Alabama Supreme Court Throws Out $274M in Verdicts Against Drug Makers

October 19, 2009

The Alabama Supreme Court last Friday threw out jury decisions awarding the state more than $274 million from three pharmaceutical companies, ruling they did not defraud the state in pricing Medicaid prescription drugs.

The court overturned jury verdicts against the drug companies AstraZeneca, Novartis and GlaxoSmithKline, accused by the state of fraudulently manipulating prices of drugs for Medicaid recipients.

The court ruled 8-1 that the state did not have to rely on the drug companies’ information in deciding what prices to pay pharmacists for prescription drugs for Medicaid recipients. The justices said state officials could have done their own research and determined the correct price.

The court ruled the state is continuing to rely on the same formulas established by the drug companies to set prices.

“The state has never altered its course of conduct since taking issue with the reporting methods,” said the majority ruling written by Justice Tom Woodall.

Justice Tom Parker cast the lone dissent, saying there was no evidence the drug manufacturers made available to the state the confidential details they used in determining price information.

More than 70 lawsuits were filed in 2005 by the state against drug companies. The state has settled its lawsuits against 16 of the drug manufacturers for more than $124 million.

Alabama Attorney General Troy King filed the lawsuits, charging them with causing the state’s Medicaid program to pay too much for prescription drugs for poor and elderly citizens. He said he was disappointed “but I respect them as having the final word.”

The decision is a blow to the state’s cash-strapped General Fund budget, which funds Medicaid and other non-education state agencies and could have used the money to ease budget cuts.

“I’m saddened to learn that they have allowed the drug companies to rip off the elderly and children of Alabama. Clearly the juries found fraud in these cases,” said the chairman of the Senate General Fund budget writing committee, Sen. Roger Bedford, D-Russellville.

The lead attorney for the state in the trials of the lawsuits, former Lt. Gov. Jere Beasley, said Alabama taxpayers “are the losers today and politically powerful drug companies declared winners by the Alabama Supreme Court. This is a sad day for the Alabama Medicaid program and all Alabama taxpayers.”

Beasley said the state will ask the Supreme Court to reconsider its decision.

Officials with the drug firms said the ruling validates their position that the claims were unfounded.

“This confirms our position that GSK reported clear and accurate prices, that GSK’s pricing practices were consistent with established industry standards and that the state understood full well the pricing benchmarks that GSK reported,” said GlaxoSmithKline spokeswoman Mary Anne Rhyne.

The state’s case against Wilmington, Del.-based AstraZeneca, the U.S. subsidiary of a British company, was the first to go to trial in February, 2008. The jury initially awarded the state $215 million in damages, but Circuit Judge Charles Price reduced the verdict to $160 million.

Later in 2008, another jury awarded the state $81 million in damages against GlaxoSmithKline PLC, a London-based health care company with U.S. headquarters in Philadelphia and Research Triangle Park, N.C., and $33 million in its lawsuit against Novartis, the U.S. affiliate of a Swiss company with U.S. headquarters in East Hanover, N.J.

In February, a Montgomery jury ordered Sandoz Pharmaceuticals to pay $78.4 million to the state. The Supreme Court has not ruled in that case.

Similar lawsuits have been filed against drug manufacturers by other states. A jury in Kentucky last Thursday ordered AstraZeneca to pay $14.7 million in a case that claimed the company inflated its prescription drug prices for Medicaid reimbursements.

Former Supreme Court Justice Terry Butts said he was disappointed with the Supreme Court’s decision.

“By their rulings, the current Alabama Supreme Court continues to impose a form of economic slavery on the taxpayers of Alabama, which has not been seen since the days when human beings were routinely sold just down the street from the Alabama Judicial Building in downtown Montgomery,” Butts said, referring to the day before the Civil War when slavery was legal in Alabama.

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