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Drug Company Finds Prescription for GBL § 349 Claims Beyond the Three-Year Limitations Period as State Abandon's "Continuing Wrong" Argument

In People ex rel. Spitzer v. Pharmacia Corp., ---N.Y.S.2d---, 2010 WL 424010 (Sup. Ct. Albany County 2010), the New York State Attorney General brought suit against a prescription drug manufacturer seeking a ruling that the defendant violated New York General Business Law ("GBL") § 349, which prohibits deceptive consumer oriented business practices, as well as Executive Law § 63(12), which proscribes repeated acts of fraud.

The State alleged that Pharmacia intentionally reported false and inflated prices for its products and that their reports did not reflect the actual cost paid by its pharmacy customers. According to the State, this practice caused the State and certain Medicare consumers to pay higher prices for Pharmacia's drugs because government health plans in New York rely upon the "average wholesale price" of prescription medications when providing reimbursement to pharmacies.

Following discovery, Pharmacia moved for summary judgment arguing that the State's claims were barred by the statute of limitations. Specifically, Pharmacia alleged that the State's claim accrued no later than the 1980s when State officials were well aware that published "average wholesale price" lists did not reflect pharmacies' actual acquisition costs. Because this action was not commenced until 2003, Pharmacia argued that it was time barred.

The court determined that the appropriate statute of limitations was three years as provided in CPLR § 214(2), given that the State's claim sought to establish liability arising solely from statute. The court held that if Pharmacia's price reports are violative of GBL § 349 and/or Executive Law § 63(12), each price report constituted the a separate wrong. Accordingly, the State is permitted to pursue damages in connection with price reports published by Pharmacia for the three-year period preceding the commencement of the action. Because the court determined that the action was not barred by the statute of limitations, but instead, limited to such three year period, Pharmacia's motion for summary judgment was denied.

In a case like this, where the conduct is continuous, the focus for purposes of the statute of limitations is on the date of the accrual of each separate violation, rather than merely the date of the first violation.

Sean C. McPhee, Esq.

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