American Society for Pharmacy Law Track

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April 16, 2018

DRUG PRICING
4th Circuit finds Maryland price gouging statute unconstitutional
Friday the 13^th was unlucky for Maryland’s statute, HB 361, in that the 4^th Circuit Court of Appeals found the law violated the dormant commerce clause. The statute prohibited manufacturers of generic drugs or their wholesalers from “making unconscionable increases in the price of an ‘essential off-patent or generic drug,’” according to a report in the FDA Law Blog. The Maryland Medical Assistance Program (MMAP) was required to notify the Maryland Attorney General when an increase in the wholesale acquisition cost (WAC) of a drug increased by at least 50% in the prior year, or when the price to MMAP would increase by at least 50% in one year, and when the WAC for a 30-day supply or a full treatment exceeded $80. The AG was provided with civil remedies including injunction, monetary relief, and civil penalties for violations.

Plaintiffs, the Association for Accessible Medicines (AAM) – formerly known as the Generic Pharmaceutical Association - sued in federal court and challenged the statute on constitutional grounds: (1) violation of the dormant commerce clause and (2) impermissible vagueness in violation of the due process clause of the 14^th Amendment. The district court granted Maryland’s motion to dismiss the dormant commerce clause challenge, but allowed the due process claim to proceed. AAM appealed to the 4^th Circuit. According to FDA Law Blog’s summary, a divided panel of the 4^th Circuit relied on 3 determinations to find a violation of the dormant commerce clause: (1) the law’s focus on the price initially charged by the manufacturer, not on the price paid by a Maryland consumer; (2) the fact that the manufacturer’s initial sale triggered a violation, even if no nexus to Maryland could be demonstrated; and (3) if other states followed suit, it would impose a significant burden on interstate commerce. [Schlanger SJ, Kirchenbaum AM. Fourth Circuit finds Maryland price gouging law unconstitutional. FDA Law Blog 2018 Apr 15; https://bit.ly/2H4IhFU; Association for Accessible Medicines v. Frosh et al., No. 17-2166, 4^th Cir., April 13, 2018]