Weekly Policy Blog: Amgen Lawsuit Asserts Colorado PDAB is Unconstitutional   

On March 22, Amgen, the maker of the autoimmune disease drug Enbrel, filed a lawsuit against the Colorado Prescription Drug Affordability Board (PDAB or Board) in the U.S. District Court for the District of Colorado. Enbrel could be the first drug for which an “upper payment limit” (UPL) is imposed by the PDAB.  

The lawsuit asserts that the “Board’s decision [to subject Enbrel to a UPL], and the statutory scheme on which it is based, are unconstitutional because they conflict with federal law, violate basic requirements of due process, and impermissibly seek to regulate outside of Colorado. In violating both the federal Constitution and federal laws, the Board’s decision puts in jeopardy access to Enbrel® and other innovative drugs, endangering the lives and well-being of thousands of Coloradans with serious medical conditions.”  

The State has not commented on the lawsuit—which has been assigned to U.S. District Court Judge Nina Y. Wang, who was appointed in 2022 by President Joe Biden—but the PDAB held a meeting on April 1 to seek legal advice and vote on litigation delegation. 

PDAB’s “Sweeping Authority” to “Impose Arbitrary Price Controls”

Amgen and its subsidiaries’ lawsuit “seeks to have the Court declare invalid, and enjoin the enforcement of, a facially unconstitutional Colorado law that delegates sweeping authority to a new [PDAB] to impose arbitrary price controls on the sale of prescription drugs, including drugs protected by the federal patent laws.” The act that established the PDAB (the “Act”) “does not provide any standards, definitions, or guidance to constrain the Board’s decisions about what it means for a drug to be ‘unaffordable’ and what the [UPL] for a drug should be.”  

Four Violations of the U.S. Constitution

Amgen’s complaint asserts that Colorado’s PDAB statute violates the U.S. Constitution in at least four ways: 

  • Preemption Under the Federal Patent Laws: “First, the Act violates the Supremacy Clause because it conflicts with the federal patent laws, including the Drug Price Competition and Patent Term Restoration Act of 1984 (also known as the ‘Hatch-Waxman Act’). To incentivize the immense risk-taking and investment necessary to discover and develop new medical treatments, Congress has established a carefully calibrated intellectual property regime that rewards pharmaceutical innovation with a period of market exclusivity and the ability to charge prices that allow for further investment and innovation during that period. The Act upsets that federal legislative balance by allowing five members of a state-created board to strip away the very rights and economic incentives that Congress sought to create in enacting the patent laws.” 
  • Violation of Due Process: “Second, the Act violates the Due Process Clause of the Fourteenth Amendment because it lacks the procedural protections necessary to guide the Board’s decision-making and avoid the imposition of arbitrary, confiscatory, or otherwise constitutionally inappropriate prices. Neither the Act nor the Board’s implementing regulations provide any standard for the Board to apply either when determining whether a drug is ‘unaffordable’ or when setting an ‘upper payment limit’ (nor has the Board even adopted such standards through individualized adjudication with respect to specific drugs). As a result, the Act fails to provide drug manufacturers with a meaningful opportunity to be heard and fails to protect them against erroneous deprivations of their property.” 
  • Interference with Federal Healthcare Programs: “Third, the Act violates the Supremacy Clause for the additional reason that Colorado’s statute applies the ‘upper payment limit’ so broadly as to encompass even federal payors such as Medicare. Federal law preempts state laws that impermissibly interfere with the federal government’s ability to control its own payment and coverage decisions under federal healthcare programs.” 
  • Violation of the Commerce Clause: “Fourth, the Act violates the Commerce Clause because it regulates commercial transactions that occur entirely outside of the state of Colorado.” Under the Act, a UPL applies to “all purchases of and payer reimbursements for a prescription drug that is dispensed or administered to individuals in the state in person, by mail, or by other means.” This is invalid under the dormant Commerce Clause doctrine because, “By its terms, this language applies the upper payment limit even to wholly out-of-state, upstream transactions, so long as the drug is eventually dispensed or administered in Colorado.” 

Precedent from Cases Striking Down Similar State Laws

On top of a wealth of precedent from a variety of contexts and sectors, the complaint also cites two Circuit Court decisions that struck down similar state laws that sought to regulate drug prices: 

  • Biotech. Indus. Org. v. District of Columbia (“BIO”), 496 F.3d 1362 (Fed. Cir. 2007): “As the Federal Circuit recognized in striking down another state law that sought to cap the prices of patented drugs, ‘Congress has decided that patentees’ present amount of exclusionary power, the present length of patent terms, and the present conditions for patentability represent the best balance between exclusion and free use.’ Id. at 1373. A state cannot take it upon itself to alter that balance by preventing a patent owner or licensee from charging prices that reflect its federally guaranteed patent exclusivity. ‘The underlying determination about the proper balance between innovators’ profit and consumer access to medication … is exclusively one for Congress.’ Id. at 1374 (emphasis added).” 
  • Ass’n for Accessible Meds. v. Frosh, 887 F.3d 664 (4th Cir. 2018): “As the Fourth Circuit recognized in striking down a similar drug-pricing law, a state law is invalid under the Commerce Clause if it attempts to ‘control[ ] the price of transactions that occur wholly outside the state.’ Ass’n for Accessible Meds., 887 F.3d at 671; see id. at 672 (“[T]he Act is effectively a price control statute that instructs manufacturers and wholesale distributors as to the prices they are permitted to charge in transactions that do not take place in Maryland.”); see also Ass’n for Accessible Meds. v. Ellison, 2023 WL 8374586, at *3 (D. Minn. Dec. 4, 2023) (holding that Minnesota could not “directly regulate[ ] extraterritorial sales of drugs … simply because the product eventually makes its way into Minnesota”), appeal docketed, No. 24-1019 (8th Cir. Jan. 20, 2024) (emphasis added).” 

PDAB’s Selection of Enbrel for a UPL

On February 16, 2024, the PDAB voted that Amgen’s autoimmune disease drug Enbrel is “unaffordable for Colorado consumers.” On February 23, the Board voted to “Select Enbrel for establishment of [a UPL]” and then voted to “Direct staff to initiate rulemaking to establish [a UPL] for Enbrel with the Secretary of State so that we can hold our first rulemaking hearing at a future meeting that accommodates the Board’s overall schedule.” 

As asserted in the complaint, “While the specific amount of the upper payment limit for Enbrel® is still being determined, the Board’s decisions to date mean that Enbrel® will be subject to an upper payment limit that will prevent Plaintiffs from realizing the full benefit of their federal patent exclusivity.” “Moreover, the Board’s determination that Enbrel® is ‘unaffordable’ and its decision to select Enbrel® for establishment of an upper payment limit are already harming Plaintiffs by, for example, causing them to incur substantial costs to participate and defend their interests in a preempted state price-setting process that violates the U.S. Constitution and federal law and casting a shadow of uncertainty over Plaintiffs’ longstanding contractual relationships involving Enbrel®.” 

Final Thoughts

As discussed in The Colorado Sun, Amgen stated, “We have significant concerns with the Colorado Prescription Drug Affordability Board’s decision to move forward with its flawed policy and process…There is no legal basis for the Board’s actions or haphazard process throughout the review period.”  

Colorado has pressed forward with its “flawed policy and process” to be the first among several state boards that, according to a STAT News reporter, “plan to set upper payment limits…in hopes of surviving legal arguments that these are actually gussied-up versions of price control measures.” 

CBSA will continue to strongly advocate that UPLs are the wrong solution for patients in the coming months leading up to the PDAB’s decision on whether and how to set a specific UPL for the first time. 

Categories: CBSA News