Since the ongoing states of emergency were put in place in response to a health crisis, pricing in the pharmaceutical industry is under more of a microscope than usual.  While the immediate focus may be on products that are used to diagnose, treat, or prevent COVID-19, price gouging laws cover a wide variety of pharmaceutical products covering the full range of conditions. Given the current and proposed regulations that may impact pricing, companies should remain mindful of their price gouging compliance policies when considering pricing movements during the states of emergency.

In terms of pricing for products that relate to the novel coronavirus, bipartisan Senate and House bills propose prohibiting market exclusivity for taxpayer-funded COVID-19 drugs, and would not only empower but require the federal government to mandate affordable prices. The bills would also apply the same criteria—prohibiting exclusive licensing, requiring manufacturers report their federal funding and total expenditures, and mandating federally-set affordable pricing—to drugs used to treat future diseases that would cause a public health emergency.  Precisely which drugs might fall into that category will be hard for companies to predict in advance.

The President also issued several executive orders recently that appear to be aimed at reducing prices paid by consumers for certain pharmaceutical products. While their practical impact remains to be seen, the actions indicate that the industry’s prices remain on the White House’s radar, suggesting that pricing will likely continue to be scrutinized at the federal level.

Setting aside predictions and political issues surrounding the pricing of any coronavirus treatments, at the local level, many states already explicitly cover a range of pharmaceutical products, not just those related to the pandemic. California’s price gouging law limits permissible price increases on “medical supplies,” including prescription and nonprescription medications. Texas prohibits “exorbitant” pricing of “medicine.” Maine limits price increases on “pharmaceutical products,” including but not limited to prescription medications.” Idaho prohibits “[t]aking advantage of a disaster or emergency” with “exorbitant or excessive” pricing on “pharmaceuticals.” Minnesota’s March 20, 2020 Executive Order prohibits charging “unconscionably excessive prices” for “pharmaceuticals.”

While many price increases during the pendency of these states of emergency will likely fall within permissible exceptions, including justifications for increased costs, companies would benefit from reviewing those exceptions and documenting the permissible bases for any pricing movements.

While it may be typical for some in the industry to adjust pricing on a regular basis, companies may wish to consider how pricing constraints due to the ongoing states of emergency could impact those practices. If the planned increases fall within permissible justifications or exceptions, then any presumed price caps may not apply. Delaying or staggering increases may also be prudent, depending on the product and which statutes and restrictions are triggered.

For additional guidance on how to evaluate and, if necessary, update internal compliance practices to account for these considerations, read our article on conducting a price gouging audit and our blog post on Price Gouging Dos & Don’ts for Supply Chain Companies.

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Visit Proskauer on Price Gouging for antitrust insights on COVID-19.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

Photo of Christopher E. Ondeck Christopher E. Ondeck

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.

Chris has handled antitrust matters…

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.

Chris has handled antitrust matters for clients in a number of industries, including advertising, aerospace, alcoholic beverages, appliances, building materials, consumer products, defense, franchise, medical devices, metals, mining, natural resources, oil and gas, packaging, pharmaceuticals, software and telecommunications. He also has developed substantial experience advising clients regarding the application of the antitrust laws to the pharmaceutical industry, the agriculture industry, trade associations and the energy industry.

Photo of John R. Ingrassia John R. Ingrassia

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating…

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating to competition and antitrust, CFIUS or foreign investment issues.

For more than 25 years, John has counselled businesses facing the most challenging antitrust issues and helped them stay out of the crosshairs — whether its distribution, pricing, channel management, mergers, acquisitions, joint ventures, or price gouging compliance.

John’s practice focuses on the analysis and resolution of CFIUS and antitrust issues related to mergers, acquisitions, and joint ventures, and the analysis and assessment of pre-merger CFIUS and HSR notification requirements. He advises clients on issues related to CFIUS national security reviews, and on CFIUS submissions when non-U.S. buyers seek to acquire U.S. businesses that have national security sensitivities.  He also regularly advises clients on international antitrust issues arising in proposed acquisitions and joint ventures, including reportability under the EC Merger Regulation and numerous other foreign merger control regimes.

His knowledge, reputation and extensive experience with the legal, practical, and technical requirements of merger clearance make him a recognized authority on Hart-Scott-Rodino antitrust merger review. John is regularly invited to participate in Federal Trade Commission and bar association meetings and takes on the issues of the day.

Photo of Kelly Landers Hawthorne Kelly Landers Hawthorne

Kelly Landers Hawthorne is an associate in the Litigation Department.

While at Columbia, she served as an articles editor of the Columbia Journal of Law & the Arts and was involved with the Lawyering in the Digital Age Clinic.  She also worked as…

Kelly Landers Hawthorne is an associate in the Litigation Department.

While at Columbia, she served as an articles editor of the Columbia Journal of Law & the Arts and was involved with the Lawyering in the Digital Age Clinic.  She also worked as a judicial intern for the Honorable Sandra Townes of the United States District Court for the Eastern District of New York.

Kelly is a Teach For America alumnus and taught middle school special education and math in Washington, D.C. prior to law school.