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The Fix is In

Texas settled a lawsuit with Baxter Healthcare Corporation, "a corporation organized under the laws of Delaware with its principal offices in Deerfield, Illinois." Per the terms of the settlement, Texas will receive $8.5M, but will kick $3,792,000 to the U.S government (because Medicaid involves everyone). Texas will also kick "a percentage" to Ven-A-Care of the Florida Keys, the real plaintiffs in this lawsuit (and, as we'll discuss, many others).

Not surprisingly, the settlement loves itself: "The STATE has concluded that this settlement is in the public interest." Which state? The settlement means Texas, but consumers, shareholders, and employees from four states are directly involved and citizens from all fifty are affected.

More disheartening than even the mess-traterritoriality of the suit, though, are the perverse incentives that have been created by the Medicaid whistleblower rules.

Ven-A-Care, a one-time pharmacy, seems to have become a full-time whisleblower; and law firms specializing in Medicaid whistleblower suits have sprung up as well.

Moreover, states (led by AGs) have fed the litigulation monster by continually suing and settling over pill-supplier pricing practices. We're no champions of drug-suppliers sharping the Medicaid reimbursements system, but we don't see why surplus-skimming lawsuits (and lawyers) are preferable.

Retroactive price-fixing via state litigation doesn't ameliorate the problem---though it certainly lines more lawyers' wallets with graft. If the states want to limit their pharmaceutical spending, they can do it up front; a back-end race among the states' Attorneys General to raid the pharmaceutical piggy bank should, and eventually will, make us all sick.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.