AstraZeneca faces calls for multimillion-dollar damages

Lawyers are demanding that AstraZeneca, the UK's second-largest pharmaceuticals company, pay hundreds of millions of dollars in damages after a court found it had run a six-year scam to inflate drug prices for patients and company health insurance schemes.

The ruling by a Boston court reopens an issue AstraZeneca had believed settled in 2004 when it pleaded guilty and agreed to pay $355m (£178m) to end criminal and civil charges that it overcharged the US government for a prostate cancer drug.

Yesterday, in what was described by the victorious attorney in a class action lawsuit as a "test case" that will be copied across the other 49 states, AstraZeneca and two other drug companies were found liable for the extra costs piled on to patients and health insurers in Massachusetts as a result of a scheme to keep up the average wholesale price (AWP) of numerous drugs.

AstraZeneca, Bristol-Myers Squibb and Schering-Plough all sold drugs to doctors at steep discounts, but encouraged them to say they had paid a higher wholesale price when they claimed reimbursement from Medicare. Doctors could pocket the difference and the companies kept the AWP at an artificially high price.

The mark-up from the discounted price to the AWP ranged from 28 per cent to 1,131 per cent. According to court documents, a sales representative for AstraZeneca pitching its prostate cancer drug Zoladex was blunt about the benefits to doctors of the mark-up. "Do the math!" he wrote in a letter to a group of urologists in Arizona.

The legal victory will benefit the company health insurance schemes and the uninsured individual patients who paid for drugs at prices based on the AWP. Steven Berman, lead attorney for the plaintiffs, said the liabilities of AstraZeneca alone could run into hundreds of millions of dollars. He has until 1 August to file a claim for damages.

"We are grateful that the judge found the biggest victims were the patients who had to pay these outrageous prices out of pocket as a result of the defendants wrongful conduct," Mr Berman said. "Because of the actions of these companies, patients who rely on these drugs, often times to save their lives, have been critically injured through the grossly inflated prices."

"The Medicare statute created a perverse incentive by pegging the nationwide reimbursement for billions of drug transactions a year to a price reported by the pharmaceutical industry, putting the... pharmaceutical fox in charge of the reimbursement chicken coop," Judge Patti Saris wrote in a 183-page opinion.

AstraZeneca agreed in June 2003 to pay $355m in fines and damages to settle criminal charges brought by the Department of Justice and other civil cases. It admitted criminal marketing practices from 1993 to 1996. Yesterday, a company spokesman said: "AstraZeneca has competed responsibly with respect to pricing and marketing of drugs and we have acted at all times in accordance with the law."