Generic drug group sues to block Illinois drug pricing law

Jan 25 (Reuters) - The leading U.S. generic drug industry group said Thursday that it is asking a court to block Illinois from enforcing a state law capping price increases for certain generic drugs.

In a lawsuit filed Monday, in federal court in Chicago, the Association for Accessible Medicines said the law, which was passed last year and took effect this month, regulates sales outside of Illinois because it applies to any drugs that ultimately end up in the state. That runs afoul of the U.S. Constitution's Commerce Clause, which does not allow states to regulate commerce outside of their borders, it said.

The group is seeking an injunction barring Illinois Attorney General Kwame Raoul from enforcing the law. Raoul's office did not immediately respond to a request for comment.

Generic drugs represent 91% of drugs sold in the United States and 18% of total U.S. drug spending, according to AAM.

Unlike name-brand drugs, they are not protected by patents, meaning multiple manufacturers can sell versions of the same drug, using a streamlined U.S. Food and Drug Administration approval process.

Typically, competition causes the price of a drug to fall sharply when its patent protection expires and generic versions become available. In recent years, however, prices of some generic drugs have increased, leading to accusations of price fixing by states.

The Illinois law limits increases in the price at which drugmakers sell certain essential generic drugs to wholesalers. It bans increases of 30% or more over the preceding year, 50% or more over three years or 75% or more over five years, unless those prices can be justified with increased costs.

The covered drugs are those on the World Health Organization's list of essential medicines, including painkiller morphine, antibiotic amoxicillin and anti-seizure drug diazepam, as well as any others designated by Illinois.

The law covers both generic drugs and so-called biosimilar drugs, a newer class of off-patent drugs that also use a streamlined FDA approval process. It applies to any drugs ultimately sold in Illinois.

AAM said that most of its members - including Amneal Pharmaceuticals (AMRX.O), Teva Pharmaceuticals and Sandoz (SDZ.S), - are based outside of Illinois, and sell their drugs to wholesale distributors outside Illinois.

That means that the law could regulate sales that take place "entirely outside of Illinois," the group said, "for example, a drug manufacturer located in Pennsylvania that sells generic drugs to a wholesale distributor located in Ohio," if the drugs ultimately end up in Illinois.

It said that some of its members plan to increase prices for essential drugs this year more than allowed by the law, though it did not give any specific examples.

A Minnesota federal judge in December blocked a similar law in that state from taking effect.

The case is Association for Accessible Medicines v. Raoul, U.S. District Court, Northern District of Illinois, No. 1:24-cv-00544.