In March, the U.S. District Court for the District of Oregon issued a ruling in Pharmaceutical Research and Manufacturers of America (PhRMA) v. Stolfi, granting in part PhRMA’s motion for summary judgment in its challenge to the Prescription Drug Price Transparency Act. The court held that the Act’s annual price increase reporting requirements violated the Free Speech Clause of the First Amendment. The court also held that the Act’s public-interest exception to the reporting of trade secret information violated the Takings Clause of the Fifth Amendment.
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On February 16, 2024, the district court granted a declaratory judgment to PhRMA, and its full opinion followed on March 19, 2024. The court concluded that the Act’s public-interest exception results in a regulatory taking without just compensation in violation of the Fifth Amendment’s Takings Clause. The court concluded that all factors supported the finding of a regulatory taking. Among other things, the court noted that Oregon Department of Consumer and Business Services (DCBS) had not explained how it determines when the public interest requires publication, which, in practice, places “an extremely low burden on [Oregon]” and results in an “irrevocable loss” for affected manufacturers. The court also explained that because the state is legally compelling the involuntary disclosure of trade secret information, manufacturers have a reasonable investment-backed expectation that the state will maintain the secrecy of such information.
The court also concluded the Act’s annual price increase reporting requirements violated the Free Speech Clause of the First Amendment. In reaching this conclusion, the court first evaluated whether the reporting requirements constituted compelled private speech or commercial speech and sided with Oregon’s stance that the Act regulates commercial speech. In support of this conclusion, the court observed that manufacturers are acting out of an “economic motivation” to provide information about prescription pricing in order to participate in the market, which the court found to provide strong support that the speech in question is commercial. The court concluded that Oregon had not satisfied its burden, which was to advance a substantial government interest in the regulation and to choose means not more extensive than necessary. Oregon had asserted various governmental interests, including providing accountability for prescription drug pricing to permit purchasers and pharmacy benefit managers to negotiate discounts and rebates and providing buyers of prescription drugs with better information about drug pricing. But even assuming these constituted substantial governmental interests, the court found that Oregon had failed to show how the Act would actually directly advance such interests.
The PhRMA v. Stolfi ruling is a significant development in the realm of state drug price transparency laws. Not only has it resulted in Oregon’s annual price increase reporting requirements being suspended, but — if followed by other courts — the district court’s reasoning could have far broader implications. Numerous other states have enacted similar laws that require reporting of significant pricing information from manufacturers or other health care entities that could potentially be subject to similar challenges. That said, the district court’s opinion will likely not be the final word.