Delegate not surprised by McGraw decision

John O'Brien Apr. 14, 2010, 10:55am



CHARLESTON, W.Va. (Legal Newsline) - One of West Virginia Attorney General Darrell McGraw's biggest critics says a federal court has done to McGraw what state lawmakers won't.

Del. Jonathan Miller, a Republican from the Eastern Panhandle, said Tuesday that a recent decision by a federal judge proves what McGraw's critics have been saying for years -- that McGraw has been illegally mishandling settlement funds.

U.S. District Court Judge Joseph Goodwin ruled in March that the state owed the federal Medicaid agency more than $400,000 from a McGraw settlement with pharmaceutical maker Dey.

"There was little doubt the court would rule this way. It was pretty clear to most observers that McGraw violated the law," Miller said.

"I'm glad the federal courts are setting McGraw straight. This is something our state legislature and governor could have and should have straightened out."

A Departmental Appeals Board had ruled the federal Center for Medicare and Medicaid Services was owed $446,607 from McGraw's 2004 settlement with Dey. CMS provides approximately 70 percent of the state's Medicaid budget.

McGraw sent $100,000 of the settlement to his Consumer Protection Fund, while none of the settlement funds went to the state Department of Health and Human Resources.

CMS says $750,000 McGraw gave to the Public Employees Insurance Agency was an amount much greater than the damages he claimed for the agency during litigation.

Goodwin's decision may provide a preview for a similar case involving a much larger amount of money. McGraw is challenging a DAB decision that withheld $2.7 million in federal appropriations to the state Medicaid agency.

That decision concerned a $10 million settlement with OxyContin-maker Purdue Pharma in 2004.

"West Virginia's theory in pursuing the pharmaceutical companies was built around inflated reimbursement rates that the State paid to pharmacies - which are 'providers' and which West Virginia's complaint labeled as such (claiming that Dey caused the State to 'overpay substantially' when it 'reimbursed providers for the drug')," Goodwin's decision says.

"The overpayments in this case were paid to providers pursuant to the Medicaid program. (CMS) is entitled to its share of those recovered overpayments regardless of the source of the recovery."

Chief Deputy Attorney General Fran Hughes has admitted to the Legislature that the OxyContin money was not given to the state DHHR, which administers the Medicaid program, because CMS would then be able to claim a share -- "We have arranged a methodology that has prevented the federal government from coming back and seizing money," Hughes said.

Hughes formerly served as general counsel for a national consulting firm that specialized in Medicaid financing.

"With the federal government in as bad a shape as it is, it doesn't speak well of our state representatives to continually have the feds correct their mistakes," Miller said.

"If we had a more responsible state government, we would be correcting the mistakes made by the federal government, like joining in the lawsuit against Obamacare and passing the Healthcare Freedom Act to protect our citizens from the federal government's takeover of healthcare as other states are doing.

"Our citizens should take note because they are directly affected by an irresponsible state government. State legislative races have now become even more important."

CMS had sought more than $4 million from the Purdue Pharma settlement, but the DAB adjusted its calculations to consider the more than $3 million in attorneys fees earned by private attorneys hired by McGraw to pursue the case, which alleged Purdue Pharma misrepresented the addiction capabilities of the painkiller OxyContin.

Rather than give the settlement funds to the state agencies named as plaintiffs, McGraw has used the money from the settlement on substance abuse programs around the state, as well $500,000 to the University of Charleston for a pharmacy school.

McGraw argued that there was a fourth plaintiff - the affected individuals in his state he was representing in his parens patriae capacity.

"We find no merit in this argument," the DAB wrote.

"It is not evident from the record that the State was, at the time of settlement, seeking damages on behalf of individual consumers."

McGraw did give $250,000 of the settlement to the state DHHR.

From Legal Newsline: Reach John O'Brien by e-mail at

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