Health Law Daily Hypothetical injury not enough to stop California’s new prescription drug pricing legislation
Tuesday, September 4, 2018

Hypothetical injury not enough to stop California’s new prescription drug pricing legislation

By Rebecca Mayo, J.D.

A party must allege a concrete actual or imminent injury rather than a hypothetical injury in order to have standing. Pharmaceutical Research and Manufacturers of America’s (PhRMA) request for an injunction to stop California legislation imposing various notice, reporting, and justification obligations on the manufacturer of a prescription drug sold to certain purchasers was dismissed for lack of standing. The court noted that while PhRMA members are the leading research-based pharmaceutical and biotechnology companies in America and the legislation is directed squarely at the pharmaceutical industry, standing may not be inferred from the pleadings and PhRMA failed to make the necessary allegations to show they have standing (Pharmaceutical Research and Manufacturers of America v. Brown, August 28, 2018, England, Jr., M.).

Legislation. The legislation amended the California Health and Safety Code to include a chapter titled "Prescription Drug Pricing for Purchasers." Under this chapter, purchasers must be notified at least 60 days before increasing the drug’s federally-defined wholesale acquisition cost if the course of therapy has a wholesale acquisition cost of more than $40 and the proposed increase would result in cumulative increase of 16 percent or more over the two calendar years prior to the current year. The 60-day notice must also include a statement whether a change or improvement in the drug necessitates the price increase and describing the change, if one occurred. The drug manufacturer must also report certain information to California’s Office of Statewide Health Planning and Development (OSHPD) quarterly for each prescription drug subject to the 60-day notice provisions. Failure to report any of the required information may result in a civil penalty of $1,000 per day for every day after the notification period.

The complaint. In addition to the potential penalty, PhRMA alleged that its members suffered classic economic harm because they were barred from increasing their prices across the country if they failed to comply with California’s notice requirements. PhRMA filed a complaint arguing that the legislation violated the Commerce Clause by creating a de facto 60-day price freeze nationwide on qualifying drugs, violated the First Amendment by compelling the communication of specified information, and violated the Due Process Clause by being unconstitutionally vague.

Sovereign immunity. For a citizen to bring a suit against a state officer in their official capacity in federal court, the state official must have some connection with the enforcement of the act. PhRMA’s complaint stated only that the Governor signed the bill into law and was responsible for the execution of the bill. The court found that this did not amount to more than the general oversight of the executive branch and did not meet the requisite connection between the Governor and the act. The motion to dismiss was granted, and PhRMA was granted leave to amend.

Standing. The issue here was whether PhRMA pleaded sufficient facts to establish that any PhRMA member had been injured or faced an imminent injury and, thus, whether any PhRMA member would have standing to sue in their own right. The court found that the complaint alleged that PhRMA’s members might be harmed at some point by operation of the statute but did not state that any members actually planned to make a pricing change that would force it to give 60-days notice and trigger reporting, or that any members would affirmatively refrain from increasing a drug price in order to avoid triggering the requirements. PhRMA plead speculatively about what members may do and how the law would injure the members if they were to trigger the requirements. The court found that this was not sufficient to take the possibility of future harm outside the realm of conjecture. The complaint was dismissed; however PhRMA was granted leave to amend.

The case is No. 2:17-cv-02573-MCE-KJN.

Attorneys: Jeffrey L. Handwerker (Arnold & Porter Kay Scholer LLP) and Annie Smith Amaral (Downey Brand LLP) for Pharmaceutical Research and Manufacturers of America. Selma Michele Inan, Office of the Attorney General, for Edmund Gerald Brown, Jr.

Companies: Pharmaceutical Research and Manufacturers of America

MainStory: TopStory CaseDecisions CMSNews FDCActNews DrugBiologicNews PartCNews PrescriptionDrugNews CaliforniaNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More
Health Law Daily

Health Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on health legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More