A recent $22.5 million settlement by Eli Lilly and Co. of a state Attorney General's Office lawsuit over the marketing of the anti-psychotic drug Zyprexa might seem like small potatoes compared to office's latest litigation regarding prescription-drug pricing.

Filed in Boone Circuit Court, the lawsuit alleges that CVS Pharmacy, Kmart, Kroger, Walgreen Pharmacy and Target all violated a state law designed to promote use of generic equivalents for brand-name prescription drugs.

Under the law (30-5-12B), all savings from the substitution of the less-expensive generic drug must be passed on to the consumer.

Fran Hughes, managing deputy attorney general, said the lawsuit contends that the pharmacies in question have routinely failed to comply with the state law, and have pocketed the savings instead of returning it to the consumers.

Because of their much-lower acquisition costs, the companies' profit margins on generic drugs are frequently much greater than on the brand-name equivalents, the lawsuit contends.

Among the evidence cited is a CVS annual report to stockholders in 2007, which credited an increase in gross profit margins to the increased utilization of generic drugs.

"Our gross profit and gross profit margins generally increase with the corresponding increase in generic dispensing rates, since generic drug revenues normally yield a higher gross profit rate than equivalent brand-name drug revenues," the report stated.

"The real profits earned by these pharmacies are in generic drugs," Hughes said.

In other words, because of a much lower "wholesale" price on generics, the pharmacies can impose a higher retail mark-up than they can on the equivalent brand-name drugs.

Hughes said that huge mark-up is why companies such as Walmart have been able to institute $4 pricing on certain generic prescriptions, and still make a profit.

This sounds like basic free-market economics, except that 30-5-12B states that all savings from the generic equivalent must be passed on to the consumer.

"In no event shall such savings be less than the difference in the acquisition cost of the brand-name product ... and the acquisition cost of the substituted product," the law states.

"I think the Legislature was very wise when they enacted the pharmacy act, and helped position West Virginia to control drug costs," Hughes said.

A recent $22.5 million settlement by Eli Lilly and Co. of a state Attorney General's Office lawsuit over the marketing of the anti-psychotic drug Zyprexa might seem like small potatoes compared to office's latest litigation regarding prescription-drug pricing.

Filed in Boone Circuit Court, the lawsuit alleges that CVS Pharmacy, Kmart, Kroger, Walgreen Pharmacy and Target all violated a state law designed to promote use of generic equivalents for brand-name prescription drugs.

Under the law (30-5-12B), all savings from the substitution of the less-expensive generic drug must be passed on to the consumer.

Fran Hughes, managing deputy attorney general, said the lawsuit contends that the pharmacies in question have routinely failed to comply with the state law, and have pocketed the savings instead of returning it to the consumers.

Because of their much-lower acquisition costs, the companies' profit margins on generic drugs are frequently much greater than on the brand-name equivalents, the lawsuit contends.

Among the evidence cited is a CVS annual report to stockholders in 2007, which credited an increase in gross profit margins to the increased utilization of generic drugs.

"Our gross profit and gross profit margins generally increase with the corresponding increase in generic dispensing rates, since generic drug revenues normally yield a higher gross profit rate than equivalent brand-name drug revenues," the report stated.

"The real profits earned by these pharmacies are in generic drugs," Hughes said.

In other words, because of a much lower "wholesale" price on generics, the pharmacies can impose a higher retail mark-up than they can on the equivalent brand-name drugs.

Hughes said that huge mark-up is why companies such as Walmart have been able to institute $4 pricing on certain generic prescriptions, and still make a profit.

This sounds like basic free-market economics, except that 30-5-12B states that all savings from the generic equivalent must be passed on to the consumer.

"In no event shall such savings be less than the difference in the acquisition cost of the brand-name product ... and the acquisition cost of the substituted product," the law states.

"I think the Legislature was very wise when they enacted the pharmacy act, and helped position West Virginia to control drug costs," Hughes said.

The lawsuit seeks restitution of all overcharges for failure to comply with the state's generic pricing law, as well as civil penalties of up to $5,000 for each individual violation.

So how much is the Attorney General's Office potentially seeking in claims? Well, consider that for the 2008-09 budget year, the Public Employees Insurance Agency alone spent $162.15 million on prescription drugs -- with 72 percent of those prescriptions for generic drugs.

"It's very substantial, obviously," Hughes said. "It has very significant implications."

Shortly before he died, Sen. Ted Kennedy called on Massachusetts lawmakers to change a state law there that requires a special election to fill U.S. Senate vacancies - creating a five-month void at a time when critical legislation will be before the Senate. (Ironically, Kennedy was instrumental in getting the law changed in 2004, so that Republican Gov. Mitt Romney would not be able to appoint a senator in the event Sen. John Kerry had won the presidential election.)

That being said, a quick refresher on how vacancies in elected offices in West Virginia are filled is in order.

With one exception, the governor fills all vacancies in executive, legislative, judicial and federal offices (except his own, obviously) by appointment.

The exception is the U.S. House of Representatives, in which case the governor has 10 days from the time the seat is vacated to issue a proclamation setting a special election to fill the vacancy, to be held not less than 30 days nor more than 75 days from the date of the proclamation.

Five weeks and counting. . . . That's how long the Department of Administration and Division of Protective Services have now spent evaluating the four bids to build a wrought-iron and brick fence semi-enclosing the Governor's Mansion and Holly Grove Mansion on the Capitol grounds.

Since the bids are essentially identical, other than the amounts (ranging from $478,000 to $868,161), one wonders what the holdup might be. . . .

Finally, the total costs are in for the two Margaritaville-style cookouts Gov. Manchin hosted at the executive party tent earlier this month (the second of which began minutes after the special session on state/public school employee bonuses came to an abrupt and acrimonious end).

The two parties, which featured a Jimmy Buffett tribute band, drew a total of about 900 people at a total cost of $10,521, or roughly $11.69 per person, according to Manchin spokesman Matt Turner.

Reach Phil Kabler at ph...@wvgazette.com or 304-348-1220.