General fund gets $38 million from drug lawsuits

posted on:
September 3, 2009

author:
BOB JOHNSON

MONTGOMERY, Ala. – More than $38 million will be deposited into Alabama’s cash-strapped General Fund budget from the latest round of settlements reached with companies in prescription drug pricing lawsuits, Alabama Attorney General Troy King said Wednesday.

King released a breakdown of how the money would be divided in the state’s May agreement to settle lawsuits with six prescription drug manufacturers for a total of $89 million.

Private attorneys who handled the litigation for the state will receive about $12.46 million in attorneys fees and $500,000 for expenses, according to the breakdown released by King.

Almost $20.8 million from the settlements will go to the federal government, which provides much of the funding for Alabama’s Medicaid program. Medicaid provides medical care and prescription drugs for children, the elderly and people with low incomes.

The latest settlements were with Abbott Laboratories of Chicago; Aventis Pharmaceutical L.P. of Bridgewater, N.J.; TEVA Pharmaceuticals USA, of North Wales, Pa.; Schering-Plough/Warrick Companies, with global headquarters in Kenilworth, N.J.; Forest Laboratories, with corporate headquarters in New York City; and Baxter International of Deerfield, Ill.

In 2005, King filed lawsuits against more than 70 prescription drug companies charging them with causing the state to pay too much for prescription drugs for Medicaid patients. The state had previously settled with 10 of the companies for almost $35 million. The General Fund budget has now received a total of almost $57 million from all the settlements.

The state has won four of five cases where the lawsuits have gone to trial with judgments totaling $352.4 million. Those verdicts are being appealed.

The chairmen of the House and Senate budget writing committees, Rep. John Knight, D-Birmingham, and Sen. Roger Bedford, D-Russellville, said Wednesday they had not factored in the money from the settlements when lawmakers approved the $2.5 billion General Fund budget.

“This is new money that hopefully will prevent cuts to essential services, especially for our seniors,” Bedford said.

Knight said revenue to fund the budget is running below expectations.

“This is going to help, but I’m not under any illusion that it’s going to be a salvation,” Knight said.

King said Wednesday that he’s glad the money from the settlement is in the state General Fund, but he said the lawsuits were not about trying to fund the state’s budgets.

“It was driven by the sense of what is right and what is wrong. If you steal from the poor and the needy you ought to pay the price,” King said.

He defended the amount of money that went for legal fees, saying his office could not have handled the amount of work required to investigate and litigate the lawsuits.

The state has been represented in the litigation by the law firms of Hand Arendall in Mobile and Beasley Allen of Montgomery. The lead attorney for the state, Jere Beasley, said the amount the lawyers received is 14 percent, the amount agreed upon in the original contract.

“These cases have taken as much time as any case we’ve ever had,” Beasley said.

Skip Tucker, executive director of Alabama Voters Against Lawsuit Abuse, said the legal fees in the cases “seem a little high-priced to me.” Tucker said he feels the state should have used a more competitive process in selecting the law firms to handle the litigation.

He said he would also like for King to release figures showing what work the attorneys performed and the number of hours they worked.

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