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Federal judge to hear arguments in suit challenging Md. drug price gouging law

A law scheduled to go into effect next month would prohibit a manufacturer or wholesale distributor from engaging in price gouging in the sale of an essential off-patent or generic drug and gives the Maryland attorney general the power to order the manufacturer to submit a statement explaining the reasons behind a significant price increase. (Deposit Photos)

A law scheduled to go into effect next month would prohibit a manufacturer or wholesale distributor from engaging in price gouging in the sale of an essential off-patent or generic drug and gives the Maryland attorney general the power to order the manufacturer to submit a statement explaining the reasons behind a significant price increase. (Deposit Photos)

Attorneys for the state are asking a federal judge to dismiss a lawsuit filed by manufacturers of generic pharmaceuticals attacking the constitutionality of Maryland’s new price gouging law, set to go into effect in October.

The hearing, scheduled for 5 p.m. Wednesday in U.S. District Court in Baltimore, will allow attorneys to debate the state’s motion to dismiss and the Association for Accessible Medicines’ request for an injunction.

House Bill 631, which passed both chambers of the General Assembly with bipartisan support and veto-proof majorities, became law in June without the signature of Gov. Larry Hogan, who expressed concerns about the legal questions raised by the bill. The law prohibits a manufacturer or wholesale distributor from engaging in price gouging in the sale of an essential off-patent or generic drug and gives the Maryland attorney general the power to order the manufacturer to submit a statement explaining the reasons behind a significant price increase as well as request a court order restraining or enjoining a violation. A violation also carries a civil penalty of up to $10,000 per violation.

AAM, a trade association, alleges the law violates the Commerce Clause of the Constitution by giving a state the power to regulate interstate commerce as well as the Due Process Clause because it gives the Maryland attorney general “extreme, arbitrary enforcement powers.”

But in a motion to dismiss the suit filed last month, lawyers for the state contends that AAM’s characterization of the law’s reach “into every corner of the United States, if not beyond” is “sheer hyperbole.”

The law only applies to “the most egregious instances of misconduct in the pricing of certain types of prescription drugs,” according to the motion, and does not reach “any stream of commerce that does not end in Maryland.” By relying on the common law doctrine of unconscionability, the law is also not vague as AAM suggests.

Proponents of the legislation pointed to the recent, sharp price increases of Naloxone, used to treat opioid overdoses, and EpiPens, some of which saw 5,000 percent increases. If such an increase is deemed unconscionable under the law, Medicaid may notify the attorney general who investigates.

AAM countered earlier this month that the state’s description of the statute it is defending “bears little resemblance to the one the General Assembly actually enacted” and clearly purports to regulate out-of-state commerce even under the state’s interpretation.

“Defendants may wish the General Assembly had passed a more defensible statute, but federal courts ‘must apply the Constitution to the law the state enacted and not attribute to the state a law [it] could have written to avoid the problem,'” the plaintiffs argued in opposition to the motion to dismiss.

The law, according to AAM, could feasibly be applied to an entirely out-of-state entity which may have no knowledge its product ends up in Maryland.

The association is represented by Jonathan Janow, Jay Lefkowitz and Matthew Rowen of Kirkland and Ellis LLP in Washington D.C.

The case is Association for Accessible Medicines v. Brian E. Frosh et al., 1:17-cv-01860-MJG.


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