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Apr 24, 2002

State Eyes Filing Suit Over Drug Pricing

Featuring: Robert T. Cunningham and John T. Crowder Jr.

Mobile Register 

Montgomery - Gov. Don Siegelman's administration could file a lawsuit over drug pricing and follow the lead of two other states already in court over an alleged scheme that affects Medicare reimbursements. 

Nevada and Montana filed suits after federal reports last year found inflated prices by several drug companies. 

The Mobile law firm Cunningham, Bounds, Yance, Crowder & Brown is researching the possibility of suing the drug firms. The Mobile firm has contrubuted to Siegelman's election campaigns and would likely be paid under a contingency fee agreement giving it a percentage of whatever is recovered. 

The administration hired the Mobile firm to go after unpaid royalties from oil and gas companies with state offshore leases. That lawsuit resulted in one of the five largest jury awards ever in the United States - $87.7 million in compensatory damages plus $3.42 billion in punitive damages. 

Lawyer John Crowder said some drug firms have falsely inflated the industry's average wholesale price of a drug. That price, reported to the state and federal governments, has been used as the benchmark for Medicare reimbursement. 

Crowder said those firms actually sell the drugs to doctors and groups that purchase for hospitals and clinics at a much lower price. When the state reimburses the healthcare providers, they get to pocket the difference at taxpayer expense, he said. 

The drug companies profit because the doctors and other purchasers sell more of their product, he said. 

"That is not the price that health care providers are paying for those drugs, but that is the basis the state uses to reimburse those providers. And they know that," Crowder told The Birmingham News in a story Wednesday. 

The U.S. Department of Justice accused Bayer Corp. of tinkering with the prices beginning in the early 1990s. 

Mike Kanarick, Siegelman's deputy press secretary, said the administration has not decided whether to file a lawsuit. 

"The governor is working with the attorney general to determine what course of action to take on this. Of course, the governor is interested and concerned when there's any allegation that the state's getting ripped off," Kanarick said. 

Richard Allen, the chief deputy state attorney general, said the attorney general's office is still reviewing the matter. 

"Our focus right now is, 'Is there a case?' We're not going to go forward until we're confident that there is," Allen said. 

Attorney General Bill Pryor must agree to the lawsuit if the litigation is brought in the name of the state, Allen said, although Siegelman has the sole right to determine what the lawyers get paid. 

The Montana lawsuit alleges the drug makers engaged in unfair and deceptive trade practices, Medicaid fraud and racketeering. It asks for unspecified restitution and punitive damages. 

Montgomery trial lawyer Jere Beasley said his firm will be part of the legal teams representing two to six states in similar lawsuits. Beasley said the drug companies are "probably worse than the tobacco companies in one sense." 

"They are probably the most powerful political force in the country," Beasley said. "Something has got to be done, because people can't afford prescription drugs and these people are making record profits." 

Beasley said his firm originally was asked by the Siegelman administration to research a possible lawsuit, but Siegelman apparently has decided to go with the Mobile firm.

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