U.S. judge clears way for Maryland drug price-gouging law

(Reuters) - A U.S. District Court judge on Friday cleared the way for Maryland to implement the nation’s first law designed to penalize drugmakers for price gouging by denying the generic drug industry trade group’s request for an injunction.

The state’s new law will go into effect as planned on Sunday, according to the office of Maryland Attorney General Brian Frosh.

The Association for Accessible Medicines (AAM), a generic industry trade group which represents companies like Teva Pharmaceutical Industries Ltd and Novartis AG’s Sandoz unit, argued that the law is unconstitutional because it does not define price gouging and amounts to intervention by an individual state in interstate commerce.

U.S. District Judge Marvin Garbis wrote that litigation can continue under the trade group’s argument that the law is too vague, but he dismissed other arguments.

The trade group said it will immediately appeal the court’s decision.

Under the statute, Maryland will field complaints and investigate “unconscionable increases” in prices for essential off-patent or generic medicines. The law does not apply to branded drugs that are still under patent protection.

Violations will incur a fine of up to $10,000. The attorney general can also require a manufacturer or distributor to show its records and justify a price increase.

“This law will hurt patient access to safe, affordable generic medicines in Maryland and the rest of the U.S., and will create untenable uncertainty for generic drug makers who may be left with no choice but to abandon markets altogether,” Jeff Francer, AAM general counsel, said in a statement.

Pharmaceutical companies have so far dodged stricter federal oversight of drug prices despite growing outrage over hikes by companies like Valeant Pharmaceuticals International Inc and Mylan NV. But states, struggling to cover rising healthcare costs, are taking up the fight. At least 176 bills on pharmaceutical pricing and payment have been introduced this year in 36 states, according to the National Conference of State Legislatures.

Maryland’s law was passed by the state’s Democrat-controlled legislature in April, and Governor Larry Hogan, a Republican, said in May that he would allow it to take effect without his signature.