In June, Maryland became the 1st state to pass a law in an attempt to ban price gouging by generic pharmaceutical manufacturers. The bill passed without the governor’s signature, who took issue with the bill’s language. Governor Larry Hogan said that his chief counsel raised legal and constitutional concerns about the bill.
Now, generic drug manufacturers in the Association for Accessible Medicines have taken those claims to court. The generic drug trade group filed suit in a federal court, seeking declaratory and injunctive relief against the implementation and enforcement of the law.
The bill, which becomes effective on Oct. 1, prohibits generic drug manufacturers and distributors from price gouging in the sale of “an essential off-patent or generic drug”. The law defines price gouging as an “unconscionable increase” or an increase that is “excessive and not justified” by the manufacturing costs associated with expanding access to the drug.
It also includes price increases that result in patients having “no meaningful choice” whether or not to purchase the drug due to insufficient competition in the market.
The bill includes an exemption for wholesale distributors when the price increase is directly linked to additional costs brought on by the manufacturer.
If the wholesale acquisition cost of a prescription drug jumps by at least 50% compared to the previous year, the bill authorizes the Maryland Medical Assistance Program to notify the Maryland attorney general. At that time, the drug manufacturer must justify the price increase within 45 days and the attorney general can seek a court order compelling document disclosure.
The generic drug trade group’s compliant stated that the law violates the company’s constitutional rights for two reasons. Firstly, the group alleged that it violates the dormant commerce clause of the U.S. Constitution because it regulates commerce outside of the state. The commerce clause enables Congress to regulate commerce among states, thereby preventing states from burdening interstate commerce.
The AAM argued that pricing decisions are made on a national basis and therefore any attempt to restrain prices within Maryland would inevitably impact commerce in other states.
The group also alleged that the law violates the 14th Amendement’s due process clause because it is “impermissibly vague”.
“Manufacturers and distributors have no way to determine whether a given price is ‘excessive,’ whether a given market expansion is ‘appropriate,’ or whether a given consumer’s option set is ‘meaningful,'” the group wrote, according to the FDA Law Blog.
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