PhRMA Challenges Oregon Drug Pricing Transparency Laws

On December 9, 2019, the Pharmaceutical Research and Manufacturers of America (PhRMA) filed a civil action in the United States District Court for the District of Oregon seeking declaratory and injunctive relief against the Acting Director of the Oregon Department of Consumer and Business Services (OR DCBS) to prevent enforcement of two Oregon laws aimed at containing drug prices: H.B. 4005, which was enacted on March 12, 2018, and H.B. 2658, which was enacted on June 20, 2019.

As discussed in our prior post (see here), H.B. 4005 requires drug manufacturers to submit an annual report containing extensive pricing and cost information for each prescription drug that has a price (defined as the wholesale acquisition cost, or WAC) of $100 of more for a one-month supply or for a course of treatment lasting less than one month, and that had a net increase of 10% or more in the price over the course of the previous calendar year.  H.B. 4005 also requires drug manufacturers to report pricing and cost information for new prescription drugs within 30 days after introducing a drug for sale in the United States at a price that exceeds the threshold for specialty drugs set in the Medicare Part D program ($670 in 2020).  Information provided to OR DCBS by manufacturers will be posted on the OR DCBS website.  H.B. 4005 states that trade secrets may not be posted on the website if “the public interest does not require disclosure of the information.”  OR DCBS regulations set forth exacting requirements for demonstrating that a designated trade secret is entitled to protection from disclosure, and, in our experience, the agency has not hesitated to question, and request additional information in support of, a manufacturer’s trade secret designation.

Oregon’s more recent law, H.B. 2658, imposes an additional requirement for drug manufacturers to report price increases to OR DCBS at least 60 days before an increase in (1) the price of a brand-name drug that will result in a cumulative increase of 10% or more, or an increase of $10,000 or more, in the price of the brand-name drug within a 12-month period; or (2) the price of a generic drug that will result in a cumulative increase of 25% or more and an increase of $300 or more in the price of the generic drug within a 12-month period.  The report must include the date and dollar amount of the increase, and a statement of whether the increase is necessitated by a change or improvement in the drug, and, if so, a description of the change or improvement.  There is an exception for a generic drug that is manufactured by four or more companies and is either (1) marketed and distributed pursuant to an abbreviated new drug application; (2) an authorized generic drug; or (3) entered the market before 1962 and was not originally marketed under a new drug application.

Similar to the complaints PhRMA filed challenging similar laws in California and Nevada (see our coverage here, here, and here), PhRMA’s latest complaint alleges that HB 4005 and HB 2568 violate federal law on four separate grounds.  First, PhRMA asserts that both laws violate the dormant Commerce Clause by restricting drug prices nationwide.  (Readers may recall that the dormant Commerce Clause was used to strike down Maryland’s price gouging law in 2018.)  Second, PhRMA asserts that both laws violate the First Amendment by compelling speech.  Third, PhRMA asserts that both laws are preempted by federal law governing trade secrets, including the Defend Trade Secrets Act (codified at 18 U.S.C. § 1836(b)).  Fourth, PhRMA asserts that Oregon’s “threatened abrogation of trade secret protection also effects an unconstitutional taking of property without any compensation” in violation of the Fifth Amendment’s Takings Clause.

PhRMA’s lawsuit seeks a declaration that H.B. 4005 and H.B. 2658 violate federal law as well as an injunction prohibiting OR DCBS from implementing or enforcing either law.  However, drug manufacturers have already had to submit information to OR DCBS under H.B. 4005; the reporting requirement for new drugs went into effect on March 15, 2019 and drug manufacturers with price increases were required to submit reports by July 1, 2019.  H.B. 2658 is set to take effect on January 1, 2020.  The District Court judge recently granted Oregon’s motion to extend the time for the state’s response; Oregon’s response to PhRMA’s complaint is now due by February 14, 2020.  We will continue to monitor this case and other state efforts to constrain drug prices.