Novartis and GlaxoSmithKline have been ordered to pay some $114.1 million between them in damages to the state of Alabama as part of a Medicaid drug pricing fraud case.

The Montgomery County Circuit Court says that the two firms’ US subsidiaries misled the Alabama State Medical Agency and inflated prices for drugs prescribed to its patients under the scheme. A jury has agreed and says that GSK should pay the state of Alabama $80.9 million in compensatory damages and that Novartis should pay about $33.2 million.

It could have been worse for the drugmakers as Alabama had been trying to get damages of as much as $800 million to cover overcharging for Medicaid prescription drugs from 1991 to 2005. However the jury rejected the state's claims for punitive damages.

The two drugmakers do not think they have got off lightly, though. Novartis immediately announced that it will appeal the verdict, saying that it believes Alabama's claims of fraud were unfounded because the firm “reported true and accurate prices, based on terms that have been known and used by all participants in pharmaceuticals markets, including Alabama Medicaid, for more than 30 years”.

The UK-headquartered drugmaker wasted no time in declaring its intention to appeal as well. “We have said from the beginning that GSK reported true and accurate prices to the state of Alabama,” said Chilton Varner, an attorney representing the firm. He added that “we believe the evidence shows the state made informed choices about how and how much to pay Alabama pharmacists”. Furthermore the lawyer said “evidence also shows that, although the state now says it was not being fairly treated, [it] has not changed the rules since it filed the lawsuit more than three years ago”.

The Novartis/GSK case marks the second trial to come out of a lawsuit filed by the Alabama Attorney General in January 2005 against 72 pharmaceutical manufacturers, claiming that the average wholesale price and wholesale acquisition cost provided by drugmakers to “price-reporting services” resulted in overpayment to pharmacists and doctors in the Medicaid system. The first trial, in February, saw a jury award Alabama $40 million in compensatory and $175 million in punitive damages from AstraZeneca.

However a state judge recently reduced that amount to $120 million, because Alabama limits punitive damages to three times the compensatory figure.