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Frosh presses states’ rights in drug-pricing appeal

From The Daily Record

By Steve Lash

January 28, 2019

Attorney general makes final pitch for justices’ review

In his final bid for Supreme Court review and restoration of a state law aimed at preventing price gouging, Maryland Attorney General Brian E. Frosh urged the justices Friday to hold that states may protect their residents from unwarranted price increases for generic drugs, even if those costs are set out of state.

Frosh’s high court filing comes as the justices consider his request that they review a 4th U.S. Circuit Court of Appeals decision that the Constitution’s commerce clause reserves such cross-border regulation to Congress, not state legislatures.

Frosh, in pressing for the justices’ review, said the 4th Circuit read the clause too narrowly.

“This [Supreme] Court has not yet addressed whether the Commerce Clause prohibits states from protecting their citizens from abusive commercial practices that are targeted at in-state consumers but originate out of state, and uncertainty over that question is now directly interfering with states’ ability to address a current, well-documented public health risk,” Frosh wrote in the filing co-signed by Julia Doyle Bernhardt, the attorney general’s litigation chief and attorney of record before the high court. “This case presents an important federalism question that only this court can resolve.”

The Association for Accessible Medicines, a generic drug industry group challenging the law, has told the justices the 4th Circuit was right and that review and reinstatement of the law “would not only upend longstanding, well-established (Supreme Court) precedent, but also fundamentally alter interstate commerce as we know it.”

“Simply put, the interstate market could not function if every state were allowed to impose its own rules on commerce that applied coast to coast,” AAM’s lead attorney, Jay P. Lefkowitz, stated in papers filed with the justices this month. “Any other rule would produce the sort of ‘economic Balkanization’ that the Constitution was designed to prevent.”

Lefkowitz is with Kirkland & Ellis LLP in New York.

The Supreme Court has not set a date to vote on Frosh’s request for review. The case is docketed at the high court as Brian E. Frosh et al. v. Association for Accessible Medicines, No. 18-546.

The law, which was to go into effect Oct. 1, 2017, would prohibit a significant price increase of an essential off-patent or generic drug. It would give the Maryland attorney general the power to order the manufacturer to explain the reasons behind a significant price boost as well as request a court order restraining or enjoining a violation.

Gov. Larry Hogan in June 2017 allowed the law to go into effect without his signature, citing his concerns about its constitutionality.

The Association for Accessible Medicines – which denies the allegation of price gouging — filed suit in July 2017, challenging the law as unconstitutional. U.S. District Judge Marvin J. Garbis, who sits in Baltimore, dismissed the commerce clause challenge, prompting AAM to appeal.

Overturning Garbis’ dismissal, a divided three-judge panel of the 4th Circuit panel last April found three factors pointing to the law’s violation of the Constitution’s clause.

“First, the act is not triggered by any conduct that takes place within Maryland,” Judge Stephanie D. Thacker wrote in the majority opinion that Judge G. Steven Agee joined. “Second, even if it were, the act controls the prices of transactions that occur outside the state. Finally, the act, if similarly enacted by other states, would impose a significant burden on interstate commerce involving prescription drugs.”

Judge James A. Wynn Jr., in dissent, said the Maryland statute falls within the state’s “general police powers to regulate matters of legitimate local concern” without violating the commerce clause.

In July, the full 4th Circuit refused to review the panel’s decision, prompting Frosh’s bid for Supreme Court review.