MADISON, Wis. - (Mealey's) The Wisconsin Supreme Court on June 22 affirmed a $13.5 million verdict and judgment against Pharmacia Corp. for reporting inflated drug prices and causing the state Medicaid program to overpay, an appeal that stayed the state's cases against 25 other drug company defendants (State of Wisconsin v. Abbott Laboratories, et al., No. 2010AP232-AC, Wis. Sup.; 2012 Wis. LEXIS 359).
(Opinion available. Document #28-120712-002Z.)
In 2004, the Wisconsin attorney general sued 22 brand-name and generic drug defendants and their subsidiaries in the Dane County Circuit Court, alleging that since about 1992, they provided drug price publisher First DataBank with inflated average wholesale prices for their drugs, actions that resulted in the state's Medicaid program overpaying for the medications. One defendant was Pharmacia, a subsidiary of Pfizer Inc.
The case against Pharmacia went to trial, and in 2009 a jury awarded the state $2 million for violations of the state Deceptive Trade Practices Act (DTPA) and $7 million for violations of the state Medicaid fraud statute. The jury also found that Pharmacia committed 1,440,000 separate violations of the Medicaid fraud statute.
During post-trial proceedings, Judge Richard G. Niess vacated the jury's answer to the verdict form question about the number of violations, and the judge separately determined that there were only 4,578 violations. The judge assessed a forfeiture of $1,000 for each violation, for a total of $4,578,000.
3 Questions Certified
Both sides appealed, and the Wisconsin Court of Appeals certified the following questions to the state Supreme Court: whether the state was entitled to a jury trial as opposed to a bench trial, whether the damages were based on impermissible speculation by the jury and whether the Circuit Court properly reduced the number of violations.
The first appeal issue was Pharmacia's argument that the state did not have a constitutional right to a jury trial and that the case instead should have been tried in a bench trial. The state argued that that the DTPA claim is an essential counterpart to the common law claim of cheating.
In a 4-0-3 ruling, the Supreme Court rejected Pharmacia's argument that the divergence between the elements of the DTPA and common law cheating is so significant as to exclude a jury trial on the former. It found that the cause of action under the DTPA was recognized under common law when the Wisconsin Constitution was adopted in 1848 and passes case law tests.
The high court said it would be "illogical for us to confine a jury trial right to only those fraud statutes which mimic the common law as it was in 1848, when the common law in 1848 could not imagine many of the contexts in which fraud operates today. We decline to rest an important constitutional right on historical vicissitude."
Jury Award Not Speculative
The high court rejected Pharmacia's argument that the jury's $9 million award was impermissibly speculative. "The jury's damage award of $9 million reflected the State's request for an award in approximately that amount," the court wrote.
"The request in turn reflected the State's position, communicated through expert testimony and reiterated at closing argument, that approximately $9 million represented the amount of money Medicaid would have saved had it received, and used, actual wholesale prices," the court wrote. It said "there was plentiful evidence from a wide range of credible witnesses with extensive experience in the field to substantiate the State's argument that the legislature would have reduced brand drug reimbursements to reflect actual wholesale prices had Pharmacia offered them."
Pharmacia argued that the state knew that published wholesale drug prices were inaccurate and that the state used its own political process to adjust how much states would reimburse pharmacies for prescriptions written for Medicaid recipients. The high court turned that argument aside: "The jury was given a compelling account of that uncertainty, as it heard testimony describing a chaotic, confusing process in which decision-makers received dramatically different reports from different sources."
"Indeed," the court continued, "Pharmacia's evidence only strengthened that account, because it described even more disagreements among the actors feeding information to the state."
Number Of Violations
"In light of these conflicts, we have concluded that the jury's damage award as to brand name drugs was based on a reasonable inference flowing from credible evidence," the court said. "The jury had ample evidence to credit suggesting that Wisconsin officials did not know with certainty actual wholesale prices, that Pharmacia's published prices provided the basis for its reimbursement rates, and that Medicaid paid more than it intended to and rightfully owed as a consequence."
Judge Niess, the court said, determined the number of violations based on the number of times the inflated prices were published, not the number of times the state paid for inflated prices.
The court turned aside Pharmacia's argument that the number of violations should be zero because the Circuit Court judge failed to issue his decision within 90 days as required by state law. The court said Judge Niess disposed of Pharmacia's motion on the number of violations within 90 says, then took up the new issue of the proper number of violations.
The court said the number of times First DataBank transmitted inflated average wholesale prices to Medicaid "constituted the best measure of how many violations occurred."
Remanded To Appeals Court
The court remanded the case to the Court of Appeals, where other appeal issues are pending.
The opinion was written by Justice Michael J. Gableman. He was joined by Chief Justice Shirley S. Abrahamson and Justices Patience D. Roggensack and Annette Kingsland Ziegler. Justices Ann Walsh Bradley, N. Patrick Crooks and David T. Prosser did not participate in the opinion.
In a press release, the Attorney General's Office said that proceedings against 25 nonsettling defendants have been stayed pending the Pharmacia appeal.
The Attorney General's Office also said that in addition to the jury's verdict and the judge's forfeiture assessment, the Circuit Court imposed on Pharmacia costs and attorney fees of $8,819,352.
10 Defendants Settled
The Attorney General's Office said that 10 other drug defendants have settled their drug pricing cases for more than $17 million.
Pharmacia is represented by O. Thomas Armstrong, Beth J. Kushner and Douglas M. Raines of von Briesen & Roper in Milwaukee and John C. Dodds, Erica Smith-Klocek and Maire E. Donovan of Morgan, Lewis & Bockius in Washington.
Wisconsis is represented by Attorney General J.B. Van Hollen and Assistant Attorney General Frank D. Remington of the Attorney General's Office in Madison, Wis., and by George F. Galland Jr., Charles Barnhill Jr., Betty Eberle and Barry J. Blonien of Miner, Barnhill & Galland in Madison.
Brand-name drug defendants appearing as amicus curia were represented by Donald K. Scott, Elice Wos and Matthew J. Splitek of Quarles & Brady in Madison, William F. Cavanaugh and Adeel A. Mangi of Patterson, Belknap, Webb & Tyler in New York and Andrew W. Schau of Covington & Burling in New York.
Generic drug defendants appearing as amici were represented by Robert H. Friebert and Shannon A. Allen of Friebert, Finerty & St. John in Milwaukee and Joseph Angland, Michael J. Gallagher and Heather K. McDevitt of White & Case in New York.
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