Drug Companies Sue Maryland Over First-in-Nation Price Gouging Law
By Erin Cox
Drug companies asked a federal judge on Thursday to throw out Maryland's new prescription drug price gouging law, saying the state's first-in-the-nation measure is both unconstitutional and vague.
A trade association representing generic drug firms filed a lawsuit in U.S. District Court on Thursday challenging the law, which takes effect in October and allows Attorney General Brian E. Frosh to prosecute some manufacturers that impose "unconscionable" price hikes.
The lawsuit uses the same legal arguments laid out by Republican Gov. Larry Hogan last month in a letter objecting to the legislation and explaining why he chose to let it become law without his signature.
The price-gouging bill was passed by the Democrat-led General Assembly with near unanimous support this year and only governs off-patent and generic drugs, not branded medications protected by patent laws.
Chip Davis, CEO of the Association for Accessible Medicines, said Maryland's law will have a chilling effect on drug makers who have to set prices without knowing whether Frosh will decide they've crossed a line.
Davis said companies faced with changing market conditions may decide to stop manufacturing a medicine altogether rather than risk adjusting prices and face litigation from the state. And because manufacturers' sales to wholesalers take place outside of Maryland, Davis argued the law effectively controls drug pricing for the entire country.
Those two issues form the basis of the association's lawsuit seeking an injunction from the U.S. District Court for Maryland.
First, the drug makers argue that since policing medicine prices here affects prices in other states, the law steps on the federal government's authority to regulate interstate commerce. Second, they argue that the term "unconscionable" is not well defined, and being prosecuted under it would violate the companies' constitutional right to due process.
"No one supports 'price gouging,'" said Jeff Francer, the association's attorney. But companies deserve clarity, he said. "The highway doesn't have a sign that says, 'please drive at a reasonable speed.' The sign gives you a number and you know whether you're speeding or not."
A spokeswoman for Frosh declined to comment on the litigation. The attorney general pressed the legislature to approve the law as an expansion of his power to prosecute consumer protection matters. Frosh's assistant attorney generals deemed the measure constitutional.
Lobbyist Vinny DeMarco, CEO of the Maryland Citizens' Health Initiative, also pressed for the legislation and criticized drug firms for attacking "a desperately needed law."
"It's very sad that the governor gave ammunition to the drug companies to challenge that law," DeMarco said. "Maryland has the authority and responsibility to protect its citizens from price gouging."
Hogan has said he is "very supportive" of keeping down prescription drug costs, but criticized the law for not addressing patented medicines and medical devices that are often more expensive than generics. In his May 26 letter raising constitutional concerns about the law, Hogan said "the legislation does have a laudable goal."
His spokesman on Thursday declined to comment on the lawsuit.
The complicated law applies to generic or off-patent drug makers that manufacture a medicine at least three other firms also make. If those conditions apply, companies can't impose a significant price increase without justifying it to the attorney general, who can ask a judge to order that the price increase not take effect. Violating the law carries a $10,000 fine.
Advocates say the law was tailored to cover the most essential drugs that people can't live without. As examples, advocates point to price increases in the injectors for the heroin antidote Naloxone, albuterol-sulfate that is commonly used to treat asthma, and EpiPens that treat severe allergic reactions.
The generics trade association, however, questioned the policy behind the law, pointing out that the generic drug industry has been instrumental in driving down the cost of many common medicines.
"Do we want to be picking on the part of the pharmaceutical industry that is helping consumers?" Francer asked.
Baltimore County Del. Eric Bromwell oversaw negotiations over the bill in the House of Delegates. On Thursday, the veteran Democratic lawmaker was unmoved by the threat of a lawsuit.
"I agree that there's other bad parties responsible for the high cost of drugs, and I plan to get a lot deeper into that in this upcoming session and sessions in the future," Bromwell said. "If they're maintaining that we didn't cover the entire pharmaceutical industry, then clearly we have more work to do."
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