Judge: Maryland can act against drug price-gouging, for now

An effort by drug makers to block Maryland's first-in-the-nation law against pharmaceutical price gouging was denied by a federal judge on Friday.

A group representing makers of generic prescription drugs sought to stop the law from taking effect this Sunday, calling it an "unconstitutional overreach" that will create market instability.

U.S. District Judge Marvin Garbis denied the request by the Association for Accessible Medicines for an injunction as its lawsuit proceeds. He is allowing litigation to move forward on the association's contention that the law is vague, but dismissed its other arguments.

Garbis wrote that the association has not persuaded him that the law "is substantially likely to be held unconstitutional."

"Moreover, the court finds that an erroneous grant of a preliminary injunction would cause substantial harm by permitting the sale of essential drugs to Maryland residents at unconscionable prices," Garbis wrote.

On the vagueness argument, Garbis wrote: "The Court recognizes that there are reasonable — though not necessarily prevailing — contentions asserted by the Plaintiff."

Jeff Francer, senior vice president and general counsel for AAM, said the organization plans to immediately appeal to the 4th U.S. District Court of Appeals. He said the association is confident Supreme Court and appeals court precedent "clearly restrict states from directly regulating wholly out-of-state commercial activity," as the Maryland law does.

"As AAM has stated from the outset, this law will hurt patient access to safe, affordable generic medicines in Maryland and the rest of the U.S., and will create untenable uncertainty for generic drug makers who may be left with no choice but to abandon markets altogether," Francer said.

Maryland Attorney General Brian Frosh said he's confident the state will prevail.

"We won this round big time," Frosh, a Democrat, said. "Not only did he deny their preliminary injunction, he also dismissed most of their case ... It's hard to win a motion to dismiss, and the fact that we got it for most of the causes of action here I think is very significant."

Vincent DeMarco, president of the Maryland Citizens' Health Initiative, which lobbied for the legislation, said "we are thrilled that Maryland is moving forward and hope that states across the country will copy/paste our landmark law to protect consumers nationwide."

The Maryland law is one of the strongest moves yet by a state to address rising drug prices, an issue Congress has been unable to confront.

The attorney general can use the law to sue makers of off-patent or generic drugs that make an "unconscionable" price increase — described as an excessive increase, unjustified by the cost of producing or distributing the drug.

Manufacturers could face a fine of up to $10,000 per violation. The attorney general also can request information from the corporations that instituted price increases to help determine if price gouging occurred.

Concerns about sky-high drug prices have been building for years nationally. They boiled over last year after it was revealed the Turing Pharmaceuticals and Canadian drug maker Valeant Pharmaceuticals were hiking prices on previously low-priced medicines for patients with heart problems and other life-threatening conditions.

Unlike most countries, the U.S. doesn't regulate pricing for drugs, leaving their makers free to set prices as high as the market will bear. Congress has avoided passing laws that would change how drugs are priced, in keeping with the wishes of the powerful pharmaceutical lobby.

Maryland isn't the only state taking action.

Nevada Gov. Brian Sandoval signed into law in June a measure requiring drug makers to annually disclose the list prices they set, profits they make and discounts they give market middlemen on insulin.

Ohio residents have put an initiative on next year's ballot that would bar state entities from buying drugs at prices higher than those paid by the U.S. Department of Veterans Affairs, which receives deep discounts.