In late December, a US District Court judge in the Eastern District of California upheld that state’s drug price transparency law. The ruling represents the latest legal victory for states working to curb drug prices following the December Supreme Court decision that upheld an Arkansas law regulating pharmacy benefit managers (PBMs).
California’s drug price transparency law, SB17, requires manufacturers to report and provide information about certain drug price increases. They must give a 60-day advance notice of drug price increases if the wholesale acquisition cost (WAC), or list price, is more than $40 and if the price increased more than 16 percent over the past two years.
The industry trade group, Pharmaceutical Researchers and Manufacturers of America (PhRMA), which challenged the California law in federal court, claimed the law violated the federal dormant Commerce Clause by regulating out-of-state commerce and also the First Amendment by compelling speech. The judge rejected both of the constitutional challenges, denying PhRMA’s request for a summary judgement. The judge’s order establishes that:
- SB17 does not regulate out-of-state drug prices simply by requiring reporting on a drug’s WAC, and dormant
- The state has sufficient interest to require manufacturers to provide notice of and justification for drug price increases.
Ten states have enacted drug price transparency laws, including Oregon. Oregon’s law is very similar to California’s and currently faces a challenge from PhRMA on the same grounds the trade group used to challenge California’s law.
