State reaches $22M settlement with GlaxoSmithKline

CHARLESTON — Attorney General Patrick Morrisey has announced that West Virginia has reached a $22 million settlement with GlaxoSmithKline.

The lawsuit alleged the drugmaker engaged in an illegal marketing campaign to promote the diabetic drugs Avandia, Avandamet and Avandaryl. The amount is one of the largest pharmaceutical settlements in the state’s history.

Morrisey's office says revenues from it will be used to shore up several state funds that benefit West Virginians and reduce budget shortfalls. Based on a settlement agreement with GSK, the state’s Public Employees Insurance Agency will receive nearly $10.6 million, while the Department of Health and Human Resources’ Medicaid program will receive $3.7 million.

The Attorney General’s Consumer Protection Fund will receive nearly $3.1 million. The remaining $4.6 million will go to pay attorneys’ fees and expenses.

“Our Office represented the state, PEIA and Medicaid in this legal challenge, and we are pleased that we were able to recoup some of the money spent on these products,” Morrisey said in a press release. “We will always vigorously enforce the laws.”

The lawsuit was filed on behalf of the State of West Virginia, Medicaid and PEIA in Wayne Circuit Court. It alleged that GSK failed to disclose the side effects of Avandia, Avandamet and Avandaryl when it was marketing the medicine as a product to lower patients’ blood sugar and reducing diabetics’ cardiovascular risks.

“Our citizens have the right to know the risks and possible side effects of the medication they are taking,” Morrisey said.

On March 26, the Centers for Medicare and Medicaid Services deemed the state was entitled to all of the settlement money after the Attorney General’s Office and state agencies sent a letter seeking CMS’s input on the matter. By seeking CMS’s input during the process, the Office was able to assure that CMS would not pursue money from the state in the future.

“As part of this settlement, we wanted to make sure everything was handled appropriately and openly,” Morrisey said. “We instituted a different process so that the state was protected.”

The settlement also was contingent upon the Attorney General’s Office prevailing last year in the case SER Discover Financial Services Inc., et al v. Hon. David W. Nibert and SER GlaxoSmithKline LLC v. Hon. James H. Young Jr.

In that case, GSK and several large banks filed a motion in the West Virginia Supreme Court of Appeals that sought to disqualify the outside counsel lawyers who were representing the state in this matter. It was challenging an agreement between former Attorney General Darrell McGraw and private lawyers that says the lawyers will be paid out of attorneys fees paid by the defendant.

“This settlement is a significant victory for the state, its agencies and the people,” Morrisey said. “I was pleased to be able to work with Gov. Tomblin and his staff to ensure the monies recovered were returned to those agencies that were most impacted in this matter, while at the same time ensuring the Consumer Protection Division maintains three years of operating expenses.

West Virginia was represented in this case by Greene Ketchum Farrell, Bailey & Tweel in Huntington, as well as the Texas-based firms of Heard Robbins Cloud LLP and Baron & Budd PC. The firms involved are being compensated under the outside counsel policy established by Morrisey's office last year.

By using that structure, the Office was able to save the state approximately $2.7 million in fees on this case alone. Since the policy was implemented, the state has saved nearly $3.9 million in attorneys’ fees and costs.

During his 2012 election campaign against McGraw, Morrisey vowed to reform the way the state hires private attorneys.

Last year, Morrisey introduced a new policy that puts in place a competitive bidding process and a page on Morrisey’s website that will allow the public to view information regarding outside counsel agreements.

It was McGraw’s practice of hiring private attorneys who also contributed to his campaign that irked some businesses against which he filed lawsuits.