Amgen Inc. v. Health Care Servs.
| Decision Date | 09 April 2020 |
| Docket Number | B296563 |
| Citation | 47 Cal.App.5th 716,260 Cal.Rptr.3d 873 |
| Court | California Court of Appeals Court of Appeals |
| Parties | AMGEN INC., Plaintiff and Respondent, v. HEALTH CARE SERVICES, Defendant and Appellant. |
Xavier Becerra, Attorney General, Thomas S. Patterson, Assistant Attorney General, Paul Stein and Sharon L. O’Grady, Deputy Attorneys General, for Defendant and Appellant.
Hueston Hennigan, Moez M. Kaba and Lauren McGrory Johnson, Los Angeles, for Plaintiff and Respondent.
U.S. Chamber Litigation Center, Janet Galeria ; Gibson, Dunn & Crutcher, Blaine H. Evanson and Shaun A. Mathur, Irvine, for Chamber of Commerce of the United States of America and National Association of Manufacturers as Amici Curiae on behalf of Plaintiff and Respondent.
Downey Brand, Annie S. Amaral ; Arnold & Porter Kaye Scholer, Robert N. Weiner, Jeffrey L. Handwerker, and R. Stanton Jones for Pharmaceutical Research and Manufacturers of America as Amicus Curiae on behalf of Plaintiff and Respondent.
Shook, Hardy & Bacon, Amir M. Nassihi, Joan R. Camagong, San Francisco; GlaxoSmithKline and Marc Leonard Moore for GSK as Amicus Curiae on behalf of Plaintiff and Respondent.
Shook, Hardy & Bacon, Amir M. Nassihi, Joan R. Camagong, San Francisco, for ViiV Healthcare as Amicus Curiae on behalf of Plaintiff and Respondent.
Health and Safety Code section 127677, enacted as part of Senate Bill No. 17 (Stats. 2017, ch. 603, § 4), requires pharmaceutical manufacturers to provide 60-days’ notice to public and private registered purchasers, including state entities and health insurers, before increasing the wholesale acquisition cost of a drug (we will refer to the notice as a "price increase notice"). That statutory section further mandates that registered purchasers who are pharmacy benefit managers give notice to certain of their customers irrespective of whether those customers are registered purchasers. Senate Bill No. 17 does not impose any confidentiality obligations on the recipients of the price increase notices or restrict their use of the information provided in the notices.
Plaintiff and respondent Amgen Inc. (Amgen) submitted a price increase notice by e-mail to defendant and appellant California Correctional Health Care Services (CCHCS) and the other approximately 170 registered purchasers. When Reuters News made a request under the California Public Records Act (CPRA) ( Gov. Code, § 6250 et seq. ) seeking the price increase notices CCHCS had received, Amgen filed a petition for a writ of mandamus blocking disclosure, commonly called a "reverse-CPRA" action. Amgen invoked the trade secret privilege under Evidence Code section 1060, incorporated into the CPRA through Government Code section 6254, subdivision (k).
Amgen also moved for a preliminary injunction, which the trial court granted. CCHCS appeals from that order.
While this appeal was pending, the trial court sustained CCHCS’s demurrer to the mandamus cause of action with leave to amend. Amgen chose to dismiss its action instead.
On appeal, CCHCS argues the trial court abused its discretion when it found, among other things, that Amgen had made a sufficient showing that its price increase notice met the definition of a trade secret despite its disclosure to more than 170 registered purchasers and an unknown number of customers of pharmacy benefit managers. CCHCS further contends the trial court erred in finding that the balance of hardships favored Amgen. Amgen argues the appeal is moot following its dismissal of the underlying mandamus action, and that the trial court correctly ruled that limited disclosure of the price increase notice to noncompetitors did not deprive the information included in the price increase notice of its trade secret status.
We exercise our discretion to decide this otherwise moot appeal. The issues this appeal raises are capable of repetition because there will be future price increase notices. In addition, the issues are likely to evade review because a pharmaceutical manufacturer has little reason to continue to prosecute a mandamus action after obtaining a preliminary injunction for the 60-day period before a price increase becomes public.
On the merits, we agree with CCHCS. Amgen has failed to demonstrate that once it disclosed its price increase information pursuant to Senate Bill No. 17, that information retained whatever status it may previously have had as a trade secret. First, Amgen has failed to show that its disclosure was limited. Senate Bill No. 17 and Health and Safety Code section 127677 place no limitation on the registered purchasers’ further dissemination of Amgen’s price increases during the 60-day period, including to Amgen’s competitors. Amgen provides no evidence that the registered purchasers have, or would, maintain the confidentiality of the price increase notice.
Second, Amgen has failed to explain why, even if the price increase information were not disseminated to competitors, the registered purchasers, who sit opposite Amgen at the bargaining table, are not themselves capable of taking economic advantage of that information, thus inflicting the very harm Amgen claims a preliminary injunction would prevent. Indeed, as detailed below, the purpose of Health and Safety Code section 127677 was to allow the registered purchasers actively to prepare for upcoming price increases by, inter alia, finding cheaper alternatives to the drugs subject to the notices.
Given Amgen’s failure to show its price increase information was still a trade secret after disclosure to the registered purchasers, we further conclude that the trial court abused its discretion in finding that the balance of harms favored Amgen.
Accordingly, we reverse the trial court’s order granting the preliminary injunction.
The Legislature passed Senate Bill No. 17 in 2017 to increase transparency into pharmaceutical pricing. The bill’s author stated, "Expensive drugs and steady price increases are becoming commonplace with little transparency for astounding prices," and explained that Senate Bill No. 17 would "shin[e] a light on drugs that are having the greatest impact on our health care dollar." (Sen. Rules Com., Off. of Sen. Floor Analyses, Unfinished Business of Sen. Bill No. 17 (2017–2018 Reg. Sess.) as amended Sept. 5, 2017, p. 8.)
Among other things, Senate Bill No. 17 requires pharmaceutical manufacturers to provide advance notice of price increases to statutorily defined purchasers, including state purchasers and health insurers. ( Health & Saf. Code, §§ 127675, 127677 ; Stats. 2017, ch. 603, § 4.) Supporters of the bill contended that providing them advance notice of price increases would allow them to "make changes to formularies; find alternatives to costly drugs; hold third-party purchasers accountable for prices and rebates; negotiate larger rebates and discounts; ... prevent unnecessarily high payment for drugs, such as those with short-term price hikes where an alternative formulation can achieve the same result; and budget for price increases." (Assem. Com. on Appropriations, Analysis of Sen. Bill No. 17 (2017–2018 Reg. Sess.) as amended July 20, 2017, p. 4 [statement of San Francisco Culinary, Bartenders, and Service Employees Welfare Fund]; see also Sen. Health Com., Analysis of Sen. Bill No. 17 (2017–2018 Reg. Sess.) Mar. 14, 2017, p. 8 [].)
Health and Safety Code section 127677 sets forth the advance notice provision of Senate Bill No. 17. It requires a prescription drug manufacturer to provide a minimum of 60 days’ notice to specified recipients of an "increase in the wholesale acquisition cost of a prescription drug," subject to certain limitations not at issue in this appeal.1 ( Health & Saf. Code, § 127677, subds. (a), (b).) The notice "shall include" the date and amount of the increase, the current wholesale acquisition cost of the drug, "a statement regarding whether a change or improvement in the drug necessitates the price increase," and, if applicable, a description of that change or improvement. (Id. , subd. (c).)
The manufacturer must provide the notice to "each purchaser described in [Health and Safety Code] Section 127675" who "registers with the [Office of Statewide Health Planning and Development] for the purpose of this notification." ( Health & Saf. Code, § 127677, subds. (a), (d).) The entities listed in Health and Safety Code section 127675 are considered "purchasers" for purposes of Health and Safety Code section 127677 because they either purchase drugs directly or because they provide reimbursement for prescription drug purchases by others. (See Health & Saf. Code, § 127675, subd. (a) [].)
Purchasers described in Health and Safety Code section 127675 include state purchasers like CCHCS, as well as "licensed health care service plan[s]," "health insurer[s] holding a valid outstanding certificate of authority from the Insurance Commissioner," and "pharmacy benefit manager[s]" as defined under Business and Professions Code section 4430, subdivision (j).2 ( Health & Saf. Code, § 127675, subd. (a).) Pharmacy benefit managers in turn "shall notify [their] large contracting public and private purchasers of the increase"; a " ‘large purchaser’ " is defined as "a purchaser that provides coverage to more than 500 covered lives." ( Id. , § 127677, subd. (e).)
Neither Health and Safety Code section 127677 nor any other provision enacted under Senate Bill No. 17 requires the purchasers to keep the price increase notices confidential or otherwise...
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