Unpacking the Impact of State Drug Pricing Boards on Pharmaceutical Manufacturers: The Case of Amgen

     From a pharmaceutical manufacturer’s perspective, the establishment of state drug pricing boards presents a significant challenge to their business operations. Pharmaceutical companies, like Amgen, are concerned about the potential impact of these boards on their ability to set prices for their medications and maintain profitability.

     The lawsuit filed by Amgen against Colorado’s state drug pricing board highlights the company’s belief that these boards are overstepping their authority and interfering with the free market. Amgen argues that the regulations imposed by these boards could be unconstitutional because it conflict with the federal pharmaceutical regulatory regime, violate Amgen’s rights, violate federal laws that govern drug pricing, and disrupt interstate commerce.

     Amgen, like many other pharmaceutical companies, invests significant resources in research and development to bring innovative medications to market. The ability to set prices for these medications is crucial for companies to recoup their investments and continue developing life-saving drugs.

     The high cost of prescription drugs is often attributed to the complex process of drug development, which involves extensive research, clinical trials, and regulatory approval. Pharmaceutical companies argue that drug pricing reflects the value of these investments and the need to fund future research and development efforts.

     The Drug Price Competition and Patent Term Restoration Act of 1984 was intended to balance these concerns. It packaged a period of patent exclusivity to incentivize new drug development with an expedited pathway for generics afterward. State boards setting new price controls interferes with that delicate balance, if more states adopted them it would suppress pharmaceutical innovation in the United States and by extension the globe.

     From a pharmaceutical manufacturer’s perspective, the establishment of state drug pricing boards could also potentially undermine their ability to set prices based on market conditions and the value of their medications. The regulations imposed by these boards may limit the flexibility of companies to adjust prices in response to changing market dynamics and competition.

     Pharmaceutical companies also raise concerns about the potential impact of state drug pricing boards on patient access to medications. Companies argue that price controls and regulations imposed by these boards could limit patient choice and restrict access to innovative treatments, particularly for patients with rare diseases or complex medical conditions where the risk-reward for new drugs can be speculative.

     In response to the challenges posed by state drug pricing boards, pharmaceutical companies are likely to continue advocating for policies that support innovation and patient access to medications. Companies may also seek to engage in dialogue with policymakers and stakeholders to address concerns about drug pricing and ensure a balanced approach that supports both innovation and affordability.

     While the legal challenges posed by state drug pricing boards are significant, pharmaceutical manufacturers, like Amgen, are likely to continue defending their ability to set prices for their medications based on market conditions and the value of their products. Companies will also continue to emphasize the importance of innovation in developing life-saving drugs and the need to maintain a regulatory environment that supports research and development efforts.

     Kendall PC is well-versed in advising clients on matters related to federal and state drug pricing regulations and laws.  If you are seeking a trusted, strategic legal partner to assist with this ever-changing area of the law, which includes actual and/or potential impacts of state pricing boards on your business, please do not hesitate to contact us. We are here to help you achieve your goals and navigate the complex legal and regulatory landscape with confidence. Give us a call today to discuss how we can assist your company.