Bristol-Myers Wins Pennsylvania Court Ruling on Pricing

Bristol-Myers Squibb & Co. (BMY) doesn’t owe Pennsylvania $28 million awarded by a judge in a drug-pricing dispute, the state’s top court ruled.

Pennsylvania sued Bristol-Myers and 13 other drugmakers in 2004 claiming they artificially inflated the average wholesale prices on medicines. At least 26 other states filed similar lawsuits. The average wholesale prices are used by federal health programs, including Medicare, and insurers to reimburse physicians.

The Supreme Court of Pennsylvania today threw out the money award, saying the lower court failed to account for more than $164 million in drug rebates the state received from Bristol-Myers, as well as rebates it got from other manufacturers.

“Our present decision to overturn the monetary component of that judgment is grounded on the Commonwealth’s failure, by any measure, to offer a rational accounting for the billion dollars in rebate monies which Commonwealth agencies received from the drug manufacturers it has haled into court,” the Supreme Court said in its ruling.

The lower court in September 2010 ruled New York-based Bristol-Myers had engaged in unfair and deceptive practices. The court barred the company from reporting average wholesale prices to state agencies in addition to awarding the money damages.

Rebates Offset

Bristol-Myers had argued at trial that its conduct wasn’t deceptive and the company’s rebates should offset any damages.

The Supreme Court said today that while it had concerns about the lower court’s “credibility judgments” it elected to limit its focus to the rebate issue.

“The Commonwealth Court might have cabined the ten-year course of this litigation by recognizing -- earlier on -- the significance of rebates to prices,” the Supreme Court ruled. “By the Commonwealth’s abject failure to account responsibly for rebates taken from the defendants it sued, it has proved no harm as a result of the pharmaceutical-company pricing practices.”

The court sent the case back to the lower court for further review.

The case is Commonwealth of Pennsylvania v. TAP Pharmaceutical products Inc., 85MAP2011, Supreme Court of Pennsylvania Middle District (Harrisburg)

To contact the reporter on this story: Sophia Pearson in federal court in Philadelphia at

spearson3@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Joe Schneider, Andrew Dunn

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