Earlier this year, Nevada became one of the first states in the country to implement drug price regulations as legislation on the issue stalled at a national level. The pharma industry now has its response: a lawsuit alleging that the state’s new law violates the Constitution in four ways.
Top lobby groups BIO and PhRMA, in a lawsuit filed in federal court in Nevada, say the state’s pricing restrictions on diabetes meds are “unprecedented and unconstitutional.” The groups argue that the law “interferes with the federal patent and trade-secret laws, deprives manufacturers of their property interest in their trade secrets, and improperly overrides the regulatory choices of every other state.”
Passed in June, Nevada’s legislation aims to bring transparency to diabetes drug pricing by forcing companies to hand over info on manufacturing, marketing and advertising costs for essential diabetes drugs, as well as profits, with some details to be posted on a government website. It also zeroes in on pharmacy benefit managers and seeks to obtain information about confidential rebates, which the industry argues are proprietary.
BIO represents biotechnology industry players, while PhRMA advocates for major drugmakers. Sanofi, Eli Lilly and Novo Nordisk are the leading diabetes drugmakers, and the companies have faced criticism for years over rising insulin prices. The pharma companies have countered that growing rebates to PBMs are a driving force behind the increases. PBMs say their tough negotiations save the healthcare system billions in drug expenses.
Before signing the current version of the state’s pricing regulation, Nevada Gov. Brian Sandoval vetoed an earlier version because it left out any focus on PBMs, according to a veto statement. The lawmakers came back to the table with SB 539, but the drug industry still opposes the regulations.
In a statement, Gov. Sandoval said the lawsuit "does not come as a surprise because pharmaceutical companies publicly threatened litigation from the inception of Senate Bill 539."
"My office will review the filing in consultation with the Attorney General’s office and I’m confident the Attorney General will vigorously defend this existing state law which was passed with bipartisan majorities of both houses," Gov. Sandoval continued.
The Nevada Department of Health and Human Services declined to comment on the suit.
Maryland has also passed a price regulation bill focusing on “unconscionable” price hikes in the generics industry. That approach gives the state’s attorney general the power to ask companies to explain high price increases. If he determines there’s been a violation of the law, he can ask a court to intervene and issue a fine.
Taking a similar approach against that bill, the generics industry called the Maryland legislation “unconstitutional and invalid” in a lawsuit. Elsewhere, dozens of states have introduced drug pricing legislation aimed at increasing transparency or limiting price hikes.
The moves come after years of talk in Congress about reducing drug prices as controversial price increases from companies such as Turing Pharmaceuticals, Valeant and Mylan fueled a public and political debate on the issue. PhRMA responded by calling some of those companies outliers and expelling some from its rolls.
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But it is also spending heavily to keep any federal restrictions from gaining traction. Pharma's spending on lobbying leapt 36% during the first quarter to $47.4 million. So far, despite calls for price controls of some kind from both parties, no proposal has gained much steam.