July 1 (Bloomberg) -- GlaxoSmithKline Plc and Novartis AG inflated drug prices paid by Alabama's Medicaid program and must pay the state $114.3 million in damages, a jury ruled after a two-week civil-fraud trial.

After deliberating for 5 1/2 hours yesterday and today, the state jury in Montgomery, Alabama, found the drugmakers liable for misrepresentation. It awarded $81 million in compensatory damages against Glaxo, the world's second-largest drugmaker, and $33.3 million in compensatory damages against Novartis. It awarded no punitive damages. The trial began June 16.

"They've operated a shell game,' stealing money from Alabama, Jere Beasley, a Montgomery attorney representing the state, told jurors yesterday in closing statements. "Now the same shell game has been tried with this jury.'

The trial of London-based Glaxo and Basel, Switzerland- based Novartis is the second stemming from Alabama's 2005 lawsuit against 70 drugmakers. The state alleged the companies overstated the drugs' average wholesale prices, a number used to calculate Medicaid reimbursement rates to pharmacies. On Feb. 22, a jury ordered AstraZeneca Plc to pay $215 million after deliberating for 45 minutes.

Glaxo will appeal, spokeswoman Mary Anne Rhyne said. "We've said from the beginning that GSK reported true and accurate prices,' she said.

Punitive Damages

"We certainly agree with the jury that punitive damages were not warranted in this case,' said Don Jones, a Montgomery lawyer representing Glaxo.

Novartis spokeswoman Karen Sutherland said the company will also appeal. The company "reported true and accurate prices based on terms that have been known and used by all participants in pharmaceuticals markets including Alabama Medicaid and we've been doing this for more than 30 years,' she said.

The damages award is the 13th-largest jury verdict in the U.S. so far this year, according to data compiled by Bloomberg. Beasley had asked for $114 million in compensatory damages, plus interest, and punitive damages of as much as $700 million. "This is really a perfect verdict,' he said today.

Beasley said trying the companies together probably helped Glaxo -- which he said had the weaker case -- avoid punitive damages. In April, the Alabama Supreme Court denied their bid for separate trials.

The February award against London-based AstraZeneca's AstraZeneca Pharmaceuticals LP unit in Wilmington, Delaware, included $40 million in compensatory damages and $175 million in punitive damages.

AstraZeneca Damages

On June 19, Alabama Circuit Judge Charles Price, who also oversaw the trial against Glaxo and Novartis, lowered the punitive damages to $120 million, citing a state law limiting them to three times compensatory damages, the Associated Press reported that day.

A third trial is scheduled for October against Bristol- Myers Squibb Co., Abbott Laboratories and Novartis's Sandoz unit, Beasley said.

The drug companies have argued that Alabama knew the average wholesale price didn't reflect the actual cost to providers. In the mid-1980s, the state changed its reimbursement method to reflect the average acquisition cost, plus a percentage. It didn't rely on information from drugmakers to create that method, and hasn't changed its approach since 1987, the companies said.

Paxil, Ritalin

Glaxo's drugs include the diabetes medicine Avandia, the antidepressant Paxil and the ulcer drug Zantac. Novartis's medicines include hypertension treatment Diovan, the cholesterol-lowering pill Lescol and Ritalin for hyperactivity.

In November, U.S. District Judge Patti Saris in Boston ordered AstraZeneca to pay $12.9 million in damages in a similar case over the pricing of cancer drugs. AstraZeneca is appealing.

Takeda Pharmaceuticals North America and Merck KGaA's Dey unit settled pricing claims with Alabama in January for a combined $6.75 million while admitting no liability.

On March 19, Saris in Boston certified a class of consumers and a class of third-party payers in a related lawsuit accusing McKesson Corp., the biggest U.S. drug distributor, of overcharging for prescription medicines and seeking more than $5 billion in damages.

Glaxo's American depositary receipts, each representing two ordinary shares, fell 29 cents to $43.93 in New York Stock Exchange composite trading. Novartis's American depositary receipts, each representing one ordinary share, fell 9 cents to $54.95.

Novartis is Europe's third-largest drugmaker after Glaxo and Paris-based Sanofi-Aventis SA. New York-based Pfizer Inc. is the world's largest drugmaker.

In the U.S., Glaxo is located in Philadelphia and Research Triangle Park, North Carolina. New York-based Pfizer Inc. is the world's largest drugmaker.

The case is Alabama Medicaid Pharmaceutical Average Wholesale Price Litigation, cv2005-219, Circuit Court of Montgomery, Alabama (Montgomery).