MONTGOMERY, Ala. (Legal Newsline) - Alabama Attorney General Troy King says the federal Medicaid agency won't comply with his request for records pertaining to its recent policy changes.

Those changes are the subject of King's recent lawsuit against the Centers for Medicare and Medicaid Services that alleges the CMS is trying to grab portions of settlements and awards that haven't even been collected yet by the State.

King filed another suit against the CMS Dec. 1 on behalf of the state's Medicaid agency.

"Five days after the Alabama Medicaid Agency submitted its (Freedom of Information Act) request to CMS, the State of Alabama filed suit against CMS and various other federal agencies and officials
related to the requirements set forth in (an Oct. 28 letter)," the complaint says.

"The filing of that action did not divulge CMS of its legal responsibility to respond to the Alabama Medicaid Agency's FOIA request."

King says the Freedom of Information Act requires the CMS reply to the request within 20 business days. That time limit expired Nov. 28.

"Neither the Alabama Medicaid Agency nor its counsel has received a determination from CMS as to whether CMS will comply with the Oct. 29 FOIA request," the complaint says.

Proskauer Rose is representing the State in its action.

King is upset with the new requirements regarding what amount must be returned the CMS when a state files an action seeking recovery of Medicaid funds, a move popularized in suits against tobacco companies in the 1990s.

His FOIA request sought CSM records related to and considered during the decision to enforce new requirements.

"These new requirements provide that states must 'return' to the Federal Government not only those amounts attributable to the federal share of payments made by a state's Medicaid program, but also a significant portion of amounts attributable to fines and penalties (such as punitive damages) obtained as a result of states' efforts to prosecute those who defraud their respective Medicaid programs, with little or no help from the federal government," King wrote in the first complaint.

"Adding insult to injury, (a letter from CMS to the states) also requires states to make these payments to the Federal Government without regard to whether the state has actually received the amounts in question."

The Oct. 28 letter from the CMS to the states says they are not allowed to segregate portions of their recovery as out of the Federal Government's reach.

" The (Heath and Human Services) Departmental Appeals Board has long recognized the federal government's entitlement to its proportionate share of civil penalties assessed by states against providers or other entities," the CMS letter states.

It adds that recently enacted federal legislation "provides that the full amount of any State (False Claims Act) recovery serve as the basis for measuring the federal share."

In fiscal year 2008, the Federal Government provided nearly 68 cents of every dollar spent on Medicaid in Alabama. King wrote that the new requirements "will have a devastating impact on the State of Alabama and the low-income and disabled individuals served by the State's Medicaid program."

Potentially hundreds of millions of dollars are at stake, he said. The State sued 79 pharmaceutical companies in 2005.

Arising from those claims were a $2 million settlement with Takeda Pharmaceuticals and a $4 million settlement with Dey, L.P.

Larger amounts could be in question. In February, a jury ordered AstraZeneca to pay $215 million, though the award was reduced to $160 million. The original verdict provided only $40 million in compensatory damages, while the remainder was punitive damages.

AstraZeneca has appealed, and the State has not received any money yet.

In July, a jury ordered Novartis Pharmaceutical to pay $33 million and GlaxoSmithKline $80.9 million. Though both included no punitive damages, they have both been appealed and the State has not received any money.

"A State may not seek to recover merely the 'state share' of computed fraud damages unless appropriate federal and state authorities formally agree to sever the federal and state portion of the overpayment and pursue them as separate actions," the CMS letter says.

"If there is no formal agreement to sever, a State may not claim in a State FCA case that it is only recovering damages incurred by the state, but not the federal government. Nor may a state return merely the federal portion of 'single' damages and retain all other amounts, such as double and treble damages. The federal government is entitled to the applicable FMAP share of a state's entire recovery."

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