New PhRMA Drug Pricing Lawsuit: We Have the Right to Remain Silent

A pharmaceutical industry association lawsuit challenging California’s new drug pricing law adds to the list of alleged constitutional violations drugmakers have asserted in similar litigation this year.

My colleague Dana Elfin has reported on drugmakers’ efforts to thwart state initiatives taking aim at increased drug prices, including court challenges in Nevada and Maryland.

In thosesuits, drugmakers alleged Nevada and Maryland drug pricing statutes violated their Fourteenth Amendment due process rights; the Supremacy Clause, which says federal law trumps state law; the Takings Clause, barring the taking of private property without just compensation; and the “Dormant” Commerce Clause, which infers that Congress’ power to regulate interstate commerce means states cannot unduly burden interstate commerce.

The Pharmaceutical Research and Manufacturers of America’s suit over California’s Senate Bill No. 17 offers up a new argument—a violation of drugmakers’ First Amendment free-speech rights. The law, which Gov. Jerry Brown (D) signed Oct. 9, requires drugmakers to give 60 days’ notice to health-care payers of a price increase in certain circumstances and requires them to justify it as either a change or improvement in the drug.

That is compelled speech barred by the First Amendment, PhRMA asserts in its suit, which was filed this month.

PhRMA’s concern is that the state is “telling them to explain something that, in their minds, they don’t have to explain,” Brian Rye, a health-care policy analyst with Bloomberg Intelligence.

The industry essentially is asking, “Why don’t other businesses have to do this?” Rye told Bloomberg Law. “If the price of a Coke goes up 10 percent, [Coca-Cola] doesn’t have to explain that to the authorities.”

PhRMA also argues requiring drugmakers to announce price hikes ahead of time will allow competitors to adjust, creating anticompetitive consequences that reverberate beyond California.

According to the group, “if you have to provide this advanced notification of your intent to [raise prices],” Rye said, “you have 50 different state markets that you’re dealing with and others as well outside the U.S.”

California’s advanced notice requirement stands out among laws passed and bills advanced in other states, said Stephane Trunk, a partner in Arent Fox LLP’s health-care practice and a Bloomberg Law advisory board member.

Vermont, Ohio, and Massachusetts are among other states pushing for drug price transparency.

How the PhRMA suit plays out in California could affect other states’ efforts, Trunk told Bloomberg Law.

“This has kind of been touted as the model bill that was going to be rolled out in other states, more so than the Maryland or Nevada bills,” Trunk said. “So I think this is definitely one to watch.”

Read my full story on PhRMA’s suit here.

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