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Justices show interest in Frosh’s generic-drugs appeal

01.06.14 BALTIMORE, MD- Stephen Wienner, Owner and Pharmacist at  Mt. Vernon Pharmacy, shown here with some generic pharmaceuticals for a story about the rising price of generic drugs. (The Daily Record/Maximilian Franz)

Generic pharmaceuticals at the Mt. Vernon Pharmacy. (The Daily Record/Maximilian Franz)

The Supreme Court is showing an interest in Maryland Attorney General Brian E. Frosh’s request that the justices revive the state’s law aimed at preventing unwarranted price increases for generic drugs.

On Tuesday the high court asked that the generic-drug industry group challenging the law respond by Dec. 13 to the attorney general’s petition for the justices’ review. The Association for Accessible Medicines had waived its right to reply, saying it would do so only if the justices felt it necessary in deciding whether to hear Frosh’s appeal of a 4th U.S. Circuit Court of Appeals decision that the law is unconstitutional.

The Supreme Court has not stated when it will vote on whether to hear the attorney general’s appeal in Brian E. Frosh et al. v. Association for Accessible Medicines, No. 18-546.

In response to the justices’ request for AAM’s reply, the association’s general counsel Wednesday gave what might be a preview of its filing due next month.

“Maryland’s law would harm patients who seek affordable generic medicines by interfering in the competitive national market for these critical drugs, which saved patients and taxpayers $4.2 billion in Maryland in 2017 and over $265 billion nationally,” Jeff Francer said in a statement. “Consistent with other courts, the 4th Circuit correctly held that the State of Maryland does not have the power to regulate commercial transactions that occur outside of its borders.”

The Maryland attorney general’s office had no comment on the high court’s request for AAM’s response.

Frosh, in his petition submitted last month, is seeking Supreme Court review of the 4th Circuit’s 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 law, which was to go into effect Oct. 1, 2017, would prohibit a significant price increase of an essential off-patent or generic drug and 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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