JACKSON, Miss. (Legal Newsline) - Mississippi Gov. Haley Barbour has warned a joint legislative budget committee against relying on recent legal settlements with four pharmaceutical companies as a "windfall" for the state budget next year.
On Monday, Mississippi Attorney General Jim Hood announced that two settlements with three pharmaceutical manufacturers were reached in ongoing cases related to average wholesale prices, or AWPs.
Hood said the settlements with Par Pharmacuetical Co., Alpharma USPD Inc., now known as Actavis Mid-Atlantic LLC, and Purepac Pharmaceutical Co., now known as Actavis Elizabeth LLC, would put $6,032,000 in the state's coffers.
The money comes from recently settled cases in the AWP litigation involving allegations of consumer protection violations and Medicaid fraud. AWPs are the average price at which drugs are purchased at the wholesale level.
Those two settlements followed a verdict in September by Judge Thomas L. Zebert in favor of the state in another AWP case against pharmaceutical company Sandoz Inc.
In a two-page letter to committee members Monday, Barbour said September's revenue estimate showed revenues for the month about $46 million above the sine die estimate.
After looking at it closer, the governor learned the estimate included $20,041,000 in so-called "revenue" from the settlements of the AWP cases.
However, Barbour said the State will only receive a fraction of those funds.
"I am writing to make sure you and others are not misled by this entry to think the State has $20.041 million in additional funds that will be available for appropriation or expenditure either now or in the next fiscal year," he wrote. "We do not."
Barbour pointed out that the State may receive less than $1 million of the proceeds, while former Gov. Ronnie Musgrove's law firm has been awarded more than $5 million in fees by Hood.
"The State settled these lawsuits for $25,700,000 this year. The attorney general gave former Gov. Ronnie Musgrove's law firm, which handled the litigation, a fee of $5,459,000," the governor explained in his letter.
"That does leave a balance of just above $20 million, but the State is not entitled to all that money. We cannot expect $20 million to be available for us to spend, as the federal government is entitled to at least 82.03 percent of that amount."
Under the law, the federal government is entitled not only to its share of the recovery but also to half, or $2,729,500, of the attorneys fees Hood gave to Musgrove's firm.
"Therefore, according to Medicaid's best estimates, the State may actually retain for appropriation as little as $907,807.70," Barbour wrote.
"Of course, this means former Gov. Musgrove and his law firm will get more money out of the lawsuit ($5,459,000) than the State of Mississippi and its taxpayers receive -- as much as six times more."
Hood's opponent in the Nov. 8 election, Republican Steve Simpson, was quick to jump on the attorney general's "blatant" misrepresentation.
"As usual, if you want to hide something from Jim Hood, hide it in a law book," Simpson campaign manager Scott Paradise said in a statement Tuesday.
"The law on this is very clear -- Jim Hood either doesn't know the law or wants to mislead the public two weeks before a tough re-election campaign."
Simpson's campaign also attacked Hood's decision to give the contract to Musgrove's firm.
"This clearly shows the problems with Jim Hood's priorities -- he took care of himself by getting donations and the hosting of a fundraiser from Gov. Musgrove, and he took care of the governor by paying him more than $5 million without any concern for Mississippi taxpayers," Paradise said.
"While Jim Hood can try and deceive Mississippians, he can't change the facts -- the federal government will immediately receive more than 80 percent of this funding -- not Mississippi taxpayers.
"Jim Hood got a fundraiser, Gov. Musgrove got millions in attorney fees and Mississippi taxpayers got the leftovers -- that's the bottom line."
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.