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President Pro Tempore Jonathan Dismang
President Pro Tempore
Arkansas Senate
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Little Rock, AR 72201-1090

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Trial Court Penalizes Pharmaceutical Companies Under Medicaid Fraud Law

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LITTLE ROCK - The state of Arkansas has won a judgment at the trial court level against a major pharmaceutical manufacturer and its subsidiary, winning a judgment of $1.2 billion for the state's Medicaid fund.
The drug manufacturer is Johnson and Johnson and its subsidiary is Janssen Pharmaceutica. They are expected to appeal the fine, which was ordered by a Pulaski County circuit judge.
The attorney general, representing the state of Arkansas, filed the suit in 2007. The trial lasted two weeks. A jury of six men and six women deliberated for about three hours before issuing a verdict saying the pharmaceutical companies committed Medicaid fraud and used deceptive trade practices by hiding the negative side effects of a drug commonly prescribed for people with mental disorders.
The potential side effects of the drug are diabetes, hormonal changes that affect the sexual development of children, increased likelihood of strokes in elderly people and excessive weight gain in users of all ages. Jurors were asked to determine whether the company's labeling accurately disclosed its possible side effects. The jurors were also asked to determine if a letter to Arkansas physicians about the drug was deceptive.
The drug manufacturer has a mixed record in defending itself in similar lawsuits in other states. According to news reports it has won on appeal in West Virginia and at the trial court level in Pennsylvania. It lost in South Carolina and Louisiana and is appealing those verdicts, which impose fines totaling more than $327 million. Earlier this year the drug company settled a case brought by Texas officials and agreed to pay that state $158 million.
Also, the federal government is seeking to impose a fine of $1.8 billion against the company and is in negotiations on a settlement.
The judgment in Pulaski County raised comparisons with the 1998 legal settlement with major tobacco companies, under which Arkansas is supposed to get an estimated $1.6 billion over 25 years.
The fine of $1.2 billion against the pharmaceutical manufacturer is based on the number of prescriptions that the state Medicaid program paid for over a three-and-a-half year period. During the trial the state claimed that Arkansas Medicaid paid for 238,874 prescriptions and each one was a violation of laws against Medicaid fraud.
The company's attorneys disputed the number of violations, arguing the number of claims by the state should be 1,319 and that it was excessive to base financial penalties on more than 238,000 separate violations.
Also, the drug company claimed that no financial fraud occurred because each prescription was medically necessary, adding that no evidence was presented during trial that proved any patient suffered harm from taking the drug and arguing that no physician had complained about its side effects.
The attorney general said he was grateful to the jury for holding the drug manufacturers accountable, and that the jury confirmed that the two drug companies had lied to physicians and patients in their marketing campaign.
Last fiscal year the state Medicaid program processed more than 39 million claims from 12,300 providers, such as physicians, clinics and hospitals. Those claims sought reimbursement for medical treatment of 770,000 Arkansans.

 


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