AG Watch

State Farm’s settlement in Mississippi will catch most AG-related headlines today, but another settlement deserves attention as well. In 2001, Bayer voluntarily removed Baycol, a “statin” cholesterol-lowering drug, from the market after learning that the drug carried higher risks than other statins. Bayer notified FDA.

Six years later, 30 state AGs led by Vermont’s William H. Sorrell have settled with Bayer for $8 million, following a brief sortie over Bayer’s alleged failure to notify consumers. As always, the AGs exercised after-the-fact interpretations of the Bayer’s legal obligations—there were no laws or guidelines for Bayer in these states at the time—to say nothing of the questionable desirability of state Attorneys General deciding public health policy. Bayer’s wrongdoing could easily have been handled by FDA and the DoJ.

It seems doubtful that $8 million six years later will really assist the affected consumers. If any of the money is distributed to specific individuals at all. And will $8 million have a significant deterrence effect on a company whose total net income approached $2 billion in 2005? We won’t hold our breath.

It seems most likely that the $8 million only really affects the states themselves. AGs boost the budget, get a nice news clipping, every beneficial pill in the universe gets slightly more expensive, and no one is any the wiser.

According to the Chicago Tribune, Mississippi will soon settle with State Farm insurance regarding Katrina damages. Mississippi AG Jim Hood, with some assistance from Dickie Scruggs, has a civil suit against State Farm about the fine points of the fine print in the insurance contracts Mississippians held.

Hood has also filed criminal charges alleging fraud by State Farm. What are the odds that State Farm’s decision to settle the civil case was influenced by the threat of criminal punishment?

Just as importantly, as the article notes, “The Mississippi settlement would not involve any cases filed by State Farm policyholders in Louisiana or Alabama.” We have one guess what lesson the AGs in Louisiana and Alabama will draw from the Mississippi maneuver.

The political dynamic will certainly make these AGs popular in the short term, but in the long run, we doubt that most businesses will want to do business in states that toss out contractual rule of law and leverage criminal threats in order to extract civil fees.