We recently wrote about the newly enacted Nevada drug price transparency law here. The law requires manufacturers of prescription diabetes drugs to disclose certain drug cost information to the state Department of Health and Human Services (“Department”). In addition, the law imposes several unique reporting requirements on non-profit patient advocacy groups and pharmaceutical sales representatives. We expected that these reporting requirements would garner some attention and, likely, some opposition. We were correct.
On September 1, 2017, PhRMA and BIO filed a complaint in the U.S. District Court for the District of Nevada challenging the new law. The complaint challenges the law on constitutional grounds and alleges that it is preempted by both federal patent and trade secret laws. The complaint also includes a takings claim and an interstate commerce interference claim. First, the complaint alleges that the Nevada law directly conflicts with the Hatch-Waxman Act which allows patent holders to exclude others from making, using or selling new inventions. Second, the complaint alleges that the Nevada law nullifies the trade secret protections afforded by the Defend Trade Secrets Act of 2016. Third, the complaint alleges that enforcement of the Nevada law constitutes a taking without just compensation because it deprives affected manufacturers of trade-secret protection for their confidential information. Fourth, and finally, the complaint alleges that the Nevada law violates the dormant Commerce Clause because the penalties it imposes relative to drugs sold in Nevada would in fact impact those prices nationwide. As initial relief, the plaintiffs seek an injunction prohibiting the Department from implementing or enforcing the law.
Indeed, the theme of the complaint is that the Nevada law undermines the federal mechanisms that incentivize pharmaceutical manufacturers to invest substantial money, time and effort into the development of critical diabetes drugs, and fails to acknowledge the risks associated with such innovative ventures. The complaint notes that although there have been substantial advances in diabetes drug treatments, new diabetes treatments and improving existing treatments require continuing research and, to that end, PhRMA’s and BIO’s members invest billions each year. Moreover, the compliant highlights the more recent preventative focus in diabetes research and development and explains that, despite recent advancements, “costly and labor-intensive research continues to lay the groundwork for the next generation of treatments.” The complaint alleges that, on average, a diabetes drug manufacturer spends between 10 and 15 years and $2.6 billion developing a new medicine with no guarantee of a return on any of these investments.
To date, the state of Nevada has not filed a responsive pleading. We will continue to keep you apprised of developments in this litigation.