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German drugmaker accused by Alabama of overpricing

February 11, 2009
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An attorney for the state of Alabama told jurors that generic drug producer Sandoz Inc. set out to cheat the state''s Medicaid program with inflated prices, a claim the Germany-based firm disputed as trial on the issue began, as reported by the Associated Press. Attorney Jere Beasley of Montgomery told jurors that Sandoz officials got greedy when they established prices that Medicaid would pay to reimburse pharmacists for prescription drugs for Medicaid patients. He called for a penalty of more than $28 million. But Tabor Novak, a Montgomery attorney representing Sandoz, disputed the accusations and said the company has done a service to the state by providing the Medicaid program with generic drugs, which are less expensive than brand name medications. Beasley and Novak made the comments as they gave opening statements in the trial of the state''s lawsuit accusing Sandoz of overpricing. The trial is expected to run for about two weeks. Sandoz is one of more than 70 companies the state has sued for allegedly overcharging the state''s Medicaid program for prescription drugs. Beasley, a former Alabama lieutenant governor, told jurors that Alabama''s Medicaid program struggles every year to come up with enough state and federal money to provide health care coverage for the poor, children, the disabled and the elderly. He said the company caused the state to pay too much, partly by not including discounts and rebates in the price quoted to Medicaid officials. But Novak said Sandoz followed federal regulations in the system it used to establish prices. In most cases, he said, the price Sandoz quoted the state included discounts and rebates, saving the agency money. Beasley told jurors he wants them to order Sandoz to pay $28 million in compensatory damages. He did not specify an amount of the punitive damages. Beasley said the state Medicaid program paid Sandoz more than $43 million for drugs from 1991 to 2005, the period covered by the lawsuit. Alabama Attorney General Troy King sued the drug companies in 2005 over drug prices they charged for Medicaid recipients. A jury last February ordered the U.S. subsidiary of U.K. drug maker AstraZeneca to pay the state $215 million -- $40 million in compensatory damages and $175 million in punitive damages. But the judge cut the total amount of the damages to $160 million. In July, another Montgomery County jury found GlaxoSmithKline liable for nearly $81 million in compensatory damages and Novartis liable for about $33 million in similar damages. No punitive damages were awarded. Sandoz is a subsidiary of Novartis with U.S. headquarters in Princeton, N.J. AstraZeneca, GlaxoSmithKline and Novartis have appealed their cases to the Alabama Supreme Court. King said it could be more than a year before the court rules and the state is able to collect any of the money from those three cases. The state has settled 10 of the lawsuits for nearly $35 million.

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