Latest in Drug Price Transparency Litigation: PhRMA Files Amended Complaint in Challenge of California Law

The law, which became effective on January 1, 2018, imposes on drug manufacturers numerous reporting and notification requirements related to drug pricing, including a requirement that manufacturers provide purchasers 60 days’ advance written notice of any price increase of more than 16% in the drug’s wholesale acquisition cost (WAC). The Arent Fox Health Care team previously summarized the law’s requirements in a October 20, 2017 Alert and previously reported on PhRMA’s lawsuit in a December 18, 2017 Alert and a September 5, 2018 Alert.

In August 2018, the United States District Court for the Eastern District of California dismissed PhRMA’s lawsuit with leave to amend, holding that PhRMA failed to allege that the law would cause actual or imminent injury to its drug manufacturer members and, therefore, lacked standing.

PhRMA’s amended complaint now directly addresses the standing issue by alleging two specific types of actual or imminent harm to its members. First, the amended complaint argues that several PhRMA members have already been forced to comply with the law’s requirement to provide advance notice of drug price changes, and that absent the law’s requirements which in effect “force” speech in violation of the First Amendment, would not have otherwise done so. PhRMA attached a copy of one of its member’s price increase notices to the complaint.

Second, according to the amended complaint, several PhRMA members are being harmed because the law is ambiguous, and it is unclear whether price increases that went into effect prior to the law’s effective date are included in the advance notice and reporting requirement calculations. Due to this ambiguity, some PhRMA members who have raised drug prices by more than 16 percent in the past two years are uncertain whether any price increases in 2018 would trigger the law’s advance notice and reporting requirements, and that without clarification, risk enforcement penalties.