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A new Nevada law will imperil future biomedical innovation and put drugmakers’ trade secrets and patents at risk, pharmaceutical industry groups claim ( Pharmaceutical Research and Manufacturers of America v. Sandoval , D. Nev., No. 2:17-cv-02315, complaint filed 9/1/17 ).
In a lawsuit filed in the U.S. District Court for the District of Nevada Sept. 1, the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO) said the Nevada law, SB 539—which requires drugmakers and pharmacy benefit managers (PBMs) to disclose pricing and rebate information for diabetes drugs—is unconstitutional. The law became effective this summer but hasn’t yet been implemented.
PhRMA and BIO are seeking to prevent the state from implementing the law. The groups’ suit underscores just how concerned PhRMA and BIO are about the Nevada law, Bloomberg Intelligence analyst Brian Rye told Bloomberg BNA in a Sept. 6 email. If the law is enforced, the two groups warn it would cause massive disinvestment in the pharma and biotech industries.
Health-care attorney Stephanie Trunk said the drug and biotech industry groups’ challenge to the law isn’t surprising because it requires manufacturers to publicly disclose significant proprietary business information, including pricing strategies and research and development plans. Trunk, a Bloomberg BNA advisory board member, is with Arent Fox LLP in Washington.
“The pharma and biotech lobbies tend to fight any state law that touches drug pricing,” Bloomberg Gadfly health-care columnist Max Nisen told Bloomberg BNA Sept. 6. “In this case, they likely feel that being forced to disclose pricing and cost information will put them at a competitive disadvantage as they negotiate with payers.”
Meanwhile, Democratic state senator Yvanna Cancela, one of SB 539’s cosponsors, called the lawsuit disappointing.
“Most of the issues discussed in the complaint were not brought up during the bill’s hearings,” she told Bloomberg BNA in a Sept. 6 email. “It seems this could be a tactic to delay implementation of a major transparency bill, to which I ask, what are they hiding?”
SB 539, signed into law by Republican Gov. Brian Sandoval in June, was introduced by Nevada Senate Republican Leader Michael Roberson to combat the skyrocketing costs of insulin.
If a diabetes drugmaker raises the list price of a drug by a certain amount or more, the law requires it to disclose information about the costs of making and marketing the drug and the rebates they provide for the drug.
PBMs—companies like Express Scripts that negotiate rebates—also are required to disclose the rebates they negotiate with makers of diabetes drugs and what rebates they keep.
The Nevada law is an illegal attempt to set price controls on medical products, Tom DiLenge, BIO’s president for advocacy, law, and public policy, said in a Sept. 1 statement on the lawsuit. DiLenge said the implementation of the law will endanger research and development of critical medicines.
The Nevada law requires diabetes drug manufacturers to disclose potential trade secrets such as production costs. The industry groups are worried it will kill any protection for industry trade secrets.
In addition, the law conflicts with, and in some cases overrides, federal and state intellectual property and trade secret laws, James C. Stansel, PhRMA executive vice president and general counsel, said in a Sept. 1 statement.
But Robert Weissman, president of the pro-consumer group Public Citizen, discounted the industry groups’ arguments.
“Nevada’s not asking for the secret sauce for making insulin products,” he told Bloomberg BNA in a Sept. 6 telephone call. “They’re just asking for what was spent on research and development and the prices that the manufacturers charge,” he said.
Although the Nevada law also affects PBMs, the PBM industry isn’t part of the suit.
Charles Cote, vice president, strategic communications at the Pharmaceutical Care Management Association (PCMA) told Bloomberg BNA in a Sept. 6 email the group—which represents PBMs—supports transparency but is concerned the Nevada law will actually lead to higher costs by allowing drug companies to share inside information that could lead them to collude with their competitors on pricing issues.
Drugmakers are under heavy scrutiny by lawmakers, consumers, medical professionals and the president for their pricing practices and pricing increases, particularly on older pharmaceutical products. Like Nevada, other states have recently enacted drug pricing bills in an attempt to address industry price hikes.
Maryland recently enacted legislation ( H.B. 631) that prohibits drugmakers or distributors from instituting “an unconscionable increase” in the price of an essential off-patent or generic drug. The generic drug industry lobby sued the state over the law in July. Like PhRMA and BIO’s argue over the Nevada law, the Association for Accessible Medicines (AAM) claims Maryland’s law violates the U.S. Constitution.
Vermont was the first state to require greater transparency from drug manufacturers regarding price increases. In 2016, Vermont passed legislation ( S. 216) requiring manufacturers of the 15 drugs registering the highest price increases each year to justify those increases to the state attorney general. It also requires insurers to inform Vermont residents about how much they will pay out of pocket for their prescription drugs.
But other states’ attempts to pass transparency initiatives, including one in Massachusetts this past summer, have failed in the face of fierce opposition from the pharmaceutical industry.
Arnold & Porter Kaye Scholer LLP and McDonald Carano LLP filed the suit on behalf of PhRMA and BIO.
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