Generics Group Sues Maryland -- WSJ

By Peter Loftus Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 7, 2017).

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A trade group for the generic-drug industry filed a lawsuit Thursday seeking to block Maryland's new state law aimed at curbing steep price increases for generic drugs, the first law of its kind in the U.S.

The law, enacted in May and set to take effect in October, bars "unconscionable" price increases for generic drugs. It authorizes the Maryland attorney general to sue companies to try to roll back certain price hikes and seek civil penalties of $10,000 per violation.

It was enacted in response to what supporters said were unjustified price increases for older drugs that are essential to patients' health, such as Turing Pharmaceuticals' 5000% increase in the price of the antiparasitic drug Daraprim in 2015.

The Association for Accessible Medicines, which represents more than 20 generic-drug companies including Teva Pharmaceutical Industries Ltd. and Mylan NV, filed its lawsuit in federal court in Maryland against the state's attorney general and secretary of the health department.

The lawsuit argues the law overreaches because it would affect pricing decisions in other states, and that it too vaguely defines what constitutes price gouging. It also alleges the law violates the U.S. Constitution's commerce and due-process clauses.

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The new law defines price gouging as an increase that is "excessive and not justified by the cost of producing the drug or the cost of appropriate expansion of access to the drug to promote public health."

The lawsuit says the law amounts to a "sweeping price restraint" with terms "so vague as to leave the state officials tasked with implementing and enforcing the law nearly unbounded discretion."

"There are absolutely no criteria, no guardrails, no parameters of what constitutes an appropriate price increase or an excessive price increase, " Chip Davis, president and CEO of the Association for Accessible Medicines, said in an interview.

The lawsuit asks a federal judge to issue an injunction against the implementation and enforcement of the law, and a declaration that it's unconstitutional and invalid.

A spokeswoman for Maryland Attorney General Brian Frosh, a Democrat, said the office is reviewing the lawsuit. Maryland Gov. Larry Hogan, a Republican, allowed the law to become enacted without his signature because he had concerns it wouldn't withstand legal challenges, he said in a letter to the speaker of the Maryland House of Delegates in May.

Mr. Frosh was a supporter of the new law. Last year, he was one of 20 state attorneys general to sue several generic-drug makers, including units of Mylan and Teva, accusing them of colluding to fix prices on an antibiotic and a diabetes medication. Mylan and Teva denied the allegations.

While steep price hikes for newer, brand-name drugs have sparked criticism from patients and politicians, pricing for generic drugs also is increasingly coming under scrutiny. The federal Government Accountability Office issued a report in August finding that more than 300 of 1,441 established generic drugs analyzed had at least one extraordinary price increase of 100% or more between 2010 and 2015.

Maryland is one of about 30 states in which bills targeting high drug prices have been introduced this year. Lobbyists for the pharmaceutical industry have mounted aggressive campaigns in state capitals to fight the legislation.

In June, Nevada's governor signed a bill to require manufacturers of diabetes drugs, as well as industry middlemen known as pharmacy-benefit managers, to disclose certain information about costs and profits associated with the drugs.

Write to Peter Loftus at peter.loftus@wsj.com

(END) Dow Jones Newswires

July 07, 2017 02:47 ET (06:47 GMT)