In late 2007, the Alabama Supremes stunned many observers by overturning most of a $3.6 billion jury verdict in a fraud case against oil giant ExxonMobil. That decision robbed state coffers of badly needed funds at the outset of the Bush recession.
The high court was at it again recently, overturning a $274 million verdict in a fraud case against three pharmaceutical companies. The Supreme Court found that AstraZeneca, Novartis, and GlaxoSmithKline did not defraud the state in pricing Medicaid prescription drugs.
This issue goes well beyond Alabama. Similar lawsuits against pharmaceutical companies are pending in other states, including Mississippi, South Carolina, Utah, Hawaii, and Alaska.
How did the Alabama Supreme Court come to its conclusion? The key issue was "reliance," one of four elements in a fraud case. Essentially, the high court found that the pharmaceutical companies tried to cheat the Alabama Medicaid Agency (AMA), but AMA did not "rely" on the misrepresentations, so a fraud did not occur.
That is like saying: "I tried to steal $500 out of your wallet, and I had my hand on the cash and was pulling it out, but you caught me--so I didn't do anything wrong."
If you think there is something wrong with that reasoning, join the crowd. It's almost exactly the same reasoning the Alabama Supreme Court used to justify the ExxonMobil ruling and its predecessor, Hunt Petroleum Corp. v. State (2004). In fact, the Supremes proudly cite Hunt Petroleum in their decision on the pharmaceutical case.
Here is the status of current fraud law in Alabama--at least as it relates to Big Oil and Big Pharma: The victim of a fraud cannot prevail unless he falls for the fraud totally and completely, from start to finish. Of course, if the victim falls totally for the fraud, he never knows he's been defrauded--and cannot possibly bring a case.
Under that interpretation of the "reliance" element, big business cannot commit fraud in Alabama. It is essentially open season on Alabama citizens.
We should point out a few oddities about the Big Pharma case. Justice Tom Parker, who wrote the bogus ExxonMobil decision, was the only justice to dissent on Big Pharma. And Chief Justice Sue Bell Cobb, the court's only Democrat and the only dissenting vote in the ExxonMobil case, concurred with the Big Pharma result--although she said the court used the wrong legal grounds to get the correct result.
Cobb either must be tired of fighting the business interests all by herself--or maybe they have bought her off, too, by now.
How wretched was the Alabama Supreme Court's ruling in the Big Pharma case? The trial was overseen by Charles Price, presiding judge of the 15th Judicial Circuit in Montgomery. Price did not mince words when he upheld the trial verdict against AstraZeneca. Reported the Associated Press:
In his eight-page ruling, Price said the evidence during the trial showed that AstraZeneca's actions in overcharging Alabama's Medicaid program were "reprehensible.''
"The state introduced evidence to establish that the defendants fraudulently diverted Medicaid funds intended to benefit the state's poor, elderly and infirm citizens,'' Price wrote. "The state established that defendants' wrongful conduct deprived the state of limited funds available for the state's Medicaid recipients.''
The trial judge found Big Pharma's actions "reprehensible." But the Alabama Supreme Court says it was A-OK. That's what we get when we blindly vote for Republicans on our statewide courts, folks.
Price was not the only one blasting the behavior of Big Pharma in Alabama. Jere Beasley, one of the lawyers for the state, issued a scathing public statement about the drug companies--and the Alabama Supreme Court. Here is a portion of that statement:
The opinion of the Alabama Supreme Court is most difficult to understand when you consider that:
* Committing fraud against the Medicaid program hurts the elderly, the disabled, the young, and the poor as well as every Alabama taxpayer;
*AstraZeneca--one of the companies--entered a guilty plea to a charge of criminal fraud in federal court involving state Medicaid reimbursement;
*AstraZeneca paid a criminal fine of $570 million relating to that criminal guilty plea;
* AstraZeneca settled state Medicaid fraud cases involving reimbursement for $355 Million;
* A top official at AstraZeneca prepared an internal pricing document containing a virtual roadmap for cheating state Medicaid agencies;
* AstraZeneca as a part of the settlements mentioned above--agreed to submit true prices to state Medicaid agencies;
* AARP--a national group with 500,000 Alabama members--has fully supported Alabama in its lawsuit against the drug companies and in the appeal;
* 13 state Attorneys General have supported Alabama's position and each filed a brief on Alabama's behalf;
* Since the Alabama case was tried--and after the case was appealed in July 2008 to the Alabama Supreme Court--a Federal Appeals Court heard a separate appeal in a case where AstraZeneca was found guilty in Federal Court of fraudulent conduct in a Medicaid reimbursement case--in a strong opinion and affirmed the trial court;
* The Federal Appeals Court found that AstraZeneca was guilty of extremely bad conduct;
* Yesterday, a Kentucky jury, after hearing the same evidence Alabama lawyers developed and presented in the Alabama case, delivered a verdict against the drug manufacturer in the amount of $14.72 million; and
Taking all of the above into consideration, and knowing the facts of this case, it is extremely difficult to see how the Alabama Supreme Court could side with the drug companies and against the citizens of Alabama who are in the Medicaid program and against all Alabamians who pay taxes that support the Medicaid program. These folks are the losers today and politically powerful drug companies declared winners by the Alabama Supreme Court. This is a sad day for the Alabama Medicaid Program and all Alabama taxpayers.
Beasley says lawyers for the state will ask the high court to reconsider its decision. Good luck with that. Alabamians wanted a conservative court. They've got one.