In a recent ruling, the Alabama Supreme Court granted the drug companies’ petition for mandamus in the State of Alabama’s average wholesale price (AWP) lawsuit. The companies cheated the State, causing about $600 million dollars in overcharges to the Alabama Medicaid Agency. But, all the justices really did in this decision was to tell the trial judge to sever all of the cases. The drug companies appealed to the Supreme Court, asking the justices to sever the claims against each company, claiming each case was a separate and distinct case. As we have reported, we filed the case on behalf of the State in January 2005, alleging that 73 companies intentionally committed fraud in misreporting the AWP for their drugs. As we have explained, AWP is the method the Medicaid Agency uses to determine its payments for prescriptions.
Unfortunately, the November 26th date set for the trial of the first group of drug companies was affected by the Supreme Court’s ruling. The case was continued and will be tried starting on February 11, 2008. The trial will not include the same number of companies as previously grouped by the trial judge. We have filed a motion to consolidate groups of cases. In a special concurring opinion, Justice Champ Lyons, joined by Chief Justice Sue Bell Cobb, correctly laid out the method the State should pursue to consolidate the companies together into small groups for trial rather than having 73 separate trials. This will be our approach as we get ready for the trial date. The defendants’ sole motive in going to the Supreme Court was to get a continuance, and that is what happened. As a practical matter, nothing will really be significantly changed in so far as how the trials will proceed. Delay has been the defendant’s game plan from the outset as evidenced by all of the appeals thus far. Eventually, they will have to face a jury.
The State will be entitled to receive approximately $600 million in compensatory damages from the defendant companies. We will also seek $1.8 billion in punitive damages for the state against the companies based on their conduct. I am confident we can prove that the defendants committed an intentional fraud against the State. In my opinion, any jury that hears this case will be outraged when they hear the testimony. In any event, the ruling by the Supreme Court wasn’t on the merits, and the State will proceed with the cases against the 73 pharmaceutical companies. The ruling by the Alabama Supreme Court simply says that the State cannot try the cases against all defendants in one trial. As stated above, we will request that cases be consolidated in groups for a series of trials. We do not believe that the Supreme Court’s ruling will have any appreciable effect on the final outcome in this matter.