Updated: Appeals Court Finds Maryland Drug Pricing Law Unconstitutional

Posted 16 April 2018 | By Zachary Brennan 

Updated: Appeals Court Finds Maryland Drug Pricing Law Unconstitutional

The US Court of Appeals for the Fourth Circuit on Friday ruled that Maryland’s recently passed generic drug pricing law is unconstitutional because it directly regulates transactions that take place outside Maryland.

The Maryland law, which was not signed or vetoed by Gov. Larry Hogan because of constitutional and other legal concerns, sought to impose fines on generic drugmakers that raised the price of their products too quickly or by too much.

“At the end of the day, AAM [Association for Accessible Medicines] argues—and the majority opinion concludes—that, absent federal regulation, its members are constitutionally entitled to impose conscience-shocking price increases on Maryland consumers, so long as AAM’s members sell their essential generic drugs to Maryland consumers through out-of-state intermediaries,” the dissenting judge said in his opinion.

Judge Stephanie Thacker wrote the majority opinion, in which Judge Steven Agee joined. Judge James Wynn wrote a dissenting opinion.

"Our dissenting colleague suggests that ... we imply that prescription drug manufacturers have a constitutional right to engage in price gouging ... This is a sweeping and incorrect conclusion to draw from our holding that Maryland is prohibited from combating prescription drug price gouging in the manner utilized by the Act. Prescription drug manufacturers are by no means “constitutionally entitled,” ... to engage in abusive prescription drug pricing practices. But Maryland must addres this concern via a statute that complies with the dormant commerce clause of the U.S. Constitution."

The majority position also took issue with a district court’s decision to uphold the law and suggest that drug manufacturers “could simply modify their distribution systems to track the shipments of drugs bound for Maryland and isolate those drugs in order to comply with the Act."

AAM said in a statement that it has maintained that this law, and any others modeled from it, “would harm patients because the law would reduce generic drug competition and choice, thus resulting in an overall increase in drug costs due to increased reliance upon more-costly branded medications.”

Opinions

Editor's Note: Article updated on 4/16/18 to reflect the two dissenting and majority opinions.

Categories: Regulatory News

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