Notes
[1] This consideration is less applicable in other contexts involving public payers. For instance, Medicaid beneficiaries’ out-of-pocket obligations are sharply limited, by law. See 42 C.F.R. § 447.56 (2014) (exempting large classes of Medicaid beneficiaries from cost-sharing under the program); 42 C.F.R. § 447.53(b) (2013) (limiting out-of-pocket payments for other Medicaid beneficiaries).
[2] Rabah Kamal et al., What Are the Recent and Forecasted Trends in Prescription Drug Spending?, Peterson-Kaiser Health System Tracker (Dec. 10, 2018), https://www.healthsystemtracker.org/chart-collection/recent-forecasted-trends-prescription-drug-spending/.
[3] IQVIA, MIDAS (2020), https://www.iqvia.com/solutions/commercialization/brand-strategy-and-management/market-measurement/midas.
[4] Id.
[5] U.S. Dep’t of Health & Human Servs., Office of the Assistant Sec’y for Planning & Evaluation, Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures, at 4 (Oct. 25, 2018), https://aspe.hhs.gov/system/files/pdf/259996/ComparisonUSInternationalPricesTopSpendingPartBDrugs.pdf.
[6] National Health Service, Drug Tariff (April 2020), https://www.nhsbsa.nhs.uk/pharmacies-gp-practices-and-appliance-contractors/drug-tariff.
[7] Health Canada, Protecting Canadians from Excessive Drug Prices: Consulting on Proposed Amendments to the Patented Medicines Regulations, at 6 (2017), https://www.canada.ca/content/dam/hc-sc/documents/programs/consultation-regulations-patented-medicine-document/con1-eng.pdf.
[8] By necessity, I provide only a brief treatment of this issue here. A complete paper on this topic has been written separately. See Robin Feldman et al., States’ Rights: A Patent Law Analysis of NASHP Rate-Setting Model Act (March 2018), https://nashp.org/wp-content/uploads/2018/03/White-Paper-2018.pdf.
[9] 496 F.3d 1362 (Fed. Cir. 2007).
[10] Id. at 1365, 1374.
[11] D.C. Code § 28-4553.
[12] D.C. Code § 28-4554(a).
[13] See Biotechnology Industry Organization, 496 F.3d at 1372 (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)).
[14] Id. at 1372.
[15] Id. at 1374.
[16] Id. at 1373–74; Biotechnology Indus. Org. v. District of Columbia, 505 F.3d 1343, 1348 (Fed. Cir. 2007) (Gajarsa, J., concurring in the denial of rehearing en banc); see also Feldman et al., supra note 8, at 4.
[17] Anna Zaret & Darien Shanske, The Dormant Commerce Clause: What Impact Does It Have on the Regulation of Pharmaceutical Costs? (Nov. 2017), https://nashp.org/wp-content/uploads/2019/02/DCC-White-Paper-new-version-wi-CK-edits-2_14_2019.pdf.
[18] Dep’t of Revenue of Ky. v. Davis, 553 U.S. 328, 338 (2008) (quoting New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 273–274, (1988)).
[19] 887 F.3d 664 (4th Cir. 2018).
[20] Id. at 666; see also Md. Code Ann. § 2-802(a).
[21] Association for Accessible Medicines, 887 F.3d at 674.
[22] Id. at 678–79 (Wynn, J., dissenting).
[23] Id. at 671.
[24] Id. at 670–71.
[25] Id. at 671.
[26] The 4th Circuit concluded that the Maryland law regulated the initial sale price for a drug charged by a manufacturer or wholesaler/distributor, which would be an impermissible state regulation of a wholly extraterritorial transaction even if it only applied to drugs that ultimately were sold in Maryland. Id. at 671.
[27] Japan Line, Ltd. v. Los Angeles Cty., 441 U.S. 434, 450 (1979).
[28] Id. at 446.
[29] Michelin Tire Corp. v. Wages, 423 U.S. 276, 285 (1976).
[30] Duncan B. Hollis, Unpacking the Compact Clause, 88 Tex. L. Rev. 741, 744 (2010).
[31] 42 U.S.C. § 1396r-8(k)(2) (2012).
[32] Id. § 1396r-8(c)(1)(A)(ii)(I). There are certain statutory exclusions from this calculation, such as prices paid by Medicare Part D plans. See id. § 1396r-8(c)(1)(C)(i).
[33] See, e.g., Ctrs. for Medicare & Medicaid Servs., CMS Approves State Proposal to Advance Specific Medicaid Value-Based Arrangements with Drug Makers (June 27, 2018) (approving Oklahoma’s use of outcomes-based contracts in the service of supplemental rebate agreements), https://www.cms.gov/newsroom/press-releases/cms-approves-state-proposal-advance-specific-medicaid-value-based-arrangements-drug-makers; Ctrs. for Medicare & Medicaid Servs., CMS Approves Louisiana State Plan Amendment for Supplemental Rebate Agreements Using a Modified Subscription Model for Hepatitis C Therapies in Medicaid (June 26, 2019) (approving Louisiana’s use of a subscription model in the service of supplemental rebate agreements), https://www.cms.gov/newsroom/press-releases/cms-approves-louisiana-state-plan-amendment-supplemental-rebate-agreements-using-modified.
[34] See Ctrs. for Medicare & Medicaid Servs., About Section 1115 Demonstrations, Medicaid.Gov (last visited April 18, 2020), https://www.medicaid.gov/medicaid/section-1115-demo/about-1115/index.html; 42 U.S.C. § 1315(a)(1) (2012).
[35] Social Security Act § 1902(a)(54); 42 U.S.C. § 1396a(54) (2012).
[36] Nicholas Bagley & Rachel E. Sachs, Limiting State Flexibility in Drug Pricing, 379 New Eng. J. Med. 1002, 1002 (2018).
[37] Centers for Medicare and Medicaid Servs., Dear State Medicaid Director: Healthy Adult Opportunity Program at 9 (Jan. 30, 2020), https://www.medicaid.gov/sites/default/files/Federal-Policy-Guidance/Downloads/smd20001.pdf.
[38] Sarah Owermohle & Sarah Karlin-Smith, Drugmakers Blast Medicaid Block Grants, POLITICO (Jan. 31, 2020), https://www.politico.com/newsletters/prescription-pulse/2020/01/31/drugmakers-blast-medicaid-block-grants-784910.
[39] Medicaid is insulated from price increases in existing drugs that outpace the inflation rate. 42 U.S.C. § 1396r-8(c)(2)(A) (2012). More than half of Medicaid rebates have been estimated to be due to these protections. Dep’t of Health & Human Servs., Office of Inspector Gen., OEI-03-13-00650, Medicaid Rebates for Brand-Name Drugs Exceeded Part D Rebates by a Substantial Margin 8 (2015).
[40] 42 C.F.R. § 447.505(c)(7) (2016).
[41] Erin C. Fuse Brown & Elizabeth Y. McCuskey, Federalism, ERISA, and State Single-Payer Health Care, 168 U. Penn. L. Rev. 389, 420–21 (2020).
[42] However, PBMs for ERISA plans who operate under certain types of revenue structures may feel that challenging the law is in their financial interest.
[43] Rachel Sachs, Administration Outlines Plan to Lower Pharmaceutical Prices in Medicare Part B, Health Aff. (Oct. 26, 2018), https://www.healthaffairs.org/do/10.1377/hblog20181026.360332/full; Ctrs. for Medicare & Medicaid Servs., International Pricing Index Model for Medicare Part B Drugs, 83 Fed. Reg. 54,546 (Oct. 30, 2018).
[44] Ctrs. for Medicare & Medicaid Servs., International Pricing Index (IPI) Model (2018), https://innovation.cms.gov/innovation-models/ipi-model.
[45] Elijah E. Cummings Lower Drug Costs Now Act of 2019, H.R. 3, 116th Cong. (2019).
[46] Rachel Sachs, Understanding the House Democrats’ Drug Pricing Package, Health Aff. (Sept. 19, 2019), https://www.healthaffairs.org/do/10.1377/hblog20190919.459441/full.
[47] Elijah E. Cummings Lower Drug Costs Now Act of 2019, at § 101.
[48] 83 Fed. Reg. at 54,550.
[49] Elijah E. Cummings Lower Drug Costs Now Act of 2019, at § 101.
[50] Panos Kanavos et al., Does External Reference Pricing Deliver What it Promises? Evidence on Its Impact at National Level, 21 European J. Health Econ. 129, 136 (2020).
[51] Id. at 129, 83 Fed. Reg. at 54,557.
[52] 83 Fed. Reg. at 54,557.
[53] Nicholas S. Downing et al., Regulatory Review of New Therapeutic Agents – FDA Versus EMA, 2011–2015, 376 N. Eng. J. Med. 1386, 1386 (2017) (concluding that the FDA approves products more quickly than does its peer agency in Europe).
[54] Elijah E. Cummings Lower Drug Costs Now Act of 2019, at § 101.
[55] Kanavos et al,. supra note 50, at 144.
[56] Elijah E. Cummings Lower Drug Costs Now Act of 2019, at § 101.
[57] Id. at § 201, 202.
[58] Prescription Drug Pricing Reduction Act of 2019, S. 2543, 116th Cong., at § 106, 128 (2019).
[59] Drug Pricing in America: A Prescription for Change, Part II, Hearing before the Comm. On Finance, U.S. Senate, 116th Cong., at 20 (Feb. 26, 2019), https://www.finance.senate.gov/imo/media/doc/37143.pdf.
[60] To be sure, there are isolated cases in which manufacturers have followed through on threats to make their drugs unavailable in certain international markets, where the governments in question were only willing to pay a price lower than what the manufacturer would accept. Perhaps Vertex’s dispute with the National Health Service in the UK over reimbursement for its newest cystic fibrosis products is the most prominent example. However, in other ways the notoriety of these exceptions may prove the rule: in the vast majority of cases, companies do accept health insurers’ offers and make their products available for sale. Indeed, Vertex ultimately reached a deal with the NHS to make its products available. Denise Roland, Vertex Resolves Yearslong Drug-Price Dispute in England, Wall St. J. (Oct. 24, 2019), https://www.wsj.com/articles/vertex-resolves-yearslong-drug-price-dispute-in-england-11571928563.
[61] H.R. 3 envisions that drug manufacturers who refuse to negotiate or fail to reach an agreement with HHS will be assessed a high Non-Compliance Fee, starting at 65 percent of the gross sales of the drug in question in the previous year and increasing by 10 percent every quarter, to a maximum of 95 percent. Elijah E. Cummings Lower Drug Costs Now Act of 2019, at § 102.
[62] Massachusetts Office of the Attorney General, Letter to John C. Martin, Chairman and Chief Executive Officer of Gilead Sciences (Jan. 22, 2016), http://freepdfhosting.com/4a608bcd36.pdf.
[63] See Amy Kapczynski & Aaron S. Kesselheim, “Government Patent Use”: A Legal Approach to Reducing Drug Spending, 35 Health Affairs 791 (2016) (proposing the use of 28 U.S.C. § 1498 to lower prices for high-cost drugs).
[64] Kamal et al., supra note 2.
[65] See, e.g., 42 C.F.R. § 447.53(b) (2013) (providing that individuals with family income less than or equal to 150% of the federal poverty line may not be charged more than $4 in cost-sharing for preferred drugs or $8 for non-preferred drugs, inflation-adjusted).