District Court Dismisses Manufacturer Lawsuit Challenging Colorado Price Setting for Prescription Drug

As PDABs march toward declaring the price of certain drugs to be unaffordable for state residents and establishing a maximum price or reimbursement for certain drugs in their states, some pharmaceutical manufacturers have begun to challenge the constitutionality of PDABs in court. In March, a federal court in Colorado tossed out one of these suits on the basis that the manufacturer lacked the requisite standing.

In 2021, the Colorado Prescription Drug Affordability Board was established under Senate Bill 21-175, as amended by House Bill 23-1225 (the Act). Under the Act, the Board has the authority to conduct affordability reviews on prescription drug products and recommend ways to address costs, including by setting an upper payment limit (UPL) for prescription drugs that the Board deems to be “unaffordable for Colorado consumers.” Interestingly in Colorado, the UPL would set the sale or purchase price of the selected drugs in the state and not just the back-end reimbursement for the drugs by health plans and insurance companies.

In August 2023, the Board met to select drugs for an affordability review, based on the Board-appointed Prescription Drug Affordability Advisory Council’s recommendations and Board staff analysis. Among the drugs selected for review was Enbrel, a medication used to treat arthritis and other autoimmune diseases, manufactured by Amgen. In February 2024, following the affordability review, the Board voted unanimously that the “use of Enbrel, consistent with the labeling approved by the FDA or with standard medical practice, is ruled UNAFFORDABLE for Colorado consumers.” This vote began the process for establishing a UPL on Enbrel.

On March 22, 2024, Amgen filed suit against the Board to challenge this action (Amgen Inc., et al. v. Colorado Prescription Drug Affordability Review Board, et al., 1:24-CV-00810 (D. Colo.)). In its complaint, Amgen argued that the Act violates the US Constitution in at least four ways:

• The Act violates the Supremacy Clause, because it conflicts with federal patent laws.

• The Act violates the Due Process Clause, 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.

• The Act additionally violates the Supremacy Clause because it applies the UPL so broadly as to encompass even federal payors, such as Medicare.

• The Act violates the Commerce Clause, because it regulates commercial transactions that occur entirely outside the state of Colorado.

Both parties filed motions for summary judgment, for which the court heard arguments at a hearing on October 22, 2024. On March 28, the court granted the Board’s motion for summary judgment and dismissed the case for lack of subject matter jurisdiction.

The court determined Amgen is not subject to direct regulation under the Act. Looking to the statutory language and legislative history of the Act, the court concluded that the UPLs set by the Board do not apply at the manufacturer’s point of sale but instead apply only downstream sales of drugs to purchasers in the state of Colorado, such as pharmacies located in Colorado, which are often effectuated by wholesalers. As such, Amgen cannot challenge the constitutionality of the Act under its asserted theory of standing because it is not subject to direct regulation under the law.

Additionally, the court considered whether Amgen might have standing as an unregulated party. This theory of standing would require Amgen to show that the challenged government action has caused or will likely cause injury in fact. The court concluded that Amgen’s asserted future injury was too speculative to be concrete and imminent. It noted that Amgen’s position presupposed that the UPL would necessarily fall below the wholesale acquisition cost (WAC) (i.e., the price at which Amgen currently sells Enbrel). Further, the Board had not yet — and still has not at the time of this alert — set a UPL for Enbrel. Consequently, unless and until a UPL is set for Enbrel (and at a lower price than the WAC), Amgen’s alleged future injuries are hypothetical at best.

Amgen filed a notice of appeal on April 8, and this matter is now pending before the Federal Circuit Court of Appeals. In the meantime, the Board has continued the process of setting a UPL for Enbrel, with the Enbrel UPL rulemaking slated to begin during the Board’s upcoming meeting on May 23.

ArentFox Schiff will continue to monitor the Amgen appeal and other relevant PDAB litigation for updates.