Alabama Judge Upholds Fraud Verdict against AstraZeneca, Trims Judgment

By | June 24, 2008

An Alabama judge upheld the fraud verdict that the state won against AstraZeneca Pharmaceuticals LP in a Medicaid drug pricing suit, but ruled the punitive damages were too high, trimming the total judgment to $160 million.

The jury ordered the company, the U.S. subsidiary of Britain’s AstraZeneca PLC, to pay $40 million in compensatory damages and $175 million in punitive damages. But Circuit Judge Charles Price ruled that state law limits punitive damages to three times compensatory damages and cut the amount down to $120 million.

A spokeswoman for AstraZeneca said the company would appeal to the Alabama Supreme Court.

The verdict in February came in the first trial of lawsuits filed by the state against more than 70 drug companies. The lawsuits claim the state was overcharged for prescription drugs for Medicaid recipients.

Two other drug companies, Novartis Pharmaceuticals and SmithKline Beecham Corp., are currently on trial in the litigation in Montgomery.

One of the state’s lawyers, Montgomery attorney Jere Beasley, said it was important that the judge found punitive damages were supported by the evidence. He said the court also “correctly found there was sufficient evidence that the defendants committed fraud” in pricing drugs for the poor and elderly in the state’s Medicaid program.

“We believe this is a most significant finding by the trial judge who heard the evidence and found that the defendants committed intentional fraud,” he said.

AstraZeneca spokeswoman Laura Woodin said the company was pleased that the judge “reduced the amount of punitive damages as required by Alabama law.”

“However, we are disappointed that Judge Price did not set aside the jury’s verdict in its entirety,” Woodin said. “AstraZeneca has fully complied with the law, government guidelines and contracts that govern Medicaid pricing.”

Drugs manufactured by AstraZeneca include Nexium, which is used to treat heartburn and acid reflux, and Crestor, which is prescribed to lower cholesterol.

In his eight-page ruling, Price said the evidence during the trial showed that AstraZeneca’s actions in overcharging Alabama’s Medicaid program were “reprehensible.”

“The state introduced evidence to establish that the defendants fraudulently diverted Medicaid funds intended to benefit the state’s poor, elderly and infirm citizens,” Price wrote. “The state established that defendants’ wrongful conduct deprived the state of limited funds available for the state’s Medicaid recipients.”

At a hearing last week, attorneys for AstraZeneca had asked Price to throw out or reduce the $215 million jury verdict. AstraZeneca contended that, if not thrown out, the total judgment should be no more than $86 million.

Alabama Attorney General Troy King filed the lawsuits against the drug companies in 2005. Since the lawsuits were filed, the state has settled its claims against two drug manufacturers, Takeda Pharmaceuticals North America Inc. and Day LP.

Similar lawsuits against pharmaceutical companies are pending in other states, including Mississippi, South Carolina, Utah, Hawaii and Alaska.

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