Perspective: Will Courts Allow States to Regulate Drug Prices? image

NEJM, August 8, 2018
Christopher Robertson (Academic Fellow Alumnus)

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From the article:

Pharmaceuticals are consuming increasingly large portions of U.S. state budgets, and high prices are preventing patients from getting, and adhering to, essential medicines. In mid-May 2018, President Donald Trump announced a heavily hyped but relatively modest federal plan to bring down drug prices. Meanwhile, several states are moving forward with their own solutions, and Maryland’s approach is particularly ambitious. In 2017, responding to notorious cases such as the 5000% increase in the cost of Daraprim (pyrimethamine) and the 10-fold increase in the cost of EpiPens (epinephrine auto-injectors), Maryland enacted a statute that prohibits manufacturers from “price gouging” on any “essential off-patent or generic drug” (see inset).

PRINCIPLES FOR DEVELOPING STANDARDS.MARYLAND’S HB 631, “AN ACT CONCERNING PUBLIC HEALTH — ESSENTIAL OFF-PATENT OR GENERIC DRUGS — PRICE GOUGING — PROHIBITION”.
WHERE CONSUMERS HAVE NO MEANINGFUL CHOICE ABOUT AN IMPORTANT DRUG AND THERE IS A LACK OF COMPETITION, THE STATUTE PROHIBITS “PRICE GOUGING”:

  • Targeting “unconscionable” price increases, defined as “excessive and not justified by the cost of producing” or expanding access to the drug;

  • Applying only to generic medications (for which all exclusive marketing rights and patents have expired); and

  • Applying only to essential medicines, as designated by the World Health Organization or the Maryland Secretary of Health;

The law authorizes the Attorney General to petition a court to restore money to consumers, require manufacturers to provide the drug at the last permissible price, and order civil penalties.

But in April 2018, a panel of the federal Fourth Circuit Court of Appeals overturned the statute. The two-judge majority reasoned that the state could not regulate the prices charged by manufacturers, because they sold to wholesalers in transactions that occurred “wholly” out of state.1 The court invoked the “dormant commerce clause,” the legal doctrine holding that the Constitution implicitly restricts states from interfering with interstate commerce, even when Congress has been silent regarding the activity in question.

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health care costs health care finance health law policy judicial opinions pharmaceuticals regulation