Big Pharma companies have sued CalPERS and state prisons to block disclosure of drug prices. CalPERS could be held liable for attorneys’ fees as a result of a Los Angeles County judge’s ruling that pharmaceutical companies are not required to publicly disclose information regarding increases to drug pricing.
California Bill 17 Sparks Lawsuits Against CalPERS
The California law at issue, arising from Senate Bill 17 and approved in 2017, required pharmaceutical companies to give 60 days’ advance notice before making a significant increase to their pricing structure. The purpose was to assist the state in dealing with surprise price increases that in some cases have risen by 2,000 percent or more. Legislative pressure was fueled by public outcries over the rise in the already high costs for some prescription treatments, including EpiPens and Hepatitis C medications.
The Pharmaceutical Research and Manufacturers of America (PhRMA), a trade group for drug makers, responded by filed a lawsuit seeking to block the California law.
PhRMA Attorneys Fight CalPERS
After PhRMA attorneys filed the notices in the fall, Reuters, an international news organization, sought to acquire copies of records kept by CalPERS and the California Correctional Health Care Services (CCHCS), to which they felt they were entitled as a matter of public record.
CalPERS, the state’s largest pension fund, and the CCHCS, which manages health care for state prisons, then notified the pharmaceutical companies that they planned to release the requested records. Three of the larger companies, Amgen, Ipsen Biopharmaceuticals and GlaxoSmithKline, immediately filed suit against the agencies, seeking to keep the pricing information private.
Attorneys Argue that Pricing Plans are Trade Secrets
The rationale behind the pharmaceutical companies’ concern was that pricing plans were considered trade secrets and revealing the pricing structures might well incite some drug purchasers to buy vast quantities of the drugs before prices went up, which could seriously deplete available drug supplies.
A further issue was that, because the law is tied to a national measure of drug prices, advance notification requirements made by California could restrict a drug maker’s ability to raise prices in other states. In fact, the author of Senate Bill 17, Sen. Ed. Hernandez, a Democrat from West Covina, indicated that once the bill had passed, it would set a national health care policy.
PhRMA reacted quickly, seeing that statement as evidence that the bill was unconstitutional on its face.
Attorneys File Lawsuits Against CalPERS
Amgen attorneys were first to file a lawsuit against the CCHS, which was heard in Los Angeles County in early December. On February 1, the judge issued a ruling in favor of Amgen, stating that the CCHCS could not release the drug pricing information in advance of the increase taking effect.
Attorneys for Ipsen and GlaxoSmithKline filed suits shortly thereafter, naming both the CCHCS and CalPERS as defendants. The parties in the Ipsen suit, which was also filed in Los Angeles County, agreed to abide by the judge’s decision in the Amgen case. GlaxoSmithKline attorneys filed suit in Sacramento County, also naming both CCHCS and CalPERS as defendants. Filings in that case don’t yet state whether the parties will follow the Los Angeles judge’s decision.
Reuters was able to obtain price increase numbers for drug makers Novartis and Bayer, and it included that information in a Dec. 19 story on drug pricing.
Attorneys Continue to Argue Against Senate Bill 17
Attorneys for the pharmaceutical industry are still arguing that the 2017 law, which resulted from Senate Bill 17, is unconstitutional because, among other reasons, it violates the First Amendment by forcing drug companies to justify price increases. A district court judge initially dismissed PhRMA’s challenge to the law last year, and the organization filed an amended complaint in September. In the meantime, however, CalPERS’ legal staff informed its board in a February 2019 monthly update that it could be on the hook for legal fees in the Ipsen and GlaxoSmithKline cases, indicating its uncertainty regarding a favorable outcome.
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This article applies to members of California Public Employees’ Retirement System (CalPERS); and does not reflect the rules, laws or regulations governing how other public retirement systems are administered. If you have question about another public employee retirement system, find your system, below – or call our attorneys at: 562-622-4800
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