The Wall Street Journal - Monday, 17 March 1997
George Anders, Staff Reporter of The Wall Street Journal

But Mr. Phillipps and 6,200 other hemophiliacs may have to keep waiting in this long-running case amid fresh delays caused in part by the federal government.

"I don't need to be rich," says the 42-year-old onetime musician and science-lab technician in San Francisco. "But I would like to live a little better than this for a few years of my life."

Hemophilia and HIV together have left Mr. Phillipps unable to work; he now subsists in San Francisco on a $630-a-month disability check. His bedroom rug is threadbare. His 1989 Ford Fiesta sputters when he drives it to doctor's appointments, and he relies on a local charity for help in feeding his dog.

Like most of the hemophiliacs with HIV who are covered by the proposed settlement, Mr. Phillipps says he has been baffled by the repeated delays in carrying out the accord. He just hadn't bargained on how many other parties might want a piece of the settlement.

The biggest potential claimant -- the federal-state Medicaid program that provides health insurance for the poor -- hasn't aggressively pressed for cash. But Medicaid officials also haven't agreed to waive a potential claim based on the money they spent to treat impoverished hemophiliacs over the past 15 years. And as long as the Medicaid issue remains unresolved, no one will get any checks.

The Medicaid imbroglio has become an embarrassing sticking point for almost everyone else in the blood-products case. A spokesman for Rhone-Poulenc Rorer Inc., one of the four drug companies involved, says his company wants the matter resolved quickly. David Shrager, lead counsel for the hemophiliacs in the settlement, says the case "isn't going half as fast as I would like."

Federal Judge John Grady, who is overseeing the settlement efforts, delivered a blistering admonition earlier this month, urging all parties to work faster. "Time is of the essence of this proposed settlement," Judge Grady wrote in a pretrial order. "The tragic fact is that class members are dying every day." He ordered the drug companies to work out terms by May 1 to pay money to HIV-positive hemophiliacs who never qualified for government assistance, and to sort out terms for everyone else by Dec. 31.

Earlier this year, private insurers largely resolved claims that they might be entitled to part of the accord. Most of those insurers agreed to settle for a total of about $15 million, which will be added to the overall payout.

After months of cautious negotiating, federal officials may be starting to budge. Officials at the Justice Department and the Department of Health and Human Services declined to speak for attribution, but one federal official late last week acknowledged a desire to "resolve this quickly." Earlier, he had been saying that the government wanted to maintain its negotiating leverage.

"Medicaid could be a substantial recipient," this official added. "The drug companies caused us to spend money for people who were infected." He said the government is taking a similar position in suits against tobacco companies over the costs of lung-cancer treatment. In the hemophilia case, he acknowledged, "we are to some degree looking like bad guys right now. I don't believe we will when this is done."

Meanwhile, hemophiliacs with HIV are trying to improve their standing with the court. They have sent dozens of letters to Judge Grady's offices in Chicago, urging him to hasten the settlement process.

"There's a sense of urgency in the hemophilia community that people who work nine-to-five jobs don't understand," says Lynn R. Allen, president of the Hemophilia Foundation of Michigan and a potential settlement-check recipient. "Other people can go home from their jobs at the end of Friday afternoon; we can't go home from our disease."

In Garland, Texas, Steven Minsky says that last year, for the first time in his life, he couldn't buy Christmas presents for family members because of severe financial troubles. A few years ago, Mr. Minsky says, he ran a convenience store in Englewood, Colo., and had enough money to afford a sports car. But HIV and hemophilia have left him with huge medical bills and an inability to work.

"We have to be very careful with our money now," Mr. Minsky says. "We go to $1 movie-dances if we go out at all. We're falling behind on our car-insurance payments. We had excellent credit 15 years ago; now we don't. My fear is that if I don't live long enough to see the money, there will be no money."

Another HIV-positive hemophiliac, Jack Morris, says his emotional well-being depends in part on a belief that the settlement checks won't prove to be mirages. "We have such a bleak fate to look at," Mr. Morris says. "When things get bad, we talk about going to DisneyWorld with our kids. It keeps our mind off our problems."

The four drug companies -- Rhone-Poulenc Rorer, Baxter International Inc., Alpha Therapeutic Inc. and a unit of Bayer AG -- are offering $5 million to $10 million to settle the federal government's possible claims. Talks began last year with Harriet Rabb, general counsel of the Department of Health and Human Services, but now are being handled by two Justice Department officials, Nikki Calvano and Jeffrey Axelrad.

One drug-company lawyer voiced optimism that Justice Department officials could resolve the federal claims quickly. But he said that a comprehensive federal pact still wouldn't settle everything. Because Medicaid is partly state funded, officials in all 50 states would need to endorse a similar settlement of potential claims.

Other complications remain as well. To ensure that creditors can't lay claim to individual settlement checks, there is talk of paying the money into a complex financial vehicle known as a "special needs trust." Some lawyers say that even that maneuver may not be sufficient in all cases; they say special legislation may be needed to make sure hemophiliacs and their families can keep the full settlement amount.

Even if Judge Grady's May 1 deadline is met, actual settlement checks might not be mailed for several months, while lawyers finish sorting out notification procedures and make sure no appeals are filed. Some hemophiliacs with HIV have chosen not to participate in the settlement and are pursuing separate suits against the drug companies instead. The companies have been accused of failing to screen for HIV in the early 1980s in the face of mounting evidence that the virus could be transmitted by contaminated blood products.

Other hemophiliacs, such as Mr. Minsky, say that after more than a decade of waiting for a settlement, it may take more extreme measures to bring the matter to completion. "I wish we could lock all the lawyers in a room," Mr. Minsky says, "and tell them they have seven days to settle this -- or they won't get to see next Christmas."

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