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High court hears arguments in drug-pricing lawsuit


By Rebecca Vesely
Posted: January 19, 2011 - 6:30 pm ET
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The U.S. Supreme Court questioned in oral arguments whether local governments and their hospitals can sue pharmaceutical companies over drug-pricing agreements with the HHS.

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The case, Astra USA Inc. v. Santa Clara County, was originally brought by Santa Clara County, Calif., which alleged that major drug companies overcharged them for prescription drugs for Medicaid patients.

Like many hospitals serving the poor, the Santa Clara Valley Medical Center in San Jose, Calif., a county facility, receives discounted drugs through pricing agreements between the HHS and pharmaceutical companies. The county and its health facilities argued that they should be able to sue the drug companies directly to enforce the pricing agreement with the HHS. A lower court upheld that position.

But some justices seemed to agree with the drug companies that allowing every local entity to sue over drug prices could wreak havoc on the system because of the sheer number of lawsuits and price fluctuations. “That strikes me as an argument in favor of leaving the enforcement with the Secretary (of the HHS),” said Chief Justice John Roberts, according to a transcript of the oral arguments. The federal government filed an amicus brief with the drug companies.

But Justice Stephen Breyer expressed concern that counties would have no recourse in these disputes. “So what is Santa Clara County supposed to do?” Breyer asked lawyers for the drug companies. “What are they supposed to do if they are right? How do they get the money?”

A decision is expected this summer.


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