The recently enacted California drug price transparency law SB 17 is facing a legal challenge to its constitutionality in the form of a PhRMA lawsuit filed in the US District Court for the Eastern District of California on December 8. In PhRMA v. Brown, PhRMA is seeking declaratory judgment that the drug pricing provisions of SB 17 are unconstitutional and a permanent injunction against their implementation and enforcement.
PhRMA is challenging the constitutionality of the law on three grounds. First, PhRMA alleges that the law’s provision requiring drug manufacturers to provide 60 days’ advance notice of a triggering increase in WAC amounts to a 60-day price freeze that applies nationally. PhRMA argues that in restricting prices nationally, California is violating the “dormant” application of the Commerce Clause, which limits states’ right to interfere in interstate commerce.
Secondly, PhRMA alleges that SB 17 violates the First Amendment because both the advance notice requirements and the transparency reporting to the Office of Statewide Health Planning and Development constitute compelled speech. PhRMA contends that the court must apply heightened judicial scrutiny of the compelled speech because SB 17 discriminates based on speaker, content, and viewpoint by targeting drug manufacturers and compelling disclosures that suggest that drug prices are too high and manufacturers are responsible.
Finally, PhRMA is alleging that SB 17 violates the Due Process Clause of the Fourteenth Amendment as unconstitutionally vague. PhRMA argues that SB 17 fails to articulate whether WAC increases taken in 2016 and 2017 will count toward the reporting threshold of more than 16% over three years.
The suit has been assigned to Judge Morrison C. England, Jr. and referred to Magistrate Judge Kendall J. Newman.