The Alabama Supreme Court late last week overturned a $78.4 million verdict the state had previously won against the Sandoz unit of Novartis after determining there was insufficient evidence to support allegations the drugmaker had defrauded the Alabama Medicaid Agency. The justices, in fact, ruled 7-to-1 that the 2009 case should never have resulted in a verdict against Sandoz or even made its way to a jury.
The state won the verdict by claiming Sandoz prompted Alabama Medicaid to overpay for prescription drugs over a 14-year period that ended in 2005. At the time, Sandoz was ordered to pay $28.4 million to compensate Medicaid for losses and $50 million in punitive damages. But the Supreme Court tossed the judgment and ruled the state based its Medicaid reimbursement payments on policy concerns and federal regulations, not steps taken by Sandoz.
"Alabama law requires that a party claiming to be the victim of fraud must have actually relied on the false information it received and that such reliance must have been reasonable. Because in this case, the state knew that the prices reported by Sandoz were not what the state claims they should have been, Alabama law does not allow the state to claim that its reliance on that information was reasonable," the court wrote (here is the ruling).
Nearly three years ago, the same court threw out jury decisions awarding the state more than $274 million from three drugmakers – AstraZeneca, Novartis and GlaxoSmithKline – over the same allegations. Sandoz was among dozens of drugmakers named in a lawsuit filed in 2005 by the Alabama attorney general. Justice Tom Parker issued a dissenting opinion; he had also dissented when the court overturned the AstraZeneca verdict (back story).
The spate of lawsuits filed by Alabama and subsequent rulings three years ago, which generated substantial publicity, prompted the American Tort Reform Association to label rank the state as a 'judicial hellhole' and criticized then Attorney General Troy King for 'regulation by litigation' and relying on outside law firms to litigate the lawsuits (read here).
While the state settled lawsuits against 16 of the drugmakers for more than $124 million, Sandoz is, of course, quite happy about its decision to slug it out. “We are very pleased by today’s ruling of the Alabama Supreme Court as it confirms our belief that these allegations are without merit,” Don DeGolyer, president of Sandoz US and head of commercial operations for North America, says in a statement.
gavel pic thx to walknboston on flickr