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Generics industry waives response to Frosh’s Supreme Court appeal

Attorney general urges justices to uphold 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)

Maryland Attorney General Brian E. Frosh has asked the Supreme Court to reinstate Maryland’s law designed to prevent price gouging in the sale of generic or off-patent drugs. DepositPhotos)

A generic-drug industry group will wait to be asked by the U.S. Supreme Court before responding to Maryland Attorney General Brian E. Frosh’s request that the justices revive the state’s law aimed at preventing unwarranted price increases for the pharmaceuticals.

In a form filed Monday with the high court, the Association for Accessible Medicines — through counsel — waived its right to reply to Frosh’s petition that the justices review and overturn a lower court decision that struck the law down as unconstitutional. The association would respond if requested by the justices, stated the association’s lead counsel, Jay P. Lefkowitz, of Kirkland & Ellis LLP in New York.

Such waivers are fairly common and are given by Supreme Court respondents to save time and costs, provided the justices subsequently reject the petition without requesting a response. If the justices do seek a reply, the respondents then have an indication of the high court’s interest in the case before filing their response.

The association declined to comment Tuesday on its waiver.

Frosh did not respond to a message seeking comment on the waiver Tuesday.

Frosh, in his petition submitted last month,  is seeking Supreme Court review of the 4th U.S. Circuit Court of Appeals’ 2-1 decision in April that the 2017 law directly regulates the price of generic drug transactions that occur outside the state, authority the Constitution’s Commerce Clause leaves to Congress and not to state legislatures.

The full 4th Circuit in July refused to review the three-judge panel’s decision, prompting Frosh’s bid for Supreme Court review arguing that states may regulate generic-drug prices.

“(T)his (Supreme) Court has never held that the states are unable to protect their citizens from harm by imposing requirements for transactions leading to in-state sales of consumer goods that both in-state and out-of-state manufacturers must follow if they wish their products to be sold in a state,” Frosh wrote in his review request. “That question is now squarely presented, and the court should grant the petition and hold that states are not powerless to regulate dangerous, predatory commercial practices that occur in complex interstate markets and will injure people within state borders.”

Frosh’s brief is co-signed by Julia Doyle Bernhardt, the attorney general’s litigation chief and attorney of record before the high court.

The Association for Accessible Medicines has denied the allegations of price gouging and has successfully challenged the law’s constitutionality so far. The group has stated that the law “would harm patients by damaging the national market for more affordable generic medicines.”

The Supreme Court has not stated when it will vote on Frosh’s request for review in Brian E. Frosh et al. v. Association for Accessible Medicines, No. 18-546.

The law, which was to go into effect Oct. 1, 2017, would prohibit a significant price increase of an essential off-patent or generic drug. It would give the Maryland attorney general the power to order the manufacturer to explain the reasons behind a significant price boost as well as request a court order restraining or enjoining a violation.

Gov. Larry Hogan in June 2017 allowed the law to go into effect without his signature, citing his concerns about its constitutionality.

The Association for Accessible Medicines filed suit in July 2017, challenging the law as unconstitutional. U.S. District Judge Marvin J. Garbis, who sits in Baltimore, dismissed the Commerce Clause challenge, prompting AAM to appeal.

Overturning Garbis’ dismissal, the divided 4th Circuit panel found three factors pointing to the law’s violation of the Constitution’s clause.

“First, the act is not triggered by any conduct that takes place within Maryland,” Judge Stephanie D. Thacker wrote for the majority. “Second, even if it were, the act controls the prices of transactions that occur outside the state. Finally, the act, if similarly enacted by other states, would impose a significant burden on interstate commerce involving prescription drugs.”

For example, “if multiple states enacted this type of legislation, then a manufacturer may consummate a transaction in a state where the transaction is fully permissible, yet still be subject to an enforcement action in another state (such as Maryland) wholly unrelated to the transaction,” added Thacker, who was joined by Judge G. Steven Agee.

Judge James A. Wynn Jr., in dissent, said the Maryland statute falls within the state’s “general police powers to regulate matters of legitimate local concern” without violating the Commerce Clause.

“Here, Maryland legitimately targeted generic drug pricing practices specifically designed to prey on the special vulnerabilities of a defenseless group of Maryland citizens,” Wynn wrote. “Simply put, the Maryland statute – which applies equally to in-state and out-of-state manufacturers and distributors – does not implicate the concerns that lie at the heart of the Supreme Court’s dormant (state-law generated) Commerce Clause jurisprudence: economic protectionism, discrimination against interstate commerce, and state regulation of streams of transactions that never cross through the state’s borders.”

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