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WASHINGTON | Tue Mar 29, 2011 10:45am EDT - The Supreme Court ruled on Tuesday that a group of large pharmaceutical companies cannot be sued by a California county for allegedly overcharging for prescription drugs in violation of federal law.
By an 8-0 vote, the justices overturned a U.S. appeals court ruling that the county with its medical facilities could sue because it was a direct beneficiary of the pricing agreements between the federal government and the companies.
Santa Clara County, which operates a number of hospitals or health clinics that receive federal funds, filed the lawsuit in 2005 for alleged overcharges dating back to 2001.
The county claimed the drug manufacturers violated a 1992 federal law that requires them to give the same discounts to federally funded medical facilities under the Medicaid program as those under standard pricing agreements between the federal government and the companies.
A federal judge initially dismissed the lawsuit and ruled only the federal government, which signed the Medicaid agreements with the companies, had the right to enforce it.
The appeals court disagreed, reinstated the lawsuit, and ruled the county can seek reimbursement of excess payments.
"Recognizing the county's right to proceed in court could spawn a multitude of dispersed and uncoordinated lawsuits" by outside parties, Justice Ruth Bader Ginsburg wrote in the unanimous opinion.
The court also noted that if the suits were allowed to proceed, secret pricing information could be revealed in violation of the law governing the Medicaid program.
"This ban on disclosure is a further indication of the incompatibility of private suits with the statute Congress enacted," the opinion said.
The companies in their appeal told the Supreme Court that the appeals court ruling threatened to disrupt the $30 billion Medicaid program for outpatient prescription drugs.
Among the companies appealing were Pfizer, Merck & Co Inc, AstraZeneca, GlaxoSmithKline, Bristol-Myers Squibb and Bayer.
The Obama administration supported the companies.
Justice Elena Kagan did not participate in the case. She previously served as U.S. solicitor general.
The Supreme Court case is Astra USA v. Santa Clara County, No. 09-1273.
(Reporting by James Vicini, editing by Matthew Lewis)
© 2010 Thomson Reuters.
