Arizona suit over discontinued GSK inhaler lobbed to state court

PHOENIX (CN) — A lawsuit challenging a popular pharmaceutical company’s move to discontinue a lifesaving inhaler to avoid Medicaid rebate payments will return to state court after a federal judge ruled Tuesday that he has no jurisdiction over the sole Arizona Consumer Fraud Act claim.

Though Arizona Attorney General Kris Mayes says dropping the inhaler and forcing thousands to pay out-of-pocket violated federal Medicaid policy, GlaxoSmithKline’s accused federal violation is not a necessary element of her legal claim and instead serves as supportive evidence of unfair practice under state law, the judge found.

“The state’s Arizona Consumer Fraud Act claim requires a court to analyze GSK’s business decisions and conduct in light of the changes to the Medicaid Drug Rebate Program, but the claim does not necessarily rely on the violation of MDRP public policy,” U.S. District Judge Michael T. Liburdi wrote in a 14-page order filed Tuesday night.

Under the Arizona Consumer Fraud Act, courts can use the Federal Trade Commission’s test for unjustified injury to consumers to determine fairness. Because the test considers unfairness to consumers and not violations of federal policy, Liburdi explained the case could proceed even without the MDRP violation, though he added that the policy is “pivotal” to the success of the state’s case.

“A court could simply review GSK’s business decisions, motivation, and conduct without analyzing whether GSK violated MDRP public policy to determine if an Arizona Consumer Fraud Act violation occurred,” the Donald Trump appointee wrote.

To sell drugs to Medicaid, manufacturers agree to pay rebates to the government in part based on price increase, as required by the Medicaid Drug Rebate Program. If the price of a drug rises faster than inflation, the manufacturer is to pay back the difference between the new price and the inflation-adjusted product launch price.

Because GlaxoSmithKline raised the Flovent inhaler price so aggressively — the average market price is now more than $250 — the company paid nearly 100% of the product’s market price back in rebates. When the American Rescue Plan amended the program in 2024 by eliminating the 100% cap on rebate payments, GlaxoSmithKline faced the prospect of paying a rebate larger than the price of the product, losing money on every prescription.

Instead, the pharmaceutical giant discontinued the Flovent inhaler and replaced it with an authorized generic that most insurance plans didn’t cover. With the launch price to current price difference now being zero, it could sell the new inhaler at the same price without the high rebates.

Mayes sued a year later, accusing the company of deceiving Arizona consumers in violation of the Arizona Consumer Fraud Act.

Though he deferred to state court on the matter of GlaxoSmithKline’s motion to dismiss, Liburdi hinted that he sides with the defendant.

“In a nutshell, the state sues GSK for making a business decision,” he wrote.

GlaxoSmithKline says it’s ready to argue it’s motion to dismiss again in state court.

“GSK has always been and will continue to be strongly committed to improving patient access, especially when those patients are children,” a spokesperson said.

In court last month, the pharmaceutical company argued the claim is better suited for federal court because it’s based on a perceived violation of the MDRP. The attorney general’s office motioned to return the case to state court after GlaxoSmithKline had it removed, arguing instead that the legal question comes down to fairness to Arizona consumers, which can be answered better under Arizona state law.

In his Tuesday night order, Liburdi agreed, adding the attorney general’s case doesn’t technically claim violation of statute but rather public policy derived from the statute.

“Meaning, the state is not alleging a violation of the MDRP per se, but a violation of the spirit of the MDRP,” he wrote. “This complaint does not identify a specific violation of the statute, making the federal issue here insubstantial.”

The attorney general’s office declined to comment for this story.

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