California Sued by Drug Companies Over Transparency Law

On Friday, the pharmaceutical industry filed a lawsuit challenging the constitutionality of a new law that California Governor Jerry Brown signed and who many consider to be the most comprehensive legislation related to transparency in prices of prescription drugs in the country.

The Pharmaceutical and Manufacturers of America, calling the two-month old law unconstitutional and unprecedented, argues that the new legislation will dictate national policy for health care related to prices of drugs.

The complaint was filed in Sacramento and said as well that the new law, which will take effect starting in January, singles out the makers of drugs as the only determinant for drug costs, ignores roles that other entities play in the cost paid by patients for their prescription drugs, and will create stockpiling as well as a reduction in competition.

PhRMA, which is a national trade group representing 37 drug companies, furiously attempted to defeat the measure, partially due to fear it could become a model for the nation and the first big step towards controls on prices.

The complaint has asked for the court to declare that certain SB 17 provisions violated the United States Constitution.

It also asks the court to prohibit California from the implementation and enforcing of those particular provisions in the law.

Co-authors of the bill, San Francisco Assemblyman David Chiu along with Assemblymen Jim Wood from Healdsburg and Ed Hernandez of West Covina were not surprised by the move made by the trade group.

Chiu said it was disappointing but he was not surprised that the industry continues to fight against transparency for the consumer who is suffering from drug costs that have skyrocketed. He added that patients deserve better.

Executive Director Anthony Wright of Health Access California, a healthcare advocacy group, called the lawsuit baseless.

SB 17’s goal is to make prices of drugs for both private and public health plans in California more transparent. It would require the pharmaceutical companies to give notification to the government health plans and health insurers a minimum of 60 days prior to scheduled price hikes for prescription drugs that exceed 16% over a period of two-years. It also would force drug makers to explain reasons that are behind the increases.

The lawsuit named Governor Brown as well as the Director of the California Office of Statewide Health Planning and Development Robert David, as defendants.