AstraZeneca to Face 2012 Trial in Arkansas Over Sales of Anti-Psychotic

AstraZeneca Plc (AZN) must face a trial over claims by Arkansas that the drugmaker hid health risks of its anti-psychotic drug Seroquel when selling it to residents covered by the state’s Medicaid program, a judge ruled.

London-based AstraZeneca, which agreed in March to pay $68.5 million to resolve claims that it deceptively marketed Seroquel in a number of states, will face a September 2012 trial of a lawsuit filed by Arkansas Attorney General Dustin McDaniel over sales of the drug, Circuit Judge Chris Piazza in Little Rock ruled today.

Arkansas officials, who opted out of the March Seroquel settlement, contend AstraZeneca defrauded the state’s Medicaid program by failing to properly outline the anti-psychotic medicine’s risks in its warning label. The state seeks a $5,000 penalty for each Seroquel prescription written in Arkansas over an 11-year period starting in 1997, according to Fletcher Trammell, one of the state’s lawyers.

AstraZeneca officials are confident the drugmaker will be “fully vindicated as the case progresses” in Arkansas, Tony Jewell, a U.S.-based spokesman for the company, said in an e- mailed statement. AstraZeneca is the U.K.’s second-largest drugmaker after GlaxoSmithKline Plc.

Over the last year, AstraZeneca officials have been working to resolve litigation over Seroquel, which was the company’s second-biggest selling drug in 2009 after the ulcer medicine Nexium.

Settling Claims

The company agreed to pay almost $1 billion to resolve claims by the U.S. government and 37 states over Seroquel marketing. That figure also includes more than $345 million in settlements of patient lawsuits over the drug. AstraZeneca officials said in August that they had resolved about two-thirds of the 26,000 product-liability suits filed over the medicine.

In the accords with state and federal officials, AstraZeneca resolved claims that the company marketed Seroquel for uses that weren’t approved by the U.S. Food and Drug Administration. AstraZeneca promoted the drug, approved for schizophrenia and bipolar disorder, for dementia, depression and anxiety in violation of federal drug rules, according to the states.

While doctors can prescribe medicines for other diseases, companies aren’t allowed to market drugs beyond approved uses.

In the Arkansas case, the state’s lawyers contend AstraZeneca officials knew prior to putting Seroquel on the U.S. market in 1997 that it could cause some users to gain weight and develop diabetes, according to court filings.

‘Material Misrepresentation’

The drugmaker failed to include those risks on the product’s label and that amounted to a “material misrepresentation” under the state’s Medicaid Fraud False Claims Act, Trammell told Piazza at a hearing today.

Steven Quattlebaum, a Little Rock-based lawyer for AstraZeneca, countered that state officials couldn’t properly press fraud claims under the Medicaid law over Seroquel’s label.

The claims are “simply insufficient to proceed” under Arkansas law, he said.

Piazza agreed to throw out the state’s claims seeking damages over Seroquel sales under Arkansas consumer-protection laws. Still, the judge rejected AstraZeneca’s bid to have the Medicaid fraud claims dismissed.

The case is State of Arkansas v. AstraZeneca Pharmaceuticals LP, 08-5448, Pulaski County, Arkansas, Circuit Court (Little Rock).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; Sonny Rhodes in Little Rock, Arkansas, at sonnyrhodes@sbcglobal.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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