CHARLESTON – A television ad targeting Attorney General Darrell McGraw has both sides talking.
Last month, the West Virginia Chamber of Commerce and the West Virginia Business & Industry Council (BIC) began airing ads criticizing how McGraw's office has handled money obtained from a $10 million settlement in 2004 with pharmaceutical company Purdue Pharma over its marketing of OxyContin.
State Chamber President Steve Roberts said something has to be done.
"We think that the issue is timely now because more settlement dollars have come into West Virginia, and West Virginia recently received a letter from the federal government demanding the money either be paid back or they're going to withhold Medicaid money from West Virginia to make up for it."
"A $10 million settlement that belonged to the people of West Virginia was instead divvied up between the attorney general's office and McGraw's trial lawyer friends," the ad's narrator says. "The Wheeling Intelligencer says legislators should have put a leash on McGraw long, long ago."
The ad then asks residents to contact their legislators and ask that something be done about McGraw.
Roberts said his group and BIC think now is the right time to ask the public and legislators to take a much harder look at the practices of the AGs office.
"This is the one we're focusing on now because it involves the Medicaid dollars," Roberts said. "West Virginia already is in a Medicaid crisis."
Chief Deputy Attorney General Fran Hughes said her office is "astounded" by the ads.
"I am interested in knowing which particular member of the Chamber financed those ads," she said. "I think it's important for West Virginians to know what kind of money the vested interests are willing to spend to defeat Darrell McGraw.
"That's what astounds me. We're truly astounded that an organization that purports to be about West Virginia businesses would attack an office that has been responsible for balancing the state budget. There has been at least $250 million -- and perhaps as much as $500 million -- go into the Rainy Day Fund provided by the attorney general's office.
"It's a distortion, and we're hoping it backfires against them. People will see it for what it is."
Hughes called the accusations some groups have about McGraw's office "laughable."
"When people talk about that the Attorney General has taken money and spent it for his own projects, it's really laughable in the face of evidence," she said. "If any of your readers have PEIA insurance, they will have benefited from the work product of the attorney general's office. If they've been hurt on the job and are on Workers' Compenstaion, they will benefit from the work product of the attorney general's office. If they've been to a doctor in the last two years, they will have benefited from the work product of the attorney general's office. If they received benefits from the state's Medicaid program for the elderly and disabled, they will have benefited from the work product of the attorney general's office.
"Clients of mental health programs, public health programs will have benefited from the work product of the attorney general's office."
Hughes also stressed that all of this has been accomplished without an additional burden on taxpayers.
"We've devised a way to enforce West Virginia laws without additional burden on West Virginia taxpayers," she said. "The vested interest, for some reason, are trying to fool West Virginia citizens by spending whatever it takes to paint a picture of the attorney general that is not accurate."
She said there is a reason the office or McGraw's re-election campaign doesn't respond.
"We're not an office that has a lot of money," Hughes said. "We have the same carpeting that we've probably had the last 25 years. It's not a campaign. The attorney general's campaign, in years past, has not been a race that has cost millions of dollars. Do citizens of West Virginia want to see every contested office costing millions of dollars? It's what causes our elections to be so expensive.
"And the vested interests ... the wealthy seem to have more of a role. They can afford it."
Hughes said McGraw's office has asked to speak to BIC about the issue.
"We truly can't understand what their issue is," she said. "For them to go on TV and have ads intimating that we have cost the state money because of the Oxycontin case ... it's stretching the laws to a degree that makes it bordering on being a falsehood.
"We're not going to go out and take away from the efforts of the attorney general's office to go after these people for libel because West Virginia has received notice from CMS (Centers for Medicare and Medicaid Services) that they want to recoup some of the money. Our office didn't have anything to do with the CMS actions.
"In fact, we've increased the likelihood that CMS will not prevail. We're optimistic we will be vindicated."
The issue isn't a new one.
Twice in recent months, the federal Centers for Medicare and Medicaid Services has notified the state's Department of Health and Human Resources that it will be withholding Medicaid funds because it does not believe it was given what it was owed from the lawsuit settlement, DHHR spokesman John Law verified.
The CMS notified the DHHR in December that it will keep $634,525 from a future Medicaid payment to the State, though McGraw's office has said it will appeal the decision. It is currently appealing a $4.1 million withhold.
The most recent dispute stems from McGraw's 2004 settlement with Dey, Inc. He had claimed the company inflated the prices of the prescription drugs it manufactured, thereby defrauding the state's Medicaid program.
The two sides settled for $850,000. The money was split among McGraw's own consumer protection and education fund, the Public Employees Insurance Agency, the old Workers' Compensation agency and the DHHR, which administers the Medicaid program in the state.
However, the CMS provides roughly 75 cents of every dollar the State spends on Medicaid. Since McGraw claimed it was the Medicaid system being cheated, the CMS says it should be entitled to the percentage it would provide on $850,000.
Dey is a U.S. affiliate of Merck KGaA, which is based in Germany. McGraw had claimed it submitted inflated average wholesale prices to organizations that pass them on to State agencies.
"Prices of prescription drugs are too high," McGraw said when he announced the settlement. "The State cannot continue to pay inflated prices for drugs which our citizens need.
"This settlement will help relieve the State's budgetary burden."
McGraw's other controversial settlement was 2004's $10 million agreement with Purdue Pharma, manufacturer of the prescription painkiller OxyContin. McGraw represented three state agencies in the suit, though he kept the settlement funds.
McGraw's office has used the money on substance abuse programs around the state, as well $500,000 to the University of Charleston for a pharmacy school.
Chief Deputy Attorney General Fran Hughes admitted to the Legislature that the money was not given to the 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 $3.4 million in the settlement. CMS arrived at its total of $4,143,075 million by taking the 74.65 percent (the rate of federal payment to the state for every dollar spent) 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.
McGraw's office is also representing the DHHR in its appeal of that decision.
In October, BIC wrote McGraw requesting that his office make immediate payment of reimbursement and restitution to the old Workers Compensation Fund from the proceeds of the settlement.
"Your office settled the case for $10 million in late 2004, and arranged for the proceeds to be given exclusively to your office for distribution, with payments to your office to be made in four equal installments of $2.5 million each," BIC wrote to McGraw last fall. "It is our understanding that you have received three such installments, with another $2.5 million scheduled to be made to you later this year. It is clear from press reports and other public documents, that you have used most of the proceeds you have received thus far to pay the outside counsel $3.3 million and to distribute much of the remainder to other public and private entities.
"You have distributed none of the proceeds of the settlement to the Workers Compensation Fund and, in fact, engaged in the settlement without even informing the agency head that you were doing so, or obtaining his consent."
BIC was formed in 1982 to create a network among various associations so they could more effectively communicate their views and lobby for legislation. About 60 trade associations and individual businesses are represented in the group. Among its members are the state Chamber of Commerce, West Virginia Coal Association, DuPont and Arch Coal.
As such, it represents thousands of the state's employers who have contributed premiums to the Workers Compensation Fund, which is used to make payments to workers who have been injured on the job.
Roberts said a lot of legislators are "paying close attention to this issue."
"They're trying to figure out what they're going to do," he said. "I'm somewhat optimistic that the combination of public and legislative scrutiny will have impact."