The Associated Press April 13, 2012, 09:55AM ET

Arkansas not counting on $1.2B from drug trial yet

For a state facing a looming shortfall in its Medicaid program, the $1.2 billion fine leveled against drug maker Johnson & Johnson and a subsidiary may look like the ultimate windfall. But Arkansas officials and lawmakers said Thursday they're not counting on the money just yet.

A day after a Pulaski County judge imposed the fine on Johnson & Johnson and Janssen Pharmaceuticals Inc., state leaders said it would be premature to plan on the funds until the appeals process is completed. The fine was imposed after a jury found the companies downplayed and hid risks associated with an antipsychotic drug.

Arkansas law requires the fine go toward the state's Medicaid Trust Fund, was faces a shortfall of up to $400 million starting in July 2013. The state is moving forward with a proposal to change the way Medicaid pays for services, and lawmakers say they expect a debate over the program to dominate next year's session.

"As you know, $1.2 billion is a lot of money, and it's especially a lot of money in Arkansas," said Sen. Larry Teague, who has been elected to serve as Senate president starting next year. Teague, D-Nashville, said he thinks it would be unwise for lawmakers to plan based on that fine.

"My assumption is it wouldn't be available," Teague said. "It seems to me that the wheels of justice turn slowly."

Teague's comments were echoed by other legislators and Gov. Mike Beebe's office, who note there could be a long appeals process. Janssen has pledged to appeal to the Arkansas Supreme Court if Judge Tim Fox denies a motion for a new trial.

A spokesman for Attorney General Dustin McDaniel's office said that process could take many months. A South Carolina judge upheld a $327 million civil penalty against Johnson & Johnson and Janssen in a similar case in December, but that state has not yet received the money as Janssen appeals the ruling to the state Supreme Court.

In Arkansas' case, Janssen had argued that the large fine was unconstitutional. But Paul Pennock of the New York-based Weitz & Luxenberg law firm in New York, who has handled similar cases, said he's confident the verdict and judgment will be upheld on appeal.

"I think this is locked in," he said.

Even if the award is upheld, state officials say it won't completely solve the state's Medicaid problems. The Department of Human Services announced in February that the projected shortfall in the program for the fiscal year that begins July 1, 2013, could be as high as $400 million -- much more than the $250 million shortfall the department originally projected for that year.

Beebe, a Democrat, has called for changes in Medicaid's payment model as a way to curb costs but has said it won't eliminate the shortfall the state will face. The federal government last year gave Arkansas permission to explore changing the way it pays medical providers for services, and DHS has said it expects to begin rolling out those reforms in July in a handful of Medicaid programs.

"If, and this is a big if, any of this money does go to the trust fund eventually, it will be one time money and would not change the need for long term systemic change, and that's what we're continuing to push for with our payment transformation initiative," Beebe spokesman Matt DeCample said.

Republicans, who believe they're on the verge of winning control of the majority-Democrat Legislature, have said they want to push for other reforms in the system. House Minority Leader Bruce Westerman said the GOP will continue exploring ways to cut costs by targeting waste, fraud and abuse in the system, regardless whether Arkansas receives the money.

"It could be like a Band-Aid or a stop gap to fix the shortfall for as long that money lasts, but I believe we need to have real reform so we won't have shortfalls in the future," said Westerman, R-Hot Springs.

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Associated Press writers Seanna Adcox in Columbia, S.C. and Chuck Bartels in Little Rock, Ark. contributed to this report.

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Andrew DeMillo can be reached at http://www.twitter.com/ademillo


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