California-based generic-drug manufacturer Dey LP has reached a $2.9 million settlement with the state of Massachusetts with regard to accusations of price inflation and defrauding of the Commonwealth’s Medicaid program. The company has already reached similar settlements with a slew of other states, including Missouri, Ohio, Connecticut, Nevada, West Virginia, Hawaii, and Idaho, but has never acknowledged any wrongdoing in any of the cases.

The origins of the pricing litigation date back to the middle of last decade, when Dey was accused of inflating their wholesale prices when reporting them to the industry meaning that state and federal Medicaid programs were reimbursing the company at much higher rates than they should have been. The alleged scam allows the company to increase its profits while keeping the costs of their pharmaceuticals low for consumers.
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Pet-Food Recall Expands Yet AgainA month ago, relatively few people in the United States had ever heard of the chemical known as melamine. Fewer still knew that melamine, a chemical used as fertilizer and in the production of plastics and resin, caused kidney failure in dogs and cats. Unfortunately, people are learning all too much about melamine as the presence of the chemical has managed to mysteriously contaminate a huge supply of pet food in the United States.

This week, two more pet-food companies announced voluntary recalls of their products due to fears of melamine contamination. California-based Natural Balance recalled all of its Venison dog products and dry Venison cat food only, regardless of date codes. The recalled products include Venison and Brown Rice canned and bagged dog foods, Venison and Brown Rice dog treats, and Venison and Green Pea dry cat food.
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Canadian pet-food manufacturer Menu Foods has once again expanded its recall of contaminated products after discovering that at least one shipment of tainted wheat gluten made it to its Canadian production facility. In addition, it appears that Menu Foods’ CFO dumped half of his holdings in the company a mere three weeks before they announced the recall.

Last month, Menu Foods recalled more than 60 million cans and pouches of “wet” dog and cat food after the food was linked to kidney failure in a number of pets, but that recall extended only to “cuts and gravy” style dog and cat food manufactured at the company’s Emporia, Kansas, facility between December 3, 2006, and March 6, 2007. However, the company announced yesterday that a shipment of tainted wheat gluten, supplied by ChemNutra, was received at its Streetsville, Ontario, plant and used in the production of pet food in December and January.
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A New York Times investigative report in today’s editions has further exposed a dangerous and growing concern within the medical community: physicians with significant financial ties to the pharmaceutical industry. Research has shown that these financial connections can unduly influence a range of important medical decisions made by doctors, including the crafting of general clinical practice guidelines and the use of specific prescription tendencies for their own individual patients.

The genesis of the Times’ report was a review of records kept by the state of Minnesota, which was the first state to pass a law requiring disclosure of all financial transactions between drug companies and physicians. (Vermont, Maine, West Virginia, California, and Washington, D.C., have similar statutes on the books.)
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The U.S. Centers for Disease Control and Prevention (CDC) announced this week that the number of patients affected by the recent salmonella outbreak has risen to 370, and incidents have been reported in 42 states. The CDC and FDA are asking consumers to refrain from eating all jars of Peter Pan peanut butter, along with certain lots of Great Value peanut butter (product code starting with 2111) that are produced at the same Georgia facility.

Although the first patients fell ill as far back as August, the majority of cases have occurred in the past three months and as recently as two weeks ago. According to the CDC, most patients infected with salmonella develop diarrhea, fever, and abdominal cramps within 12 to 72 hours after infection, and the effects usually last four to seven days. Although most people recover without treatment, the elderly, infants, and those with impaired immune systems are more susceptible to severe illness.
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In another apparent legal blow to State Farm Fire & Causalty Co., U.S. District Judge L.T. Senter rejected a Mississippi class-action settlement related to Hurricane Katrina damage, claiming that the proposed settlement favored the needs of the insurance company over those of the policyholders.

Senter asked for more information before he would approve the deal. “In the absence of substantially more information than I now have before me, I am unable to say, even preliminarily, that the proposed settlement establishes a procedure that is fair, just, balanced, or reasonable,” he said in his decision.
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After several weeks of negotiation, State Farm Fire & Casualty Co. has reached an agreement to settle all of its Mississippi lawsuits stemming from Hurricane Katrina. The settlement must now be approved by Judge L.T. Senter, the federal judge who ruled against the company in a damage-liability suit earlier this month. The settlement does not address damages to neighboring states.

The agreement calls for an initial payment by State Farm of $130 million, a tab that may grow several times larger depending on the number of policyholders who decide to reopen their claims. About $80 million will be used to settle the more than 600 existing lawsuits in Mississippi, with an additional amount of at least $50 million earmarked for settlement of reopened claims. There are roughly 35,000 policyholders who own homes on the Mississippi coast and are eligible to have their claims revisited.
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In a ruling that may have ramifications on hundreds of other lawsuits, a federal judge in Mississippi declared that State Farm Fire & Casualty Co. is liable for damage to a couple’s Biloxi home following Hurricane Katrina. While the insurance company is responsible for paying $223,292 in damages to the home, the key part of the ruling was the award by a jury of $2.5 million in punitive damages.

The ruling by U.S. District Judge L.T. Senter Jr. may be troubling news for State Farm and other insurers who are claiming that they are not responsible for damage caused by flooding. In the case of Norman and Genevieve Broussard, State Farm had contended that they were not responsible for the damages because they were caused by water. However, the judge sided with the Broussards, who claimed that the damage was mostly due to excessive winds. Senter left the decision about punitive damages to a jury, and the jury decided to award punitive damages because State Farm had initially (and illegally) denied the Broussards’ insurance claim.
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According to a report in today’s New York Times, State Farm Fire & Casualty Co. is close to reaching a huge settlement of hundreds of lawsuits related to Hurricane Katrina’s destruction of the Mississippi Gulf Coast.

The Times said that the $80 million settlement is expected to address 639 lawsuits. In addition, there is also a provision in the settlement that calls for the review of previously settled claims made by policyholders who did not file suit. The company’s expenditure may grow into hundreds of millions of dollars once these previously handled claims are reopened.
“State Farm, under the tentative accord, would provide an average of about $125,000 to homeowners who filed lawsuits, although the payments would range from as little as about $2,000 to about $2 million,” the paper noted. “The treatment of those cases would serve as a guide for increasing payments to any of the 35,000 homeowners who request a review of their claim, according to lawyers privy to the details.”
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Hewlett-Packard agreed to pay $14.5 million to settle a civil case brought against it by the California Attorney General’s office related to the company’s internal investigations of its board members. The lion’s share of the settlement will be used to establish a Privacy and Piracy Fund that will help state prosecutors fight consumer privacy and piracy violations. Felony criminal charges are still pending against five people involved in the scandal, in which company investigators were accused of impersonating board members, employees, and journalists in order to obtain personal phone records.

Also as part of the settlement, HP will make several changes to its corporate governance structure: A new independent director will be the board’s watchdog with regard to ethical and legal requirements. Both the chief ethics and compliance officer and chief privacy officer will receive greatly expanded duties. The company will also establish a new Compliance Council that reports to the CEO, the board, and the audit committee.
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