The California Supreme Court has reinstated a lawsuit against 19 major drug companies which claims they conspired to charge up to 400% more for their products in the USA than in other countries.

The suit, which was originally brought in 2004 by a group of mainly independent US retail pharmacies, claimed that the drugmakers had acted in concert to keep lower-priced medicines from Canada out of the US and restrict price competition from cheaper generics. In order to do so, the suit claimed, drugmakers had conspired to charge the pharmacists 50%-400% more for their products than the levels they were charging outside the US.

The pharmacists’ case was thrown out by a trial court in Oakland, and a court of appeals again rejected it two years ago. The latter court ruled that the pharmaceutical companies - which deny the charges - were entitled to use a “pass-on” defence, under which they could claim that they were not liable for illegal overcharging and that the pharmacists were not harmed by the higher prices because they could pass them on to consumers. Therefore, the retailers could not seek damages from the drugmakers, the appeal court found.

However yesterday, seven Supreme Court judges led by Justice Kathryn Mickle Werdegar rejected the appeal court ruling unanimously and sent the case back to the trial court for further proceedings. The “pass on” defence does not apply in California, the judges pointed out, and the plaintiffs are therefore entitled to claim that they had incurred damages even if they had passed the alleged overcharges on to consumers.

Under California’s antitrust law, the pharmacists can now claim triple damages from the manufacturers for the alleged overcharges, and consumers can bring separate suits also seeking triple damages; this is not the case under federal law.

The defendants in the case are Abbott Laboratories; AstraZeneca LP; Novartis Pharmaceuticals Corp; Allergan, Inc; Boehringer Ingelheim Pharmaceuticals, Inc; Eli Lilly & Co; Johnson & Johnson; Janssen Pharmaceutical, Inc; Ortho McNeil Pharmaceutical, Inc; Ortho Biotech, Inc; GlaxoSmithKline; Pfizer, Inc; Hoffman-LaRoche; Aventis Pharmaceuticals, Inc; Amgen, Inc; Purdue Pharma LP; Merck & Co, Inc.; Bristol-Myers-Squibb Company; Wyeth; Johnson & Johnson Health Care Systems Inc; and Pharmaceutical Research and Manufacturers of America (PhRMA).