Legal Strategies for Reining in 'Unconscionable' Prices for Prescription Drugs

Abstract

Policy discussions about the affordability of prescription drugs in the United States are infused with the theme that drug prices are unconscionably high. Many of the policy interventions proposed in Congress, the White House, and the states adopt this frame, authorizing regulatory action when prices exceed particular thresholds or otherwise constitute “price gouging” on the part of drug companies. Unsurprisingly, such initiatives have prompted legal challenges by the biopharmaceutical industry. State laws in particular are vulnerable on a number of grounds. In this Article, we focus on one avenue of challenge that has received little scholarly attention in the context of drug pricing: void-for-vagueness claims under the Due Process Clause. These challenges allege that the laws’ definition of “excessive” or “unconscionable” drug prices is so ambiguous as to fail basic requirements of procedural due process.

To better understand how federal and state legislation can be designed to survive vagueness challenges, we review and extract lessons from four adjacent areas of law in which a standard of “unconscionable” or “excessive” price has been operationalized: (1) price-gouging laws relating to times of emergency, (2) contract law, (3) consumer lending law, and (4) public utilities rate regulation. We analyze the approaches taken in each field and their potential applicability to the prescription-drug context. We conclude that consumer lending law offers the most promising model, particularly if advanced via federal legislation, and offer a series of recommendations for drafting legislation aimed at identifying and curbing excessive drug prices.

Keywords: prescription drugs, medicines, prices, regulation, vagueness, health policy

JEL Classification: I18, K20, K32, L65