On April 13, 2018, the United States of Appeals for the Fourth Circuit struck down the first-in-the-nation law aimed at lowering the price of off-patent or generic drugs. The Court, in a two-to-one ruling, stated the law is in violation of the Commerce Clause of the United States Constitution and therefore, is unconstitutional.
In 2017, Maryland became the first state to allow its attorney general to take legal action against drug companies after they increase the price of off-patent or generic drugs. The bill was passed by the Maryland legislature but became law without the signature of the state’s governor, Larry Hogan. Hogan did not sign the legislation due to concerns that it was unconstitutional.
“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,” Judge Stephanie D. Thacker wrote for the majority opinion. “We hold that the Act is unconstitutional under the dormant commerce clause because it directly regulates transactions that take place outside Maryland.”
Thacker went on to state, “To be clear, we in no way mean to suggest that Maryland and other states cannot enact legislation meant to secure lower prescription drug prices for their citizens.” This may signal that the fight – even in Maryland – is far from over.
The Court remanded the lawsuit back down to the lower court with instructions to enter a judgment in favor of the Association for Accessible Medicines (AAM), the trade group that argued against the law. AAM argued that the law was “overreaching,” vague, and wrongly gave the state power to regulate interstate commerce and business in other states. The suit also claimed that the measure violated the companies’ right to due process.
Judge James A. Wynn dissented from the majority opinion, saying the other judges had interpreted the commerce clause too broadly. Wynn wrote that their ruling would stop “Maryland from protecting its citizens against unconscionable pricing practices by out-of-state generic drug manufacturers.”
Reactions to the Decision
“We’re gratified by the decision because we believe that the law would have the reverse impact than it was trying to achieve,” said Jeff Francer, AAM’s general counsel, noting that the legislation did not apply to expensive brand-name drugs. “Generic drugs bring great savings to people and are not the cause of the great budget issues around health care that are impacting the states.”
“As Association for Accessible Medicines (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,” AAM Chief Executive Chip Davis said in a statement.
The Office of Maryland Attorney General Brian Frosh has yet to announce its next steps with respect to the law. “We remain committed to pursuing efforts to eliminate price gouging and to safeguarding Marylanders’ access to prescription drugs,” he said. Frosh’s office said it was still assessing how to respond to the ruling. The state’s lawyers could seek another review by all the judges in the 4th Circuit or take the case to the Supreme Court.
It has been said that other states were contemplating passing similar legislation prior to this ruling. It will be interesting to see if other states attempt to set up a similar law, which would open the doors for an appeal, which may, in turn, eventually lead to a circuit split and an issue ripe for Supreme Court review.