United States: State AGs In The News - October 23rd, 2014

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  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 3:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro's State AG practice, will lead an interactive discussion about that new landscape and its implications for the business community.
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Antitrust

Pennsylvania Attorney General Plays Referee to Dueling Healthcare Networks

  • Pennsylvania AG Kathleen Kane threatened to sue Highmark Inc. over actions that she alleges are in violation of a recent consent decree between Highmark and the University of Pittsburgh Medical Centers (UPMC).
  • In 2013, Highmark acquired West Penn Allegheny Health System, making Highmark a significant competitor to UPMC in certain markets. In order to ensure that consumers were not harmed by increased competition between the two healthcare networks, AG Kane brokered an agreement to ensure that patients insured by Highmark had access to UPMC's network of physicians.
  • AG Kane and UPMC object to a new Highmark Medicare Advantage plan that allegedly denies Highmark's insureds access to UPMC physicians as in-network providers.

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau Issues Report on the Private Student Loan Market

  • The Consumer Financial Protection Bureau (CFPB) issued a report highlighting its findings on the state of the market for private student loans.
  • According to the report, which is based on more than 5,300 complaints from October 1, 2013 to September 30, 2014, struggling borrowers are being provided with few option from lenders to avoid default, including a lack of information on how to avoid default, a lack of affordable loan modification programs, and the temporary nature of the programs that do exist.

Consumer Protection

New York Investigation Into Airbnb Implies Recurring Violations of New York Law

  • New York AG Eric Schneiderman recently published a report outlining his office's investigation into short-term lodging rentals in New York City facilitated through Airbnb, Inc.
  • The report, which is based on private-party rentals during a 54 month period starting in January 2010, alleges that 72 percent of the unique unit rentals violate NYC Administrative Code on building use, zoning, and more. In addition, the report claims that Airbnb hosts generated $304 million in revenue and Airbnb earned over $40 million in fees—numbers that would equate to approximately $33.5 million in unpaid hotel taxes.
  • In addition, the report concludes that 37 percent of all revenue during the investigation period came from only six percent of hosts located in just a few elite Manhattan neighborhoods. AG Schneiderman uses these findings to rebut the idea that Airbnb is mainly a tool for average residents to supplement their income with an occasional guest.
  • Airbnb contested the accuracy of some of the findings, but stated that it was moving forward to "work together on some sensible rules that stop bad actors and protect regular people who simply want to share the home in which they live."

Michigan Attorney General Secures Settlement With Propane Supplier

  • Michigan AG Bill Schuette announced a settlement with AmeriGas Propane, L.P. to resolve complaints of price-gouging and other customer issues emanating from propane sales last winter.
  • AmeriGas will provide almost $570,000 in value through credits, waived fees, and future discounts to the approximately 5,600 customers affected.

Data Privacy

Nine States Reach $850K Settlement With TD Bank Over 2012 Data Breach

  • A group of nine states, led by Florida AG Pam Bondi, agreed on settlement terms with TD Bank, N.A., regarding a 2012 incident in which TD Bank is alleged to have lost unencrypted backup tapes containing information on approximately 260,000 customers nationwide.
  • The settlement obligates TD Bank to make reforms to its data protection policies, including requirements that backup tapes be encrypted before they are transported from TD Bank facilities, and that Florida consumers are notified of future breaches in a timely manner.
  • TD Bank reported that it has not seen any unusual incidents of fraud related to the data breach, and that the bank has "continually enhanced" its technologies and processes since the breach was reported in 2012.

False Claims Act

U.S. Court of Appeals Reaffirms the Need for Firsthand Knowledge in Whistleblower Suits

  • The U.S. Court of Appeals for the Third Circuit upheld a district court decision dismissing claims that drug makers AstraZeneca and Bristol-Myers Squibb violated the False Claims Act.
  • The claims at issue were originally brought in 2003 by Karl Schumann, an employee of Medco Health Solutions, Inc., a pharmacy benefits management company acquired by Express Scripts, Inc. in 2012. Schumann originally brought the claims on behalf of 11 states and the federal government, alleging that AstraZeneca and Bristol-Myers had paid $60 million in kickbacks in order to facilitate Medco's approval of certain drugs. After a long investigation, the states and federal government did not intervene.
  • Medco previously settled with the U.S. government for $155 million in 2006, resolving similar allegations of violations of the False Claims Act.

Antidepressant Maker Settles With States for $31 Million

  • Organon USA Inc. settled a 50-state investigation into allegations that it violated state false claims acts through sales of antidepressant drugs Remeron and Remeron SolTab to Medicaid.
  • The AGs alleged that Organon failed to provide Medicaid the best price on relevant products, as required by law, by omitting information on applicable discounts and rebates, and by otherwise reporting inflated retail prices for Medicaid reimbursement. They also alleged that Organon offered kickbacks in the form of market share discounts, and encouraged the use of its drugs for non FDA-approved or "off-label" uses.
  • The multistate investigation originated from two separate qui tam lawsuits brought by former Organon employees in federal district court in Texas and Massachusetts. Organon is currently a wholly-owned subsidiary of Merck & Co., Inc.

Marijuana

Washington State Judge Confirms Local Government Authority to Regulate Marijuana Shops

  • A second Washington state Superior Court judge has ruled in line with a formal opinion issued by AG Bob Ferguson, instructing that local governments retain authority to regulate and/or ban marijuana businesses in their jurisdiction.
  • AG Ferguson's opinion, issued earlier this year, stated that Initiative 502 – the 2012 ballot initiative permitting the use of recreational marijuana in Washington State – does not obligate local government to allow marijuana businesses.
  • Plaintiffs from the prior case are currently appealing to the Washington Supreme Court in efforts to overturn the ruling in support of local government regulation.

Medicaid Fraud

Texas Settles Medicaid Fraud Lawsuit With Generics Manufacturer for $37.5 Million

  • Texas AG Greg Abbott reached a settlement agreement with Ranbaxy Pharmaceuticals, Inc., Ranbaxy Laboratories, Inc., Ranbaxy USA, Inc., and Ranbaxy, Inc. (collectively "Ranbaxy") to bring to a close a 2012 lawsuit claiming violations of the Texas Medicaid Fraud Prevention Act.
  • AG Abbott alleged that, starting in 1997, Ranbaxy reported inflated market prices to the state Medicaid program for its pharmaceuticals. Because Medicaid programs reimbursed pharmacies for their costs based on prices reported by Ranbaxy, pharmacies allegedly were able to maintain higher profit margins – via larger Medicaid rebates – by selling Ranbaxy products. The result, as alleged, was to create an incentive for pharmacies to use Ranbaxy products over similar competing products.
  • Under the terms of the settlement, Ranbaxy will pay approximately $17.9 million to the State of Texas, $17.9 million to the federal government, and $4 million to AG Abbott's office for attorneys' fees and costs.
  • Ranbaxy issued the statement that it "believes that it fully complied with all relevant laws..." and that it "settled the matter to avoid any further distraction and uncertainty of continued litigation with the State of Texas."

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