Drug companies sue to block California drug price law

Logo of the Pharmaceutical Research and Manufacturers of America. (Wikimedia commons, Fair use)

SACRAMENTO, Calif.— Pharmaceutical companies on Friday sued to block a new California law that would require them to give advance notice before big price increases.

The law was approved this year in response to consumer outrage over a rise in drug spending and high costs for some prescription treatments, including new Hepatitis C medications and EpiPens to control allergic reactions.

The Pharmaceutical Research and Manufacturers of America, a trade group for drugmakers, said in its lawsuit that California’s law illegally tries to dictate nationalhealth policy. Because the law is tied to a national measure of drug prices, PhRMA argues that California’s advance notification requirement could restrict drugmakers’ ability to raise prices in other states.

The group also argued the law is unconstitutionally vague and violates the First Amendment by forcing drug companies to justify price increases.

The law, set to take effect Jan. 1, passed over fierce objections from PhRMA and California’s thriving medical research industry. It requires 60 days’ notice to raise national wholesale prices above a certain threshold.

“The law creates bureaucracy, thwarts private market competition, and ignores the role of insurers, pharmacy benefit managers and hospitals in what patients pay for their medicines,” James Stansel, PhRMA’s executive vice-president and chief counsel, said in a statement Friday.

The law does not reflect the actual costs paid by major purchasers including insurers and the government, which negotiate prices and receive discounts, drug companies said. They also warn that advance notice will lead pharmacies and other drug purchasers to stockpile, creating shortages of medications.

Sen. Ed Hernandez, a Democrat from West Covina, who wrote the bill, said when it passed the Legislature that it would “set national health care policy” a statement PhRMA uses as evidence the bill is unconstitutional.

“California’s Legislature sent a crystal-clear message that it is time for a change,” said Charles Bacchi, president of and CEO of the California Association of HealthPlans, which supported the drug pricing law. “This action proves pharma doesn’t care what California’s voters and elected representatives think.”

The lawsuit was filed in U.S. District Court in Sacramento. It names Gov. Jerry Brown and Robert David, head of the Office of Statewide Health Planning and Development, the agency responsible for enforcing the transparency law.

Representatives for Brown, David and the California Department of Justice declined to comment.