Drug Companies Ordered to Pay Alabama $114 Million in Medicaid Pricing Fraud Scheme

Monday, December 01, 2008 by: David Gutierrez, staff writer
Tags: pricing fraud, health news, Natural News

(NaturalNews) An Alabama court has ordered two major drug companies to pay the state more than $114 million after finding them guilty of Medicaid price fraud.

State lawyers had accused GlaxoSmithKline and Novartis of charging Alabama's Medicaid program a higher price for drugs between 1991 and 2005 than it had charged private insurance companies. In addition to the compensatory damages that it was eventually awarded, the state had asked for nearly $700 million in punitive damages.

After deliberating for seven hours, the jury found both companies guilty of price fraud, but declined to order them to pay punitive damages. GlaxoSmithKline was ordered to pay $80.8 million, while Novartis was ordered to pay $33.7 million.

"I think the jury looked at the evidence and decided the fraud was substantial but that the compensatory damages plus interest was enough," said state attorney Jere Beasley.

In 2005, Alabama filed such price-fixing lawsuits against more than 70 pharmaceutical companies. The first case to go to trial ended with a jury ordering Astra Zeneca Pharmaceuticals to pay the state $215 million, although a judge later reduced that amount to $40 million in compensatory damages and $120 million in punitive damages. The case against GlaxoSmithKline and Novartis was the second to go to trial.

After the verdict, state lawyers sent letters to 69 drug companies, giving them 30 days to settle the lawsuits against them, rather than facing the risk of a trial.

Both GlaxoSmithKline and Novartis continue to deny any wrongdoing, insisting that they followed proper pricing procedures. Both companies have announced their intent to appeal the court's decision.

"It's been our position all along that [GlaxoSmithKline] reported true and accurate prices," said Don Jones, a lawyer for the company.

"We're grateful that the jury did not find the punitive damages were warranted," said Novartis lawyer Harlan Prater. "We believed we reported appropriate prices."

Sources for this story include: ap.google.com.