Two top pharmaceutical lobbying groups filed a lawsuit today challenging the constitutionality of Nevada’s first-in-the-nation insulin transparency law, alleging that implementing the law would violate patient rights and nullify trade secret protections.
Pharmaceutical Research and Manufacturers of America, or PhRMA, and the Biotechnology Innovation Organization, BIO, are asking the U.S. District Court to declare that the provisions of the Nevada law, which was passed during the 2017 legislative session, are preempted by federal law and violate the U.S. Constitution. PhRMA notified the state Department of Health and Human Services in a telephone call Thursday that they were prepared to sue over the constitutionality of the new law, though the state had asked the group to return with a list of their concerns to resolve any issues outside of court.
Legislative attorneys met with the original sponsor of the bill, Democratic Sen. Yvanna Cancela, and pharmaceutical industry representatives in May over concerns that the legislation would require manufacturers to report costs and profits associated with producing certain diabetes drugs, exempt that data from the state’s trade secret law and mandate notification ahead of certain planned price increases. The attorneys ultimately concluded that the concerns put forward in the legislation were ultimately policy driven and not legal.
In their complaint, the two lobbying groups reiterate the same legal concerns they brought forward during the legislative session, namely alleging that the law violates the Takings Clause of the Fifth Amendment, which prohibits government from taking private property without just compensation, and the Commerce Clause, which bars Nevada from interfering with commerce in other states. The complaint also alleges that the law violates federal patent law and federal trade secret law as well.
“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.
The two groups are asking the court to enjoin the implementation or enforcement of the provisions of the law that they are challenging.
“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.
The complaint directly 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.
In the waning days of the legislative session, significant portions of Cancela’s vetoed bill were grafted onto a separate diabetes drug bill from Republican Senate Leader Michael Roberson, which mandated transparency from PBMs on the rebates and profits they receive from essential diabetes drugs. When the bill passed the Legislature, Sandoval said he would be “proud” to sign it into law and did so shortly after.
The complaint pulls from the portions of Sandoval’s veto in which he said 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.