CHARLESTON – An appeal by state Attorney General Darrell McGraw's office for a new trial in a drug company case was rejected Wednesday by the state Supreme Court.

McGraw's office petitioned the court in its case against Warrick Pharmaceuticals. The office unsuccessfully asserted at a jury trial in Kanawha Circuit Court that Warrick illegally reported inflated prices for certain drugs to a pricing compendium that is relied upon by state agencies to determine prescription drug reimbursement rates.

The AG's office appeal was refused 3-2. Justices Larry Starcher and Joseph Albright voted to hear the appeal.

A Kanawha County jury sided with Warrick in December 2005 after the AG's office accused the drug maker of defrauding the state out of $3.1 million in Medicaid and other reimbursements.

The state claimed Warrick violated the state Consumer Protection Act from 1995 to 2000 by submitting inflated wholesale price information for albuterol, an asthma inhalant, to First DataBank. First DataBank is a compendium that provides average wholesale price information to states to show what a wholesaler would charge a customer for a particular product.

The state had filed a similar lawsuit against Dey Inc., which agreed to settle the case for $850,000. About $100,000 of that settlement went to the attorney general's consumer protection and education fund. The rest was split among the state's Medicaid program, the Public Employees Insurance Agency and the Workers' Compensation program.

Doug Davis, the assistant attorney general who argued the appeal before the Supreme Court on Tuesday, said Kanawha Circuit Judge Jim Stucky made a number of evidential rulings that he felt were wrong.

He said three letters should have been submitted without restrictions and redactions and with reference the joint state and federal investigation into Warrick and other drug companies' similar actions. He said the Court also didn't allow testimony from a Medicaid witness.

One letter was from former New York Attorney General Elliott Spitzer's office with a list of 400 drugs that had inflated prices submitted to First DataBank, a compendium used by state agencies. Another letter was from the U.S. Department of Health and Human Services about lower Medicaid prices. A third document was from Medicaid itself.

"The documents were admitted, but the jury never heard any testimony other than the fact that the state received a letter and did something after that," Davis said.

"All the jury saw was that Medicaid received a letter and then changed its reimbursement formula. Pharmacists needed to understand why reimbursement formula was changed. If the jury knew it wasn't just West Virginia changing the prices and that these prices were grossly overinflated and that Warrick had been caught been putting these inflated prices in the compendium, we feel it would have been a different decision."

Chief Deputy Attorney General Fran Hughes expressed frustration at the decision.

"We're really dismayed that they didn't at least hear the petition," she said Thursday. "We felt that there was an unfairness in the evidentiary rulings. The Justice Department had found these people engaged in fraud, and we didn't feel the documents that defense counsel was permitted to introduce necessarily were appropriate.

"But, we just have to go on. We were successful in obtaining a million from Dey."

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