Oct. 16 (Bloomberg) -- AstraZeneca Plc, Novartis AG and GlaxoSmithKline Plc won reversal of more than $274 million juries had awarded the state of Alabama for drug overcharges.

The Supreme Court of Alabama today overturned the verdicts against the European pharmaceutical companies, saying the state failed to prove it relied on misrepresentations they allegedly made when it reimbursed doctors and pharmacists for drug costs.

“The state determined for itself the appropriate reimbursement formulas, based on its own surveys and calculations,” Associate Justice Thomas Woodall wrote for the majority. “It cannot, therefore, claim reliance upon the alleged misrepresentation.”

Alabama and other states sued dozens of drugmakers seeking to recover hundreds of millions of dollars they say state Medicaid programs overpaid as a result of manipulation of the industry’s Average Wholesale Price reimbursement system.

They accuse the companies of posting AWP prices that were much higher than what doctors and pharmacists actually paid for drugs, and of “marketing the spread” to win business. The companies claimed the state knew AWP prices they published didn’t include discounts designed in part to encourage doctors and pharmacies to take part in the health program for the poor.

“We are extremely pleased with the court’s decision,” Mary Anne Rhyne, a spokesman for London-based Glaxo, said in a statement. “This confirms our position that Glaxo reported clear and accurate prices, that Glaxo’s pricing practices were consistent with established industry standards, and that the state understood full well the pricing benchmarks.”

Jury Verdicts

Glaxo, the world’s second-largest drugmaker after Pfizer Inc., and Novartis were ordered to pay Alabama $114.3 million in July 2008 after a jury found the companies unlawfully inflated drug prices. Glaxo’s drugs include the diabetes medicine Avandia, the antidepressant Paxil and the ulcer drug Zantac. Novartis’s medicines include the hypertension drug Diovan, the cholesterol-lowering pill Lescol and Ritalin for hyperactivity.

AstraZeneca was ordered by a jury to pay $215 million in an earlier trial, which a judge cut to $160 million in June 2008.

“The decision of the Supreme Court of Alabama confirms AstraZeneca’s longstanding position that the state’s claims against the company are unfounded,” company spokesman Tony Jewell said.

AstraZeneca, the U.K.’s second-largest drug company, yesterday lost a jury verdict in another AWP case in Frankfort, Kentucky. The panel ordered AstraZeneca to pay $14.7 million in compensation for overcharging that state’s Medicaid program. The company is considering whether to appeal.

Reconsider

Jere Beasley, an attorney who represented Alabama, said today he’ll ask the court to reconsider.

“It is extremely difficult to see how the Alabama Supreme Court could side with the drug companies,” Beasley said in a statement. “This is a sad day for the Alabama Medicaid program and all Alabama taxpayers.”

AstraZeneca’s American depositary receipts, each representing one ordinary share, fell 10 cents to $44.97 at 4:03 p.m. in New York Stock Exchange trading. Glaxo ADRs, each representing two ordinary shares, fell 8 cents $41.20. Novartis ADRs, each representing one ordinary share, fell 57 cents to $51.11 on the NYSE.

The lead case is AstraZeneca Plc v. State of Alabama, 1071439, Supreme Court of Alabama (Montgomery).

To contact the reporter on this story: Cary O’Reilly in Washington at caryoreilly@bloomberg.net.

Last Updated: October 16, 2009 16:11 EDT