The U.S. Supreme Court on Tuesday rang a death knell for a Maryland law aimed at preventing unwarranted price increases of generic drugs.
The justices let stand without comment a 4th U.S. Circuit Court of Appeals decision that the state’s effort to regulate generic drug transactions occurring outside the state violates the Constitution’s Commerce Clause. The clause holds that regulations on interstate commerce are the province of Congress, not state legislatures, the 4th Circuit ruled.
“Price gouging of generic prescription drugs is well documented and a threat to the health of Marylanders,” state Attorney General Brian E. Frosh said in a statement after the high court rejected his appeal of the 4th Circuit’s decision.
“It’s disappointing that the Supreme Court is not willing to allow our state to fix the problem,” Frosh added. “Today’s action leaves vulnerable Marylanders to suffer from enormous price increases in the essential medicines upon which they depend. It is our hope that Congress moves swiftly to develop a national policy that protects all Americans.”
Frosh, in his unsuccessful request for Supreme Court review, had argued that the 4th Circuit read the clause too narrowly and that states have the right to enact laws protecting their residents.
“This [Supreme] Court has not yet addressed whether the Commerce Clause prohibits states from protecting their citizens from abusive commercial practices that are targeted at in-state consumers but originate out of state, and uncertainty over that question is now directly interfering with states’ ability to address a current, well-documented public health risk,” Frosh wrote in the filing co-signed by Julia Doyle Bernhardt, the attorney general’s litigation chief and attorney of record before the high court. “This case presents an important federalism question that only this court can resolve.”
The Association for Accessible Medicines, a generic drug industry group challenging the law, has told the justices that the 4th Circuit was right and that review and reinstatement of the law “would not only upend longstanding, well-established (Supreme Court) precedent, but also fundamentally alter interstate commerce as we know it.”
“Simply put, the interstate market could not function if every state were allowed to impose its own rules on commerce that applied coast to coast,” AAM’s lead attorney, Jay P. Lefkowitz, stated in papers filed with the justices this month. “Any other rule would produce the sort of ‘economic Balkanization’ that the Constitution was designed to prevent.”
Lefkowitz is with Kirkland & Ellis LLP in New York.
The high court’s decision not to hear the appeal has no precedential significance beyond leaving the 4th Circuit’s ruling intact. The justices declined to hear the attorney general’s appeal in Brian E. Frosh et al. v. Association for Accessible Medicines, No. 18-546.
AAM called the justices’ denial of review “a victory for patients who depend on a strong national market for generic and biosimilar medicines.”
“Maryland’s law would have allowed one state to dictate prices in the competitive national market for generic medicines that saved patients and taxpayers $265 billion in 2017,” AAM added in its statement. “The Association for Accessible Medicines and its member companies will continue to work with all stakeholders, including state legislatures that are working to address concerns related to drug pricing, to enhance access to generic and biosimilar medicines to lower prescription drug prices for Americans.”
The law, which was to go into effect Oct. 1, 2017, would have prohibited a significant price increase of an essential off-patent or generic drug. It would have given 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 – which denies the allegation of price gouging — 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, a divided three-judge panel of the 4th Circuit panel last April 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 in the majority opinion that Judge G. Steven Agee joined. “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.”
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.
In July, the full 4th Circuit refused to review the panel’s decision, prompting Frosh’s failed bid for Supreme Court review.