by Ben Vernia | April 16th, 2010
On April 15, the Mississippi Supreme Court reversed a chancellor’s decision to dismiss the State’s AWP suit against Bayer and its subsidiaries. Four years before filing suit, the State had settled AWP qui tam actions with Bayer and other companies. The State then sued Bayer and more than eighty other pharmaceutical manufacturers in state court, alleging fraud (Mississippi has no False Claims Act). Following a report and recommendation of a special master which criticized the State’s failure to name drugs other than those involved in the settlement, the State had amended its complaint, adding drugs which had not been the subject of the whistleblower actions, and alleging conduct after the date of the settlement. Notwithstanding the State’s amendment, the chancellor dismissed the case on Miss. R. Civ. P. 12(b)(6) and 9(b) grounds, reasoning that the earlier settlement rendered the subsequent claims invalid.
The Supreme Court first rejected the chancellors’ conclusion that the State had failed to plead its claims with sufficient particularity. The State’s complaint, the court noted, alleged that the defendant companies had:
caused the Average Wholesale Prices for each of the listed pharmaceuticals to enter the stream of commerce as the principal means of estimating the acquisition costs of pharmaceuticals dispensed to the Medicaid program, causing Mississippi to overpay [Bayer’s] customers.
The Court found that this allegation by itself sufficiently alleged the elements of fraud under Mississippi law, and that the State’s additional allegations regarding the defendants’ knowing reporting of false pricing information provided sufficient specificity.
The Court then found that the chancellor’s decision to review the settlement agreement in ruling on the companies’ 12(b)(6) motion was erroneous. By considering matters outside the face of the complaint, the chancellor was required to convert the motion to one for summary judgment. He had not done so, and the Supreme Court reasoned that this omission deprived the State of notice and required reversal.
