Alabama Supreme Court rules on State’s Lawsuit against Drug Firms

posted on:
June 1, 2007



MONTGOMERY, Ala. (AP) – The Alabama Supreme Court sided with drug companies Friday in deciding how to try the state government’s lawsuit accusing the companies of causing about $600 million in overcharges to the Alabama Medicaid Agency.

In a 9-0 decision, the Supreme Court said Montgomery Circuit Judge Charles Price should not have lumped the 73 companies into four groups for four trials.
The drug companies had appealed to the Supreme Court, asking it to sever the claims against each company because each is a distinct case.

“The transactions involved different companies, different products, and different time periods over 15 years. Under the circumstances of this case, we conclude that although the alleged transactions are similar, they are not the same,” the Supreme Court ruling said.

Gov. Bob Riley’s administration and Attorney General Troy King filed the suit in January 2005, accusing 73 companies of intentionally misreporting the average wholesale price for their drugs, which the Medicaid Agency uses to determine its payments for prescriptions. The state hired private attorneys to handle the suit on a contingency fee.

Price had set a Nov. 26 trial date for the first group of drug companies.

The state’s lawyers argued for joining the defendants together for trial because their actions were similar, but the Supreme Court said the state did not allege the companies were acting in concert.

In a specially concurring opinion, Justice Champ Lyons said there are other legal grounds the state can pursue to lump the companies together into small groups for trial rather than having 73 separate trials. But he said it will require a much better explanation than the Supreme Court got this time for grouping companies together.

One of the state’s attorneys, Jere Beasley, said the state will pursue that, and he predicted that a trial will still be held in November for one or more companies.

Saul Morgenstern, lead attorney for Novartis Pharmaceuticals, the lead company in the appeal, said the Supreme Court made it clear “we are all entitled to have our separate case,” but it remains to be seen whether there will actually be 73 trials.

When the cases go to trial, Beasley said the state will seek about $600 million in compensatory damages and $1.8 billion in punitive damages against the companies.

Morgenstern said the drug companies will argue that the state fully understood their pricing structure, that there was no fraud against the state, and that the state is not due any money.


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