HARTFORD, Conn. (Legal Newsline) - Funds from settlements in the pharmaceutical world should go toward an initiative to stop tobacco use, Connecticut Attorney General Richard Blumenthal feels.

Blumenthal said money earned in a settlement over the marketing practices of Cephalon, Inc., is "ammunition to fight another battle." He has transferred $4.3 million -- $3.8 million from the Cephalon settlement -- to the Connecticut Cancer Plan Initiative and more than $2 million more to the state's General Fund to help with a deficit.

Cephalon, accused of promoting off-label usage of three of its drugs, settled with federal and state investigators in September for $425 million. Blumenthal, who settled a separate suit for $6.15 million, wants the Quitline, a hotline for those quitting smoking, restored.

"Thousands of Connecticut citizens battling nicotine addiction and seeking to quit have called the state's Quitline -- only to find that its services are constricted," Blumenthal said.

"For more than a year, the Quitline has lacked funding to provide nicotine replacement therapy along with counseling services. Nicotine replacement has been restricted to pregnant women who smoke.

"Money obtained by my office through health-related settlements provides an opportunity to renew and reinvigorate the Quitline lifeline, combining counseling and nicotine replacement for all who seek it."

Forty-six states, including Connecticut, already received millions of dollars every year from 1998's Tobacco Master Settlement Agreement, which requires tobacco companies that want to conduct business in those states to make yearly payments to offset alleged harm to Medicaid programs.

"Connecticut must remain a leader in the battle against cancer -- just as we led the court battle against Big Tobacco years ago, which has yielded more than $1 billion in tobacco money that continues to flow to Connecticut," Blumenthal said.

Another $417,918 from a settlement with pharmacy benefits manager Caremark is going to the smoking initiative, and is joined by more than $108,000 from a settlement with pharmacy benefits manager Express Scripts.

Blumenthal said state law requires the settlements be "deposited in an account designated for use by the Department of Public Health for comprehensive cancer initiatives."

One attorney general, though, has drawn criticism for steering settlement funds.

West Virginia lawmakers and Attorney General Darrell McGraw have disagreed over his past spending of settlement dollars.

The federal Centers for Medicare and Medicaid Services, which supplies about 75 cents of every dollar the State spends on Medicaid, 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 two of McGraw's lawsuit settlements.

A $4.1 million withhold, currently being appealed, results from the $10 million agreement with Purdue Pharma, reached in 2004 over the company's painkiller OxyContin. Another $634,525 potential withhold relates to a settlement with Dey Inc., which McGraw's office claimed inflated the prices of the prescription drugs it manufactured, thereby defrauding the state's Medicaid program.

The Purdue Pharma settlement was intentionally structured in a way that prevented the Legislature from receiving any funds.

Sen. Jesse Guills, R-Greenbrier, a member of the Senate Finance Committee asked McGraw in a January meeting who would be responsible for paying the federal government back.

"If we lose this contest, who will pay the $4.1 million?" Guills asked.

"The burden is back on the Legislature," McGraw replied.

Guills also asked where that money would come from.

"Perhaps sharper pencils than mine can find 0.005 percent of that money," McGraw said, referring to $2 billion figure he's secured in settlements since becoming AG.

McGraw said his office had three options when reaching the OxyContin settlement.

"We could take the money agreeable to the judge and the drug company," he said. "We could've turned it over to the DHHR, and the money would have gone back to the federal government. Bye-bye.

"Or we could've given it to the Legislature, which would have been obliged to give it to the DHHR. Bye-bye."

New York Attorney General Andrew Cuomo recently announced he would use $1.9 million from a settlement with American Electric Power to help low-income houses afford home heating oil.

Cuomo said his program will pay for cost-effective electricity-saving measures, like lighting and refrigeration replacements.

From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.