W.Va. legislature backs McGraw's settlement plan

John O'Brien May 19, 2010, 7:00am


CHARLESTON, W.Va. (Legal Newsline) - West Virginia Attorney General Darrell McGraw and the state Legislature are on the same page when it comes to how to spend part of a $22.5 million settlement with Eli Lilly & Co.

Two years after a bill was passed that required McGraw to notify lawmakers and Gov. Joe Manchin of any legal action that could result in more than $250,000, the House of Delegates unanimously approved legislation Tuesday that would put almost $15 million from a 2009 settlement in a behavioral mental health services fund.

Some lawmakers had criticized McGraw in the past for appropriating settlement funds. His doing so has also resulted in a pair of confrontations with the federal Medicaid agency.

"Government agencies and their officials require more notice of these actions and time to respond to them and the Legislature requires more timely information regarding these actions, all in order to protect the public interest," the bill said.

Gov. Joe Manchin can now sign the bill to create the fund, which will receive $14,750,000 from McGraw's settlement with Eli Lilly & Co., maker of the antipsychotic drug Zyprexa. The creation of the fund was a part of the settlement.

The rest of the settlement gave $6,750,000 to private attorneys hired by McGraw to pursue the case and $1 million to McGraw's Consumer Protection Fund. The settlement was reached in July.

Legislators and McGraw have disagreed over his past spending of settlement dollars, prompting the passage of the bill.

Twice, the federal Centers for Medicare and Medicaid Services, which supplies the bulk of every dollar the State spends on Medicaid, has notified the state's Department of Health and Human Resources that it will be withholding Medicaid funds because it does not believe it was given what it was owed from two of McGraw's lawsuit settlements.

A $2.7 million withhold, currently being appealed after being reduced from $4.1 million, results from the $10 million agreement with Purdue Pharma, reached in 2004 over the company's painkiller OxyContin.

Another $446,607 withhold, verified this year by a federal judge, stems from a settlement with Dey, Inc., which McGraw's office claimed inflated the prices of the prescription drugs it manufactured, thereby defrauding the state's Medicaid program.

The Purdue Pharma settlement was intentionally structured in a way that prevented the Legislature from receiving any funds. The listed plaintiff state agencies received either a small amount or none of the settlement.

Sen. Jesse Guills, R-Greenbrier, a member of the Senate Finance Committee asked McGraw in a Jan. 2008 meeting who would be responsible for paying the federal government back.

"If we lose this contest, who will pay the $4.1 million?" Guills asked.

"The burden is back on the Legislature," McGraw replied.

Guills also asked where that money would come from.

"Perhaps sharper pencils than mine can find 0.005 percent of that money," McGraw said, referring to $2 billion figure he's secured in settlements since becoming attorney general.

McGraw said his office had three options when reaching the OxyContin settlement.

"We could take the money agreeable to the judge and the drug company," he said. "We could've turned it over to the DHHR, and the money would have gone back to the federal government. Bye-bye.

"Or we could've given it to the Legislature, which would have been obliged to give it to the DHHR. Bye-bye."

Years ago, McGraw had another dicey encounter with lawmakers when he met with the House Budget Committee. Del. John Doyle, D-Jefferson, criticized McGraw's actions.

"The minute your office or any office gets money for the State of West Virginia, that money is instantly the property of the taxpayers of West Virginia," Doyle said.

"Therefore, the Legislature must decide how it is spent."

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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