The U.S. Court of Appeals for the Fourth Circuit last month handed manufacturers and wholesalers of off-patent drugs a victory by ruling that Maryland’s anti-price gouging act violates the U.S. Constitution’s dormant commerce clause. The legislation, like many others, was enacted in the wake of the Martin Shkreli case, where the former Turing Pharmaceutical CEO raised the price of a vital and old prescription drug by 5,000 percent. Although the Circuit sympathized with consumers affected by this type of conduct, it held, in a majority opinion written by Judge Stephanie Thacker, that Maryland overstepped its constitutional limits in seeking to compel manufacturers of off-patent or generic drugs to act in accordance with Maryland law outside of Maryland.
The statute, “An Act concerning Public Health — Essential Off-Patent or Generic Drugs — Price Gouging — Prohibition,” prohibits manufacturers and wholesale distributors from engaging in price gouging in the sale of essential off-patent or generic drugs. It defines “price gouging” as the “unconscionable increase in the price of a prescription drug.” § 2-801(c). Manufacturers and wholesalers who engage in price gouging face a civil penalty of $10,000 per violation or an injunction against the sale of the drug at the increased price. The Act authorizes the Maryland Medical Assistance Program to notify the Attorney General of any price increase. Maryland Governor Larry Hogan refused to the sign the bill because of constitutional concerns, but it still became law and went into effect on October 1, 2017.
Before the Act took effect, the Association...
