Legal fees | Following the money from Maine's court settlements
We’ve read the headlines: “Maine to share in $29M from drug settlement.” “Maine among 30 states in $8 million settlement with Bayer.”
At any one time, Maine’s attorney general’s office is involved in several lawsuits over cases of deceptive advertising practices or antitrust activities — from cases against big multinational corporations to ones against small Maine-based businesses. Most of the cases, which fall under Maine’s Unfair Trade Practices Act or antitrust laws, end up in settlements before they ever make it to court, netting the state a financial windfall of hundreds of thousands — and sometimes millions — of dollars every year. The exact dollar amount is hard to pin down since the attorney general’s office doesn’t track these numbers, according to David Loughran, communications director at Maine AG’s office.
The most recent example came in May, when Maine Attorney General Steven Rowe announced that Maine and 30 other states would receive $58 million from Merck & Co. after a three-year investigation concerning the company’s “deceptive promotion” of its drug Vioxx. Maine’s share came to $1.1 million.
But once the settlement check is in the mail, where does the money end up? And how does Maine get involved in these multi-state lawsuits?
According to Linda Conti, a Maine assistant attorney general and chief of the AG’s consumer protection division, most settlement money is either deposited directly into the state’s general fund — a roughly $3 billion nest egg used to fund most operations of state government — or it stays in the AG’s office to fund future lawsuits. If the case involved fraudulent Medicaid payments, for example, the funds may be deposited right into the state’s Medicaid program. In rare cases, the money is distributed to consumers seeking damages from the companies in question.
The money trail
The state historically hasn’t tracked the money it receives from most settlements because they are sporadic. (There’s also another reason: “You don’t count on [settlements] as a revenue stream because you don’t want to create incentives to enter into lawsuits unnecessarily,” says State Budget Officer Ellen Schneiter.)
But the attorney general’s office in July will deliver the first biennial report to the Legislature outlining the amount in settlement payments the state receives each year. That settlement money, says Schneiter, is a welcome addition to the state’s coffers. “At this point, all money is important,” she says. “Last session, we were looking for ways to save $100, and I’m not being sarcastic about that.”
The one settlement revenue the state can count on is the state’s 1998 settlement with major tobacco companies, which is known in the AG’s office as the “master settlement,” according to Conti. In April, Maine received its 2007 installment of the tobacco settlement: $58 million. Unlike one-time settlements, the annual tobacco settlement money is by law deposited in the Fund for a Healthy Maine, according to Jennifer Willis, the assistant attorney general in Maine in charge of the tobacco settlement case. (For more on where this money goes, see “Smoke signals,” this page.)
At any one time, Maine’s attorney general’s office is involved in half a dozen of the large, multi-state consumer protection lawsuits, according to Conti. But it’s juggling limited resources at hand that determines what cases Maine participates in. “We like to participate in large cases, but we also have an obligation to do smaller local cases,” she says.
The decision-making process about what cases to join — and which to skip — is not very scientific, Conti says, but usually involves how severe the company’s conduct is, if that conduct occurred in Maine and what other cases the office is involved in.
Tackling a large company with deep pockets and armies of lawyers is not feasible for a single state like Maine, which is why states band together to take on big businesses. Maine has not taken the lead on any of the recent cases against pharmaceutical companies, and Conti says the AG’s office has found a more cost-effective way to confront big businesses in hopes of dissuading them from using false advertising. Last summer, the Legislature made Maine the first — and so far only — state to require pharmaceutical companies selling drugs in the state to report clinical trials and their results on a publicly accessible website. Conti says the companies have gone along with the law and not challenged it. But the federal government said soon after that it would create a similar law within three years that would preempt Maine’s law. What the federal law will say is still unknown, Conti says.
She admits that the cost of doing business is higher if each state has different laws to which a company must adhere, but adds that one set of rules can water down their effectiveness. “The concern I have is that that swings it too far the other way,” she says.
It’s only been in the last three to four years that Conti has noticed a big increase in the number of lawsuits against pharmaceutical companies. Conti says that trend coincides with the emergence of direct-to-consumer advertising of drugs on television. “You never used to see ads on TV for drugs like that,” Conti says.
In that case, 30 states sued Merck claiming its television ads were deceptive since they promoted a drug before doctors had a chance to understand its potential side effects. Maine’s attorney general’s office will deposit the $1.1 million from that settlement into the general fund. “Since we’re paid by the general fund, we try to put back into the general fund,” Conti says, adding that the settlement funds are used to cover the cost of carrying out these lawsuits, everything from the computer on her desk to the expert witnesses. “The goal is to get enough cases that you don’t go in the hole.”
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