Ohio Drug Price Initiative contains gift from taxpayers to lawyers

Ohio Drug Price Initiative contains gift from taxpayers to lawyers
Credit: iStock

Trial lawyers and their political allies have long enriched themselves at taxpayers’ expense. But usually, it is by bringing lawsuits, not defending them.

The Ohio Drug Price Standards Initiative might change that. If approved by voters, it would give its sponsors taxpayer money to hire unnecessary lawyers, if the initiative is later challenged as unconstitutional or preempted by federal law.

The initiative is much like a controversial ballot proposition rejected by California voters in 2016. It would require state agencies, including Ohio’s Medicaid program, to pay the same or lower prices for drugs as the Department of Veterans Affairs (VA). The VA typically pays 20-24% less than other agencies for drugs, according to the organization behind the initiative. Critics argue that the initiative could lead to state agencies (and Medicaid recipients) losing “access to some drugs,” cut state rebate income, and result in unclear price limits due to the fact that “complete information regarding what drugs the VA purchases and the lowest price the VA pays is not generally available.”

A provision in the initiative declares the “committee of individuals responsible for the circulation of the petition proposing this Act” to have a “direct and personal stake” in any such challenge, and thus the right to defend any challenge to the Act, with the state of Ohio indemnifying them for their “reasonable attorney’s fees and expenses.”

There is no reason why taxpayers should have to pay them to hire lawyers, especially since the Initiative would also “require the Attorney General to defend the law if challenged in court.” Thus, it means taxpayers may have to pay for two sets of lawyers (one in the state attorney general’s office, and one hired by the sponsors of the initiative.).

The cost of defending against a constitutional lawsuit can be large. For example, $95 million was spent on the University of Michigan’s defense of its admissions policies against a constitutional challenge.

Attorneys hired to handle state lawsuits have sometimes received vast amounts of money in the past, but in those cases, they were hired to bring a lawsuit, rather than defend against it. For example, lawyers hired by New York’s attorney general got paid at a rate of $13,000 per hour to help the state sue the tobacco companies. Although a trial judge blocked payment of the rate as being ridiculously excessive, a state appeals court reversed him and upheld it—even though critics argued that New York’s tobacco lawsuit was just a low-risk “copycat” lawsuit mimicking earlier-filed lawsuits by other states.

It is hard to imagine Ohio courts allowing a similar rate in a lawsuit over the Drug Price Standards Initiative. But defending it against a challenge could still be costly to taxpayers.

Many state attorneys general, such as Mississippi’s Jim Hood and Iowa’s Tom Miller, have hired private trial lawyers to sue out-of-state businesses. The trial lawyers, who included Hood’s cronies, were then paid out of money that the sued entity would otherwise have paid into the state treasury. That circumvented state constitutional provisions giving state legislatures the exclusive authority to appropriate money.

The record for lawyers’ fees is the amount collected in the 1998 tobacco Master Settlement Agreement. Wealthy trial lawyers across the nation have received more than $15 billion in attorneys’ fees under that 46-state settlement, and they are expected to receive as much as $30 billion by 2028. The costs of that settlement were paid for primarily by smokers, the purported victims of the tobacco companies. That’s because the settlement was deliberately structured by state officials and lawyers for big tobacco to enable the big tobacco companies to pass on the cost to smokers through market-share-based liability and protections against competition from new tobacco companies. Smokers were soaked with its costs, even though the tobacco settlement resolved lawsuits brought by state attorneys general arguing that smokers had been deceived by tobacco companies about the dangers of smoking.

For more on the legal issues surrounding state attorneys general partnering with private lawyers, see the CEI study Pirates at the Parchment Gates: How State Attorneys General Violate the Constitution and Shower Billions on Trial Lawyers by Peggy Little (2017).

Hans Bader

Hans Bader

Hans Bader practices law in Washington, D.C. After studying economics and history at the University of Virginia and law at Harvard, he practiced civil-rights, international-trade, and constitutional law. Hans also writes for CNS News and has appeared on C-SPAN’s “Washington Journal.”


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