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Court Rules California Can Share Advance Notice of Rx Price Hikes

Last week, a California Court of Appeal lifted an injunction that prevented the state from sharing drug manufacturers’ advance notice of drug price increases. The ruling was a win for states working to advance drug price transparency in the face of manufacturers’ sometimes overly-broad claims of trade secret protection for their prices.

In 2017, California became the first state in the nation to pass drug price transparency legislation, since then nine other states have followed suit. California’s law requires drug manufacturers to submit 60-day advance notices when drug price increases surpass a specific threshold. The advance disclosure is made to a specific list of public and private payers that have registered with the state. These registered recipients include more than 170 individuals at entities such as the California Department of Public Health, CalPERS (the California Public Employees’ Retirement System), Blue Shield of California, Kaiser Permanente, and CVS Health. The law does not include any provisions requiring payers to keep the price increase information confidential.

Read the April 9, 2020 California Court of Appeal decision here.

In November 2018, Amgen submitted an advance notice of pending drug price increases to registered California purchasers, as required by the state statute. After the notice went out, one public purchaser, the California Correctional Health Care Services (CCHCS), notified Amgen that it would release the advance notice of price increases to a Thomson Reuters reporter in response to a California Public Records Act request.

Amgen filed suit to block the release of the information on the grounds that the information was a trade secret. Amgen was successful in securing both a temporary restraining order and a preliminary injunction to prohibit its release. CCHCS challenged the injunction and on April 9, 2020, a California Court of Appeal lifted the preliminary injunction. The pending price increases the reporter requested in 2018 have long since taken effect and are now publicly available. Though Amgen sought to have CCHCS’s appeal dismissed for this reason, the court elected to make a ruling because the trade secrecy issue is likely to rise again.

The court rejected Amgen’s claim that the 60-day advance notice should be protected as a trade secret, arguing that once Amgen had shared the information with the registered purchasers as required by the law, the information could no longer be considered secret, and that nothing in California’s Senate Bill No. 17 “requires purchasers to maintain the confidentiality of price increase notices.”

Senate Bill No. 17 is also the subject of a lawsuit filed by PhRMA, the pharmaceutical manufacturers’ trade group, that is being considered by a US District Court for the Eastern District of California. PhRMA alleges that the law violates the First Amendment by compelling speech and Dormant Commerce Clause because it impacts wholesale acquisition costs nationwide, and that the lack of clarify surrounding certain reporting requirements violates the Due Process Clause. A ruling is expected this spring.

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