Will Federal Courts Permit State Regulation of Drug Prices?

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A panel at the federal Fourth Circuit Court of Appeals overturned the Maryland statute aimed at prohibiting manufacturer price gouging.
A panel at the federal Fourth Circuit Court of Appeals overturned the Maryland statute aimed at prohibiting manufacturer price gouging.

In response to the growing burden of pharmaceutical products on state budgets, Maryland introduced House Bill 631 to prohibit manufacturer “price gouging [for] any essential patent or generic drug.” In April 2018, however, a panel at the federal Fourth Circuit Court of Appeals overturned the statute, invoking the dormant commerce clause of the Constitution.1

In a perspective piece published by the New England Journal of Medicine,2 Christopher Robertson, JD, PhD, of the University of Arizona College of Law and the University of Arizona Regulatory Science Program, offered commentary on the ruling and explored other efforts to stymie pharmaceutical monopolies.

The dormant commerce clause restricts state interference with interstate commerce. According to the Court of Appeals, this was sufficient basis for rejecting Maryland's proposal. However, as one dissenting judge wrote, numerous states currently impose their own “safety, quality, and labeling restrictions” on items manufactured out of state.1 Additionally, the Supreme Court has indicated that states have the freedom to adjust tort liabilities on drugs approved by the US Food and Drug Administration (FDA).3 The dormant commerce clause exists to prevent states from favoring local producers because of a larger goal of unifying the national economy. But Maryland's proposal, Dr Robertson wrote, was not an attempt to inhibit the market for out-of-state pharmaceuticals. HB 631 also does not interfere with federal patent policy regarding generic drugs.

A broader solution to price gouging, Dr Robertson wrote, would be to introduce more generics to the drug market. In 2017, the FDA approved a record number of generic pharmaceuticals, however, many products still have no authorized competitors. These monopolies could be undercut by “transnational regulatory reciprocity,” in which products working safely in Canada and Europe could be introduced to the American market. In May 2018, Vermont established a state agency responsible for designing a program to import drugs from Canada. Notably, this bill will also require federal approval.

Maryland has since requested that all judges of the Fourth Circuit Court review the HB 631 ruling. The Supreme Court or Congress may also authorize Maryland or other states to explore solutions to manufacturer price gouging. Intermountain Healthcare announced the formation of a nonprofit consortium in January 2018, which will work to manufacture essential generic drugs. In the absence of legal progress, states must mobilize against pharmaceutical monopolies in other ways.

References

1. Association for Accessible Medicines v. Frosh, No. 17-2166 (4th Cir. Apr. 13, 2018).

2. Robertson C. Will courts allow states to regulate drug prices? N Engl J Med. 2018;379:1000-1002.

3. New State Ice Co. v. Liebmann, 285 U.S. 262, 52 S. Ct. 371, 76 L. Ed. 747 (1932) (Brandeis, J., dissenting).

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