State-Journal.com - Drug company owes us $14 million

The drug company’s defense attorney slumped in his chair when Franklin Circuit Judge Roger Crittenden read the jury’s verdict after more than two hours of deliberation.

AstraZeneca, maker of popular drugs such as Crestor, Nexium and Seroquel, must reimburse Kentucky $14.72 million after overcharging its Medicaid program between November 1999 and March 2005.

AstraZeneca lied when reporting its average wholesale price on a number of drugs, said George Galland, representing Kentucky in the civil fraud trial that ended Thursday.

AstraZeneca inflated its prices between 20 and 30 percent depending on the drug, Galland told the jury in his summation.

The average wholesale price is calculated by adding a percentage to the price wholesalers pay for the drug. The percentage, usually between 1 and 3 percent, represents a profit that the wholesalers get after selling the drugs to pharmacies.

Kentucky Medicaid, the state and federal program for the poor, uses the average wholesale price to reimburse pharmacies participating in the program.

By inflating its drug prices, AstraZeneca tried to control drug prices and set the state’s Medicaid program back $16 million, Galland told the jury.

“It’s proven that this broken system put Medicaid on a treadmill, chasing the proper discount. It started with false prices rather than having true prices to work with.”

While the jury’s decision was just shy of the $16 million lost claimed by the commonwealth, Attorney General Jack Conway said he was happy with the verdict.

“I appreciate the jury’s careful consideration of this matter and am pleased that we have been able to recover money for the Medicaid program and for Kentucky taxpayers,” Conway said in a statement.

“My office is committed to putting an end to this type of deception and ensuring that drug companies truthfully report their drug prices.”

The state wanted additional damages because of how long the practice went on and to send a message to other drug companies.

“We ask that punitive damages be awarded essentially to discourage the defendant from doing this again and to discourage others from doing this,” Galland said.

The jury gave the commonwealth $100 in punitive damages, which drew some snickers from the crowd.

Gerson Zweifach, representing AstraZeneca, argued in closing that the state’s Medicaid program was aware that average wholesale price was not an actual sales price for drugs, but rather a benchmark.

Zweifach also said the state didn’t do anything to fix the problem because “it helped maintain a network of participating pharmacies.”

“It’s time, and today would be a good time, for Kentucky Medicaid to take responsibility for the decisions they made,” Zweifach said.

The civil trial, filed in 2007, lasted 16 days.

This case is one of several that accuses major U.S. drug makers of civil Medicaid fraud throughout the nation. Several states are making cases against drug companies, charging them with hiking drug prices illegally.

Kentucky alone has sued 47 companies over the practice. The state has recovered nearly $100 million in Medicaid fraud since 2008, Conway said.

Kentucky was awarded $16 million in June from Novartis AG’s Sandoz unit for Medicaid civil fraud.

The state is taking GlaxoSmithKline, the United Kingdom’s leading drugmaker, to trial for fraud charges in November.