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Appeals board may soon decide in McGraw's OxyContin controversy

Aug 24, 2009 | John O'Brien | Legal News Line

WASHINGTON (Legal Newsline) - West Virginia Attorney General Darrell McGraw's fight with the federal Medicaid agency over a proposed disallowance of funds may be resolved in the next few months.

McGraw is appealing a decision by the federal Centers for Medicare and Medicaid Services to withhold $4,099,452 from its next appropriation to the State because of McGraw's controversial 2004 settlement with OxyContin-maker Purdue Pharma.

Carolyn Reines-Graubard, the chief of the Appellate Division of the Departmental Appeals Board, said it appears the case will be decided on written briefing.

"There is one brief outstanding," she said Thursday. "The Board expects to issue a decision by the end of the year."

Chief Deputy Attorney General Fran Hughes said in July 2008 that a settlement was possible after the DAB sided with McGraw in his appeal of a $4,143,075 disallowance.

Hughes said then that there was a "strong possibility" of a settlement, and that McGraw has a sum of money set aside for that purpose.

In 2004, McGraw reached a $10 million agreement with Purdue Pharma, McGraw represented three state agencies, including the state's Department of Health and Human Resources, in the suit, though he kept the settlement funds for his office.

He used the money on substance abuse programs around the state, as well $500,000 to the University of Charleston for a pharmacy school.

Hughes battled with lawmakers, admitting to the Legislature that the money was not given to the state DHHR because the CMS would then be able to claim a share -- "We have arranged a methodology that has prevented the federal government from coming back and seizing money," Hughes said.

Hughes formerly served as general counsel for a national consulting firm that specialized in Medicaid financing.

Private practice attorneys hired by McGraw to represent the State earned more than $3 million in the settlement. CMS arrived at its original withhold total of $4,143,075 million by taking the 74.65 percent (the rate of federal payment to the State for every dollar spent on Medicaid) out of $5.5 million of the settlement.

That $5.5 million represents what the CMS feels should have been the equitable distribution of the settlement dollars among the three plaintiffs (the DHHR, the Public Employees Insurance Agency and the Bureau of Employment Programs) with respect to certain allegations involving Medicaid dollars.

Some lawmakers, like Del. Jonathan Miller, a Republican, are annoyed with the Democratic attorney general.

"(McGraw) is well known for his antics. That's an issue we've gotta address. If he goes off base and takes these settlements in the wrong direction, it causes problems we'll have to address in the legislature," he said.

"We haven't really wanted to get too involved with the issue. It's the big elephant in the room."

Miller is urging PEIA to see if it is owed some of the settlement. The cash-strapped agency is mulling a change to new employees' retirement policies.

Recently, the DAB approved a withhold of more than $400,000 from a similar settlement with Dey Pharmaceuticals. That settlement was worth $850,000.