PhRMA Faces Setback – For Now – In Challenge to California’s New Drug Price Transparency Law

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On August 28, 2018, the United States District Court for the Eastern District of California (the Court) dismissed with leave to amend the Pharmaceutical Research and Manufacturers of America’s (PhRMA) lawsuit challenging the constitutionality of California’s new drug price transparency law.

The law imposes on drug manufacturers numerous reporting and notification requirements related to drug pricing, including a requirement that manufacturers provide 60 days’ advance written notice of certain price increases to purchasers. Those purchasers include, among others, state agencies, health plans, insurers, and pharmacy benefit managers. The Arent Fox Health Care team previously summarized the law’s requirements in October 20, 2017 Alert.

In December 2017, PhRMA, the nation’s largest trade group representing drug manufacturers, filed suit against the state of California, arguing that the law is unconstitutional because it violates the Commerce Clause, the First Amendment, and the Due Process Clause of the United States Constitution. The Arent Fox Health Care team previously analyzed PhRMA’s lawsuit seeking to block the law in a December 18, 2017 Alert.

In its recent dismissal of PhRMA’s complaint, the Court held that PhRMA lacked standing to challenge the law because it failed to allege that the law would cause actual or imminent injury to its drug manufacturer members. Per the Court’s opinion, the injuries alleged by PhRMA were hypothetical and speculative, and PhRMA’s complaint did not state that any of its members had actual plans to make a pricing change that would force them to provide 60 days’ advance notice as required by the law, or that any of PhRMA’s members would affirmatively refrain from increasing a drug price to avoid triggering the law’s requirements.

However, the Court’s dismissal is likely only a temporary hiccup for PhRMA. The Court granted PhRMA leave to amend its complaint within 30 days and seemingly recognized that PhRMA should be able to establish standing, noting that “one might imagine that PhRMA’s members will either be affected by [the law] or will refrain from increases to avoid them.”


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