LAS VEGAS (Legal Newsline) - The world’s largest biotech trade association and a trade group representing pharmaceutical companies this month sued Nevada Gov. Brian Sandoval and the head of the state’s Department of Health and Human Services, arguing a new state law is unconstitutional.

The plaintiffs, Pharmaceutical Research and Manufacturers of America, or PhRMA, and Biotechnology Innovation Organization, or BIO, filed their lawsuit in the U.S. District Court for the District of Nevada Sept. 1.

They allege in their complaint, also filed against Richard Whitley, director of the Nevada DHHS, that Senate Bill 539 will violate patent rights and negate trade secret protection for designated diabetes medicines.

“SB 539 strips pharmaceutical manufacturers of trade secret protection for confidential, competitively sensitive, proprietary information regarding the advertising, cost, marketing, pricing, and production of their patented diabetes medicines,” the plaintiffs wrote in their complaint. “The Act then compels manufacturers to disclose this information to the Nevada Department of Health and Human Services, which must publish at least some of the information on its website and may disseminate the rest as it pleases.”

The bill, signed into law by Sandoval June 15 and almost identical to a bill vetoed by the governor, will harm patients and chill future biomedical innovation, the groups argue.

“In 2016, more than 170 medicines for diabetes and related conditions were in development. The vast majority of these drugs are potentially ‘first-in-class medicines’ that offer a new approach to fighting a disease that afflicts millions across the United States,” said Tom DiLenge, BIO’s president for advocacy, law and public policy. “But this critical research is incredibly expensive and risky, and we know from experience that very few development programs will make it all the way to approval.

“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.”

James C. Stansel, PhRMA executive vice president and general counsel, agreed, saying SB 539’s provisions should not be implemented.

“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,” he said.

Nevada, like all states, has seen an uptick in the number of adults living with diabetes. The state hopes to curb the cost of certain essential diabetes drugs, including insulin, through legislation.

But the groups contend SB 539’s provisions violate the U.S. Constitution by interfering with federal patent law and federal trade secret law; by violating the Takings Clause of the Fifth Amendment, which prohibits government from taking property without just compensation; and by violating the Commerce Clause, which prohibits Nevada from impeding commerce in other states.

In their complaint, PhRMA and BIO seek a declaration from the federal court that the challenged provisions of SB 539 are preempted by federal law and violate several provisions of the Constitution. They also seek an injunction prohibiting the implementation or enforcement of these challenged provisions. 

“During the legislature’s consideration of SB 539 and other similar Nevada bills, PhRMA and BIO expressed concerns about the legal shortcomings of these bills in written testimony, public statements, as well as in countless conversations with members of the Nevada legislature and Sandoval administration,” the groups said in a statement. “Throughout this process, the biopharmaceutical industry worked in good faith with public officials on potential solutions that did not undermine incentives to invest in biomedical innovation.

“Unfortunately, Nevada policymakers chose a different path, necessitating this lawsuit.”

On Wednesday, the plaintiffs filed motions for a temporary restraining order and preliminary injunction.

They argue the law will impose “irreparable injury” beginning Oct. 1 -- the date the challenged provisions go into effect.

“Such a temporary restraining order will preserve the status quo until the Court can rule on Plaintiffs’ motion for a preliminary injunction,” they wrote in their TRO motion.

“Plaintiffs further move for a preliminary injunction barring implementation or enforcement of the Sections of the Act identified above.”

Should the federal court not enter a TRO, the groups asked it to set a briefing schedule on the motion for a preliminary injunction allowing “sufficient time” for a ruling before Oct. 1.

Las Vegas law firm McDonald Carano LLP and Washington, D.C., firm Arnold & Porter Kaye Scholer LLP are representing the plaintiff trade groups.

Judge James C. Mahan has been assigned the case.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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Organizations in this Story

Pharmaceutical Research and Manufacturers of America
950 F St NW
Washington, DC - 20004

U.S. District Court for the District of Nevada
333 South Las Vegas Boulevard
Las Vegas, NV - 89101

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