The settlement stemmed from Oklahoma’s 2017 lawsuit against three major pharmaceutical companies — Purdue, Teva Pharmaceutical Industries and Johnson & Johnson — that has become a closely watched first test of whether states and cities can force the drug industry to pay for the damage of the opioid epidemic.
All of Purdue’s payments in the March 26 out-of-court settlement went to entities other than the state. It’s unclear how Oklahoma might pay anything to the federal government unless it digs into its own coffers.
“No way. No way on that,” said state Rep. Mark McBride (R), who was critical of the deal when it was announced because the money did not go into the state treasury. “That would just tick me off.
“Just keep asking, because you ain’t getting it.”
About $200 million of the settlement between Purdue and Attorney General Mike Hunter went to Oklahoma State University to establish a center for treatment and research on addiction. More than $12 million was allocated to cities and counties, and the rest was spent to pay private attorneys hired to work on the lawsuit. Judge Thad Balkman approved the agreement.
Hunter has said the deal was structured that way because Purdue insisted that the money go toward helping to stem the drug crisis and because of fears that the company would declare bankruptcy, leaving the state with nothing.
Oklahoma lawmakers, unhappy that the state received none of the windfall, passed a law on May 24 requiring that proceeds from future settlements with drug companies sued by the state be deposited in the state treasury. Two days later, Hunter settled with a second defendant, Teva Pharmaceutical Industries, for $85 million, most of which will go into a special state fund to address the opioid epidemic.
The Teva settlement is not mentioned in the letter from Bill Brooks, a regional CMS official in Dallas, to Oklahoma Medicaid Director Becky Pasternik-Ikard.
Johnson & Johnson, the last defendant in the lawsuit, is fighting the state in a trial in Norman, Okla., that is now in its fifth week.
Spokeswomen for Oklahoma Gov. Kevin Stitt (R) and Pasternik-Ikard referred questions to Hunter. A spokesman for Hunter said in an email that “we are aware of the letter and we are developing a response” to CMS. “This will not affect state revenue.”
A CMS spokesman said in a statement Thursday that “any time CMS becomes aware of a settlement agreement which may involve a Medicaid overpayment, CMS works with the state to determine what portion may need to be returned to the federal government as required by law.”
The agency originally gave Oklahoma’s Medicaid director a month to respond to a request for information, but has extended that deadline, the spokesman said.
The federal demand does not specify how much of the windfall CMS is seeking. It cites the state’s claim in its lawsuit that Purdue had violated Oklahoma’s Medicaid False Claims Act and its Medicaid Program Integrity Act. It also notes that the state relied on 20 years of Medicaid claims data “to help determine the amount of damages” in the case. Some of that data included state payments for prescriptions of Purdue opioid drugs.
However, Hunter dropped the Medicaid claims from the lawsuit on April 4, nine days after settling with Purdue. In its case against Johnson & Johnson, the state asserts only that the health-care conglomerate violated the state’s public nuisance law by fueling the drug crisis through deceptive promotion of drugs and by providing raw materials to drug manufacturers. It has estimated that abating the drug epidemic will cost $17 billion over three decades.
Medicaid, a state health program for the poor, is funded jointly by state and federal governments. For the current year, the federal government is picking up about 62 percent of the cost of Oklahoma’s $5 billion Medicaid program.
When states recover penalties in Medicaid fraud cases, it is common for them to reimburse federal agencies for their share.
CMS asked Pasternik-Ikard for a wide variety of information, including the 20 years of claims data, Medicaid’s share of the settlement, documentation of Medicaid funds spent on drugs and addiction treatment, and documents on attorney’s fees.
It notes that the federal government could withhold future Medicaid payments if the demand is not met.
“Please note,” Brooks wrote, “that failure to return federal funds may result in administrative actions including, but not limited to, a disallowance.”