Two days before Christmas, Attorney General Troy King played Santa to Alabamians, announcing that the state has recovered nearly $35 million dollars from drug companies who cheated the state’s Medicaid Program for 14 years from 1991 to 2005.
The lawsuits filed by the state’s attorneys alleged massive overcharging by drug manufacturers by misreporting and inflating prices for drugs for the poorest people in our state.
The State contends that more than 70 drug manufacturers falsely inflated the price of drugs and reported these fictitious prices to a reporting service called First Databank. The manufacturers submitted prices called Wholesale Acquisition Cost (WAC) and average wholesale prices (AWP) to these reporting services, knowing those prices bore no relation at all to real marketplace prices, but would be used by state Medicaid programs to reimburse them.
King and the state settled with seven drug manufacturers last month for a total of $34.75 million.
Despite the federal share and the lawyer fees, the State of Alabama collected over $10.3 million for use in the general fund from the recent settlements.
Other verdicts totaling over $250 million in favor of the state have been reached in Montgomery Circuit Court against three other big drug companies. However, these funds have yet to be recovered because the manufacturers have appealed all three verdicts to the Alabama Supreme Court.
Says King: “Alabamians need to know that my office will not sit idly by and allow companies such as these to steal from the less fortunate.” The attorney general says the lawsuits were not brought to make up for budget shortfalls, but “because it is the right moral and legal thing to do…to protect the scarce resources for Alabama’s children, elderly and disabled.” The attorney general has now appropriately placed these multi-billion dollar corporations in the same barrel as those “food stamp cheaters” the state so vigorously prosecutes.
Attorney General King probably thinks he will be criticized for going after the big boys of corporate fleecing by hiring outside counsel to prosecute these cases against the drug makers. He won’t from these pages, and can rest easy because most of us have seen how big corporations have trashed our economy, cheating millions of hard-working Americans out of their savings… King has hired two of the state’s most eminent law firms, Beasley Allen of Montgomery, a plaintiff’s firm, and Hand Arendall of Mobile, primarily a defense firm, to represent the state and they have done well. Even the usually dependable corporate defender, the Press-Register in Mobile, said King was right to sue the drug makers and right to hire the outside law firms to handle the cases.
Why hire private law firms, some might say, because the state has hundreds of lawyers on the payroll? There are several reasons. First, these state employee lawyers presumably have jobs to perform on a daily basis. Second, they likely do not have the expertise to handle complicated trials. Third, the expense of litigating such high profile cases against corporate giants and their armies of lawyers is enormous. And the fact that Beasley Allen and Hand Arendall fronted the expenses, which totaled $4 million, and charged a fee of only 14 percent (the usual being between 30-50), all on a contingency of winning, meant the state did not have to gamble a dime on the outcome.
The nation’s state attorneys general, for their part, defend the practice of hiring outside counsel as the only way to finance these lawsuits without asking the state’s taxpayers either to risk losing a large amount of state resources in an unsuccessful suit or to reduce expenditures on other state priorities in order to provide additional funding to the attorney general. Oklahoma’s attorney general, Drew Edmondson, in an interview with The New York Times recently, argued, “We simply lack the resources in the attorney general’s office to handle this. We’re not going to ask the taxpayers of the state of Oklahoma to pay the lawyers. Our adversaries would like us to ask the Legislature to choose between this litigation and increased funding for education, for mental health or for corrections.”
On Feb. 9, 2009, the State of Alabama will try a jury case and assert the same fraudulent conduct against the drug manufacturer, Sandoz, Inc. (headquartered in Princeton, New Jersey). Trials against more than 60 remaining defendants will be scheduled later.