."

The CALA also claims the Public Employees Insurance Agency expected money from the settlement, and Greg Burton, who was heading the Workers' Compensation system at the time, expected money and was never even told the case was settled.

In addition to that, Cohen argued that McGraw's office recently stated there was less than $2 million remaining in the settlement account, even though court records show his office will receive another $2.5 million payment this year.

"McGraw's pocketing these public dollars for his own pet projects has created an inconvenient truth, may jeopardize health care for West Virginian's neediest citizens and has brought out conflicting statements about what's going on here," Cohen said.

"The questionable use of these funds by Darrell McGraw's office went unchallenged by the Medicaid program for 2 1/2 years. Now we are hearing conflicting statements by the parties involved and need to get to the bottom of this story."

Hughes recently told the Charleston Daily Mail that the office will battle the CMS in court if the CMS tries to seize or withhold any funds. CMS spokesman Jeff Nelligan responded by saying the agency will not discuss its future plans.

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