King: Medicaid suits working for Ala.

John O'Brien Dec. 31, 2008, 4:32pm


MONTGOMERY, Ala. (Legal Newsline) - While he fights the Federal Government over the fruits of his State's pharmaceutical litigation, Alabama Attorney General Troy King reminded citizens that he recently reached $28 million in settlements with drug companies.

King's office said Dec. 23 that he has recovered more than $34 million through Average Wholesale Price litigation, which alleges harm to the state's Medicaid program caused by pharmaceutical companies overcharging for their products from 1991-2005.

Recent settlements with Bristol-Myers Squibb, Ethex Corporation/KV Pharmaceuticals, Amgen, Inc./Immunex Corp., Roxanne Laboratories/Bohenringer Ingelheim and Bayer Pharmaceuticals have netted $28 million.

Of that amount, more than $10 million has gone for use in the State's general fund.

King is currently opposing changes made to the amount of money the federal Centers for Medicare and Medicaid Services is permitted to claim in a state's Medicaid case.

Proskauer Rose of Washington, D.C., is representing the State in its action.

"These new requirements provide that states must 'return' to the Federal Government not only those amounts attributable to the federal share of payments made by a state's Medicaid program, but also a significant portion of amounts attributable to fines and penalties (such as punitive damages) obtained as a result of states' efforts to prosecute those who defraud their respective Medicaid programs, with little or no help from the federal government," the State's complaint says.

"Adding insult to injury, (a letter from CMS to the states) also requires states to make these payments to the Federal Government without regard to whether the state has actually received the amounts in question."

The Oct. 28 letter from the CMS to the states says they are not allowed to segregate portions of their recovery as out of the Federal Government's reach.

"The (Heath and Human Services) Departmental Appeals Board has long recognized the federal government's entitlement to its proportionate share of civil penalties assessed by states against providers or other entities," the CMS letter states.

It adds that recently enacted federal legislation "provides that the full amount of any State (False Claims Act) recovery serve as the basis for measuring the federal share."

In fiscal year 2008, the Federal Government provided nearly 68 cents of every dollar spent on Medicaid in Alabama. King wrote that the new requirements "will have a devastating impact on the State of Alabama and the low-income and disabled individuals served by the State's Medicaid program."

Potentially hundreds of millions of dollars are at stake, he said. The State sued 79 pharmaceutical companies in 2005.

Arising from those claims were a $2 million settlement with Takeda Pharmaceuticals and a $4 million settlement with Dey, L.P.

Larger amounts could be in question. In February, a jury ordered AstraZeneca to pay $215 million, though the award was reduced to $160 million. The original verdict provided only $40 million in compensatory damages, while the remainder was punitive damages.

AstraZeneca has appealed, and the State has not received any money yet.

In July, a jury ordered Novartis Pharmaceutical to pay $33 million and GlaxoSmithKline $80.9 million. Though both included no punitive damages, they have both been appealed and the State has not received any money.

"A State may not seek to recover merely the 'state share' of computed fraud damages unless appropriate federal and state authorities formally agree to sever the federal and state portion of the overpayment and pursue them as separate actions," the CMS letter says.

"If there is no formal agreement to sever, a State may not claim in a State FCA case that it is only recovering damages incurred by the state, but not the federal government. Nor may a state return merely the federal portion of 'single' damages and retain all other amounts, such as double and treble damages. The federal government is entitled to the applicable FMAP share of a state's entire recovery."

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