Update: Alabama Drug Pricing Lawsuit Case in Juries Hands

Watson Pharmaceuticals, a manufacturer of generic and brand name prescription drugs, is one of the 70 pharmaceutical companies Alabama Attorney General Troy King sued over pricing allegations in 2005.

Watson is accused of inflating prices on lists used to determine how much the state should reimburse pharmacists for drugs provided to people on Medicaid Article Controls.

After more than two weeks of testimony in the complicated case, Montgomery County Circuit Judge Charles Price sent the case to jurors around 1:30 p.m. on Wednesday. They deliberated until about 4:30 p.m. when Judge Price called a recess until Monday morning and told the lawyers to keep working on a resolution.

Jere Beasley representing the state in closing argued that Watson cheated Alabama's Medicaid program out of $23 million from 1991 to 2005. "Nothing so far has gotten their attention," Beasley told the panel of nine women and three men. "I would suggest that you take the $23.8 million as a base and say three times or five times that amount as the punitive damage award."

Beasley also said the alleged "boardroom fraud" is common in the industry, and the country's neediest citizens have been ripped off for years. Change will only come through hitting drug makers in their pocketbooks, he said.

The state claimed it was led to believe it was paying below wholesale prices for medication, but the company said Medicaid officials should have known they were paying higher prices.

Watson attorney James Matthews countered that the state knew for more than a decade that it wasn't being charged the below-wholesale price.

He told jurors the state had plenty of clues, including those in its own documents, to see it wasn't paying the lowest price.

"These are the state's own documents," Matthews said. "Ask yourself -- should that have made them suspicious? Did they really rely on the belief that those were net prices in light of all of that?".

Beasley questioned why Watson didn't bring any of its CEOs or other top executives to testify about its pricing policy and why a liability expert who was present during the trial was never called to the stand.

Matthews said the company expert wasn't needed under oath, and dismissed a state expert as someone who did shoddy work going through files and employee depositions that Watson provided.

"The real truth here is that there is no fraud," he said. "The evidence doesn't support the claims."

Last month, Alabama announced it had settled drug pricing lawsuits against six pharmaceutical companies for $89 million. They included lawsuits against Abbott Laboratories of Chicago and Forest Laboratories, with corporate headquarters in New York City. Both were scheduled to be tried with the Watson case.

The state had previously settled with 10 companies for almost $35 million. Alabama's lawsuits against four companies have gone to trial, with the state winning judgments against each totaling $352.4 million. Those verdicts are being appealed.

Sources:

http://www.forbes.com/feeds/ap/2009/07/09/ap6635121.html

http://www.businessweek.com/ap/financialnews/D99ATL880.htm