- A federal court has invalidated a Maryland law aimed at discouraging generic drug developers from price gouging.
- In a 2-1 decision, the U.S. Court of Appeals for the Fourth Circuit determined Maryland's House Bill 631 was unconstitutional because it would directly regulate commerce outside the state's boarders. Passed into law last spring, the law allows the state's attorney general to collect relevant pricing documents from companies suspected of unreasonable price hikes on essential generic or off-patent medicines. The attorney general can then levy fines or restrictions if officials find such hikes took place.
- The law's wording has caused concern, however. The appeals court, for instance, highlighted that it partially defines an essential drug as one "made available for sale" in Maryland — meaning the sale itself doesn't actually have to happen in the state. The law therefore encroaches on federal powers to regulate interstate commerce.
The appeals court's decision is a big win for the Association for Accessible Medicines, a trade group representing generic drug manufacturers. Shortly after House Bill 631 became law, the group requested a federal injunction against it on the basis of unconstitutional overreach.
So far, states have had mixed success enacting drug pricing legislation. As of April 17, more than 30 states had bills pushing pharmacy benefit managers to adopt greater transparency on pricing, rebates, cost discussions and the like. Already, Oregon, Nevada and California have enacted laws concerning drug pricing
But there has been resistance too. Powerful organizations like AAM, BIO and PhRMA argue that much of the legislation that has cropped up so far could threaten trade secrets, or even raise patient out-of-pocket costs. Those concerns have sometimes led to expensive opposition campaigns. In one example, PhRMA shelled out more than $100 million to oppose a California ballot initiative that would have prevented agencies in the state from buying drugs at prices higher than those paid by the U.S. Department of Veterans Affairs.
In their majority opinion, Fourth Circuit judges G. Steven Agee and Stephanie Thacker acknowledged that while states are surely within their rights to try to lower drug costs, they must do so in the proper way.
"Although we sympathize with the consumers affected by the prescription drug manufacturers' conduct and with Maryland's efforts to curtail prescription drug price gouging, we are constrained to apply the dormant commerce clause to the Act. Our dissenting colleague suggests that by doing so, we imply that prescription drug manufacturers have a constitutional right to engage in price gouging,"
"Prescription drug manufacturers are by no means 'constitutionally entitled,' to engage in abusive prescription drug pricing practices. But Maryland must address this concern via a statute that complies with the dormant commerce clause of the U.S. Constitution."
Maryland's attorney general Brian Frosh said in a release the state is disappointed in their conclusion and is evaluating its next course of action regarding the law.
As for AAM, which previously lost at the district court level, the reversal provides validation.
"As AAM has always maintained, this law, and any others modeled from it, would harm patients because the law would reduce generic drug competition and choice, thus resulting in an overall increase in drug costs due to increased reliance upon more-costly branded medications," the trade group wrote in an April 13 statement.