Fourth Circuit Denies Maryland’s Request for En Banc Rehearing: Drug Price-Gouging Law Remains Unconstitutional

Arent Fox’s health care attorneys have been following this case and have written about it previously on our Health Care Counsel blog here and here.

The denial of the State’s petition effectively upholds the April 13 ruling in which the three-judge panel held that the Maryland statute prohibiting “price gouging” with respect to prescription drug sales was unconstitutional as violative of the Commerce Clause of the United States Constitution. As other state legislatures (Louisiana and Illinois, in particular) are considering passing similar laws, this decision is significant to pharmaceutical manufacturers, wholesale distributers, and other industry stakeholders, as it may deter those states from passing similar legislation.

However, the decision to deny an en banc rehearing was not unanimous, and Judge Wynn authored his own dissent to the denial similar to the dissent that he authored in April as part of the panel that heard the case. Judge Wynn voted in favor of granting an en banc rehearing due to the unique nature of the case and potential split from other Circuits and Supreme Court jurisprudence on the Commerce Clause. Judge Wynn reiterated that the majority’s opinion in the April 13 ruling was premature, since the State had not as yet “sought to enforce the statute against any generic [drug] manufacturer.” Further, Judge Wynn took issue with the majority’s “myopic focus” on the location of where drug sales physically occur as a justification to strike down the law. He stated that “the modern nationwide distribution and reimbursement systems for generic pharmaceuticals counsel against the location-focused approach of the majority opinion.” He also argued that prior Supreme Court jurisprudence related to the Commerce Clause requires a “sensitive, case-by-case analysis of purpose and effects” which was absent in the majority’s “improper” pre-enforcement invalidation of the statute.

The Maryland Attorney General, Brian Frosh, may decide to petition the Supreme Court of the United States to review the Fourth Circuit’s decision. However, as of the date of this posting, no further action on the case has been taken by Attorney General Frosh.

We will continue to monitor court action as states continue to enact drug price transparency legislation and grapple with lawsuits questioning the constitutionality of legislation that has already been passed.