Life Science Compliance Update

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September 18, 2017

PhRMA and Bio Sue Nevada

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On September 2, 2017, Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO) filed a lawsuit challenging the constitutionality of Nevada’s first-in-the-nation insulin transparency law. The two groups allege that implementing the law would violate patient rights and nullify trade secret protections. PhRMA and BIO are asking the U.S. District Court to declare that provisions of the Nevada law, passed during the 2017 legislative session, are preempted by federal law and violate the U.S. Constitution.

The complaint alleges that the law violates the Taking Clause of the Fifth Amendment – which prohibits the government from taking private property without just compensation – and the Commerce Clause – which bars the states from interfering with commerce in other states. For good measure, the complaint also alleges that the law violates federal patent law and trade secret law, stating the legislation removes trade secret protections for highly sensitive information and improperly infringes on federal authority over patent rules.

The groups said the new law also requires the state to publish company-specific reports of information disclosed on a public website. If that is done, then the trade secret is no longer secret and will lose its value – not only in Nevada but also throughout the nation.

The complaint also cites Gov. Brian Sandoval’s veto of the original version of the insulin transparency bill. Sandoval believed that Cancela’s bill too narrowly focused on the role that pharmaceutical manufacturers play in setting drug prices without requiring the same level of transparency from the middlemen in the drug pricing process, known as pharmacy benefit managers. PBMs, the go-between on drug costs for manufacturers, insurance companies and pharmacies, negotiate discounts with and receive rebates from manufacturers but aren’t required to disclose how much of those savings they pass along to insurers and how much they keep for themselves.

The complaint refers to Sandoval’s veto in which he noted that the original bill posed “serious risks of unintended and potentially detrimental consequences for Nevada’s consumer patients, not the least of which is the possibility that access to critical care will become more expensive, more restricted and less equitable.”

State officials have tried to emphasize to manufacturers during the implementation process that the goal of the law is to gather information to help policymakers make good health care policy decisions and so consumers can make good choices about their own health care. Since the end of the legislative session, officials with the state Department of Health and Human Services have been in active communication with PhRMA, BIO and individual pharmaceutical manufacturers, who the state characterized as “cooperative” earlier this week.

PhRMA and BIO Statements

“Nevada’s law is, in actuality, an attempt to set de facto price controls on the few successful products that do make it to market, and in doing so, it will chill the massive private investment needed to spur our amazing biomedical innovation ecosystem that is providing hope to patients in Nevada and throughout the world,” said Tom DiLenge, BIO’s president for advocacy, law, and public policy.

“If provisions of SB 539 go unchallenged, then Nevada’s law will conflict with and in many cases override federal law and the laws of 49 other states – laws that foster pharmaceutical innovation and protect intellectual property and trade secrets. For this reason and others, provisions of SB 539 are unconstitutional and should not be implemented,” said PhRMA Executive Vice President and General Counsel James Stansel.

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