Mich. AG comes to Alabama's aid in lawsuit against feds

John O'Brien Oct. 1, 2010, 2:00pm


MONTGOMERY, Ala. (Legal Newsline) - Alabama Attorney General Troy King recently received some support from one of his colleagues in his dispute over what is owed to the federal government from settlements with and verdicts against health care companies.

Michigan Attorney General Mike Cox filed an amicus brief in August in support of King's stance in a lawsuit over a letter written to state health officials by the federal Centers for Medicare and Medicaid Services.

The letter, sent in October 2008, said CMS would begin claiming a percentage of civil penalties from settlements and verdicts.

"Because CMS is only the 'sorcerer's apprentice,' it can only require the State's to repay the medical assistance percentage of the Medicaid it recovers," King's office wrote.

"CMS has no authority to require the State to repay sums other than medical assistance recoveries, e.g., a civil penalty under state law. Because the (letter) thus exceeds CMS's authority, it should be stricken."

CMS provides funding to state Medicaid programs. When a defendant company has been found to have cheated the state program or settles those allegations, CMS can take its share of the recovery.

The share comes in the form of a disallowance in the next appropriation of funds.

King, and now Cox, claim the letter amounted to a new administrative rule and should have been open to a notice and comments period.

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 federal law "provides that the full amount of any State (False Claims Act) recovery serve as the basis for measuring the federal share."

King challenged the letter, presumably to protect recoveries from the more than 70 lawsuits he filed against pharmaceutical companies. Three of those suits resulted in more than $270 million in jury awards, but they were overturned by the state Supreme Court.

Cox is attempting to protect a $49 million settlement from 2006. Approximately one-third reflected recovery of Medicaid funds, while the rest was classified as a civil penalty.

Cox says the proper amount was paid to the feds, but CMS "tried to persuade" the State to pay it a share of the civil penalty. A disallowance was issued in 2009, and Michigan has filed a request for reconsideration.

Both King and Cox are Republican attorneys general in their final months on the job.

King's lawsuit is in the summary judgment phase.

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

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