FDAnews Drug Daily Bulletin

Alabama Sues GSK, Novartis for $800 Million in AWP Case

June 26, 2008

The state of Alabama has begun its trial against Novartis and SmithKline Beecham, a subsidiary of GlaxoSmithKline (GSK), for as much as $800 million for allegedly overcharging Medicare, Medicaid and private insurers by inflating the average wholesale price (AWP) of drugs.

The suit is the second brought by the state against approximately 76 drugmakers on overcharges to the state’s healthcare programs. The first case, State of Alabama v. AstraZeneca LP, ended in February with a jury verdict of $215 million against AstraZeneca. The company appealed to have the damages reduced or set aside. A judge later upheld the verdict but reduced it to $160 million.

The state is requesting that GSK and Novartis combined pay up to $200 million in compensatory damages and as much as $600 million in punitive damages (treble compensatory damages are allowed by state law). The monetary amounts are not mentioned in the complaint, but they were stated in an argument before the jury, according to Paul Lynn, one of the attorneys for the state.

“The defendants have engaged in false, misleading, wanton, unfair and deceptive acts and practices in the pricing and marketing of their prescription drug products,” the state’s complaint says. “The defendants’ fraudulent pricing and marketing of their prescription drugs have impacted elderly, disabled and poor Alabama citizens covered by the state’s Medicaid program … by causing the Alabama Medicaid Agency to pay grossly excessive prices for the defendants’ prescription drugs.”

A spokeswoman for GSK and Paul Lynn said the judge has imposed a gag order in the case forbidding them to comment on it.