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Since 2005, state has collected $20 million in drug company settlements

Since 2005, state has collected $20 million in drug company settlements

Mitch Coffman
April 24, 2012
Mitch Coffman
April 24, 2012

Last week the attorney general’s office reached a settlement with SmithKline Beecham Corporation for $2.6 million. The company had been giving false average wholesale prices; prices that the state uses to determine reimbursement to pharmacies for Medicaid prescriptions.

The state settling such suits is not an isolated occurrence. Attorney General Lawrence Wasden has closed on settlements with drug manufacturers to the tune of $20 million since 2005.

Bob Cooper, director of constituent information and communications for the attorney general’s office, said there is no general process in handling such cases. Each one is unique to its own set of circumstances.

“There’s not a real general process,” said Cooper, “because every case is different. If you want to narrow it to consumer protection or Medicaid fraud, then you will find more similarity of process.”

Cooper said that depending on the type of case, the attorney general’s office may use outside help. For instance, when the state filed against Obamacare, states pooled resources to hire a former federal solicitor general to represent the states involved in the suit. “That’s an example of using outside counsel because he had the expertise. But, in doing it with, I think we ended up with 27 states, it cost a whole lot less than it would have for 27 states to pay their own lawyers to do the same thing.”

But what about issues handled within the office? Say, for consumer protection?

Cooper again said it varies, but there is some similarity. If consumers file complaints, the AG’s office will forward those complaints to the business being complained about and have what Cooper called an “informal mediation process.” If a pattern of complaints continues, or there is an “egregious” situation, then a lawsuit may be filed.

However, Cooper said the AG’s office always gives the business a heads up and allows it to enter into an assurance of voluntary compliance. Basically, it is a civil document filed with the court that permits the business to say it doesn’t admit to breaking the law, but it will comply with it in the future. “They may also agree to pay some restitution to consumers, or some cost to the attorney general, depending on how far the case has progressed.”

That document is “court enforceable,” meaning that should the particular business break the law in the future, it not only is now breaking the law, but is also potentially in contempt of court.

In a case involving multiple states, Cooper said the states work together toward a settlement with the particular company. Should a settlement not be agreed on, then the states would file a lawsuit.

When an agreement is reached or a lawsuit settled, it’s seem reasonable enough that restitution would go to those consumers who were taken advantage of. While that’s usually what happens, Cooper said circumstances aren’t always so cut and dry.

“We had one a few years ago that was a nationwide, actually an international, price-fixing conspiracy among vitamin manufacturers. And the result of it was, you pay a tiny, tiny, tiny bit more for almost everything (vitamins) you put in your mouth over years, and years and years. So, how do we refund you your share, and me my share? Because you can’t calculate it, it might be a hundredth of a cent for a loaf of bread, and do you have receipts for all the bread you’ve ever bought? So in those situations when you get a settlement, which is to pay some sort of restitution and promise not to do it anymore, then you enter what’s called a ‘cy pres’ judgment.”

A “cy pres” judgment, which has to be approved by the courts, means that a determination can’t be made on individuals who were harmed, therefore restitution is distributed to a group or class of similar people.

“So, in the vitamin settlement, we provided quite a bit of money to senior centers around the state that do nutrition programs. Some of them upgraded their kitchen, some of them bought food. We provided money to the Idaho Food Bank warehouse and those kinds of things. Because, the people who were most harmed by the vitamin price fixing were the people who bought food.”

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