Pharm. Research & Mfrs. of Am. v. David

• Decision Date: 30 December 2020
• Docket Number: No. 2:17-cv-02573-MCE-KJN,2:17-cv-02573-MCE-KJN
• Parties: PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA, Plaintiff, v. Robert P. DAVID, in his official capacity as Director of the California Office of Statewide Health Planning and Development, Defendant.
• Court: U.S. District Court — Eastern District of California

510 F.Supp.3d 891

PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA, Plaintiff,

v.Robert P. DAVID, in his official capacity as Director of the California Office of Statewide Health Planning and Development, Defendant.

No. 2:17-cv-02573-MCE-KJN

United States District Court, E.D. California.

Signed December 30, 2020

Filed January 4, 2021

Allon Kedem, PHV, Pro Hac Vice, Arnold & Porter Kaye Scholer LLP, Washington, DC, Annie Smith Amaral, Downey Brand, LLP, Sacramento, CA, Jeffrey L. Handwerker, PHV, Pro Hac Vice, R. Stanton Jones, PHV, Pro Hac Vice, Robert N. Weiner, PHV, Pro Hac Vice, Arnold & Porter Kay Scholer LLP, for Plaintiff.

Sharon Louise O'Grady, Selma Michele Inan, Department of Justice Office of the Attorney General, San Francisco, CA, for Defendant.

MEMORANDUM AND ORDER

MORRISON C. ENGLAND, JR, SENIOR UNITED STATES DISTRICT JUDGE

Through the present action, Plaintiff Pharmaceutical Research and Manufacturers of America ("PhRMA") seeks a declaration that Section 4 of a California law, Senate Bill 17 ("SB 17"), is unconstitutional and a permanent injunction preventing its implementation by Defendant Robert P. David, Director of the Office of Statewide Health Planning and Development ("OSHPD" or the "State").¹ Presently before the Court is PhRMA's Motion for Summary Judgment. ECF No. 64 ("PhRMA Mot."). The Court heard oral argument on December 17, 2020. For the reasons set forth below, that Motion is DENIED.

BACKGROUND

A. SB 17

On October 9, 2017, Governor Edmund G. Brown signed SB 17 into law. Section 4 of SB 17 amends the California Health and Safety Code to add Chapter 9, titled "Prescription Drug Pricing for Purchasers," which imposes various notice, reporting, and justification obligations on the manufacturer of a prescription drug sold to certain purchasers.² More specifically, the manufacturer of a prescription drug subject to SB 17 must notify these purchasers at least 60 days before increasing the drug's federally-defined wholesale acquisition cost ("WAC")³ if: (1) a course of therapy has a WAC of more than $40, and (2) the proposed increase would result in a cumulative increase of 16 percent or more over the two calendar years prior to the current year. Cal. Health & Safety Code § 127677(a) – (b). In addition to the date and amount of the planned increase, each 60-day notice must include a statement as to whether a change or improvement in the drug necessitates the price increase and describing the change, if one occurred. Id. § 127677(c). The following legislative intent accompanies these new obligations:

The Legislature finds and declares that the State of California has a substantial public interest in the price and cost of prescription drugs. California is a major purchaser ... [and] also provides major tax expenditures through the tax exclusion of employer sponsored coverage and tax deductibility ... of excess health care costs for individuals and families.

It is the intent of the Legislature in enacting this chapter to provide notice and disclosure of information relating to the cost and pricing of prescription drugs in order to provide accountability to the state for prescription drug pricing.

It is further the intent of the Legislature to permit a manufacturer of a prescription drug to voluntarily make pricing decisions regarding a prescription drug, including any price increases. It is further the intent of the Legislature to permit purchasers, both public and private, as well as pharmacy benefit managers, to negotiate discounts and rebates consistent with existing state and federal law.

Id. § 127676.

B. Procedural History

PhRMA commenced this action on December 8, 2017, seeking declaratory and injunctive relief and naming OSHPD and Governor Brown as Defendants. The Complaint alleged that Section 4 of SB 17 violates the Commerce Clause of the United States Constitution by regulating interstate commerce through a de facto 60-day price freeze nationwide on qualifying drugs; violates the First Amendment by compelling pharmaceutical manufacturers to communicate specified information when they would otherwise remain silent; and violates the Fourteenth Amendment's Due Process Clause because it is unconstitutionally vague about the possible retroactive application of certain provisions.

On January 26, 2018, OSHPD and Governor Brown collectively filed a Motion to Dismiss the Complaint. ECF No. 19. The Court granted that Motion, finding that (1) Governor Brown must be dismissed as a party because he is immune from suit and (2) the Complaint failed to allege facts sufficient to establish PhRMA's standing. ECF No. 37. PhRMA was granted leave to amend and subsequently filed its First Amended Complaint ("FAC"). ECF No. 38. OSHPD filed a Motion to Dismiss the FAC, arguing that this suit must again be dismissed for PhRMA's lack of standing and for failure to state a claim. ECF No. 43. The Court denied OSHPD's motion, finding that the FAC contained non-conclusory allegations in support of PhRMA's Commerce Clause, First Amendment, and Fourteenth Amendment claims. ECF No. 55.

On November 22, 2019, a Supplemental Pretrial Scheduling Order ("SPTSO") was issued, which required non-expert discovery to be completed within one year and dispositive motions to be filed within 180 days after the close of discovery. ECF No. 58. PhRMA objected to the SPTSO, seeking to bypass discovery and proceed directly to summary judgment given that its arguments are facial challenges to SB 17's constitutionality. ECF No. 59. OSHPD, however, wanted to conduct discovery.

ECF No. 60. The Court sustained PhRMA's objections and set a briefing schedule for summary judgment. ECF No. 61. This matter has now been fully briefed. ECF Nos. 64, 70, 73, 74.

STANDARD

The Federal Rules of Civil Procedure provide for summary judgment when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). One of the principal purposes of Rule 56 is to dispose of factually unsupported claims or defenses. Celotex, 477 U.S. at 325, 106 S.Ct. 2548.

Rule 56 also allows a court to grant summary judgment on part of a claim or defense, known as partial summary judgment. See Fed. R. Civ. P. 56(a) ("A party may move for summary judgment, identifying each claim or defense—or the part of each claim or defense—on which summary judgment is sought."); see also Allstate Ins. Co. v. Madan, 889 F. Supp. 374, 378–79 (C.D. Cal. 1995). The standard that applies to a motion for partial summary judgment is the same as that which applies to a motion for summary judgment. See Fed. R. Civ. P. 56(a) ; State of Cal. ex rel. Cal. Dep't of Toxic Substances Control v. Campbell, 138 F.3d 772, 780 (9th Cir. 1998) (applying summary judgment standard to motion for summary adjudication).

In a summary judgment motion, the moving party always bears the initial responsibility of informing the court of the basis for the motion and identifying the portions in the record "which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323, 106 S.Ct. 2548. If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288–89, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968).

In attempting to establish the existence or non-existence of a genuine factual dispute, the party must support its assertion by "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits[,] or declarations ... or other materials; or showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 251–52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; Owens v. Local No. 169, Assoc. of W. Pulp and Paper Workers, 971 F.2d 347, 355 (9th Cir. 1992). The opposing party must also demonstrate that the dispute about a material fact "is ‘genuine,’ that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. In other words, the judge needs to answer the preliminary question before the evidence is left to the jury of "not whether there is literally no evidence, but whether there is any upon which a jury could properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed." Anderson, 477 U.S. at 251, 106 S.Ct. 2505 (quoting Schuylkill and Dauphin Improvement Co. v. Munson, 81 U.S. 442, 448, 14 Wall. 442, 20 L.Ed. 867 (1871) ) (emphasis in original). As the Supreme Court explained, "[w]hen the moving party has carried its burden under Rule [56(a)], its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586, 106 S.Ct. 1348. Therefore, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial.’ " Id. at 587, 106 S.Ct. 1348.

In resolving a summary judgment motion, the evidence of the opposing party is to be believed, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. Nevertheless, inferences are not drawn out of the air, and it is the...