Oregon’s fight for prescription drug price transparency just scored a big win in federal court. The Ninth Circuit reversed a lower court’s ruling and backed the state’s right to demand detailed pricing reports from pharmaceutical companies.
Oregon's Reporting Requirements
Oregon’s Prescription Drug Price Transparency Act (House Bill 4005) passed in 2018. The law was created because the legislature saw a big public interest in the price and cost of prescription drugs, especially since Oregon itself is a major purchaser of these drugs and provides large tax benefits for health care. Lawmakers wanted more accountability for drug pricing and hoped that by making prices more transparent, both public and private purchasers could negotiate better deals.
The main part of HB 4005 is its reporting requirement. Drug manufacturers who sell prescription drugs in Oregon have to report detailed economic information about certain drugs to the Oregon Department of Consumer and Business Services (DCBS). But not every drug is covered. The law only covers drugs that cost $100 or more for a one-month supply or shorter, and where there was a net increase of at least 10% in price over the previous calendar year.
For these drugs, manufacturers have to report things like the drug’s name and price, how much the price went up, why it increased, generic options, costs, sales and profit data, and other info that explains the price change. They also need to include documents backing up what they report. After receiving these reports, DCBS is required to post most of this information publicly on its website.
Trade Secret Loophole
However, there’s an exception for trade secrets. If manufacturers mark information as a trade secret under Oregon law, DCBS can’t post it unless they decide that disclosure is in the public interest. The definition of “trade secret” in this context is pretty broad. It covers things like formulas, processes, production data, or any compilation of info that gives a business advantage and isn’t known outside the company.
In practice, manufacturers have claimed thousands of trade secrets in their reports — over 10,500 as of December 2023. But since HB 4005 went into effect in 2018, DCBS has not actually disclosed any information marked as a trade secret. Most of what gets posted online is general economic info about drug prices and costs.
Law's Impact on Pricing
The effect of HB 4005 has been to create much more transparency around prescription drug pricing in Oregon. The law gives both state agencies and private buyers access to detailed information about why drug prices go up and how much money manufacturers are making from their products. The goal is to help buyers negotiate better prices and make informed decisions. It also puts some pressure on drug companies to justify price increases publicly. While manufacturers can keep true trade secrets confidential unless DCBS finds a strong public interest reason to share them, most other data is out in the open.
Overall, HB 4005 has changed how prescription drug pricing is reported in Oregon. So far, it hasn’t forced the disclosure of confidential business secrets but has made lots of pricing data available for everyone to see. This helps shed light on pricing practices in an industry that’s often criticized for a lack of transparency.
Drugmakers Challenge Law
Pharmaceutical Research and Manufacturers of America (PhRMA) is a trade association whose members include pharmaceutical and biotechnology companies that manufacture prescription drugs sold in Oregon. In 2019, PhRMA brought several claims challenging HB 4005, naming as defendant DCBS Director Andrew Stolfi. PhRMA argued that HB 4005 violated the constitutional rights of its member companies under the First and Fifth Amendments, among other claims.
Specifically, they claimed that the law’s reporting requirement compelled speech in violation of the First Amendment, and that the “public-interest exception” allowing disclosure of trade secrets amounted to an unconstitutional taking under the Fifth Amendment. The lawsuit was filed on behalf of PhRMA’s member companies, making it an associational challenge representing the interests of multiple drug manufacturers affected by the law.
The district court ruled in favor of PhRMA on both claims. But when the Stolfi and the state of Oregon appealed to the Ninth Circuit, things took a turn. Last week, the appellate court handed down an opinion that upheld the law as constitutional on both fronts.
First Amendment Claim Rejected
First, the Ninth Circuit ruled in favor of Oregon on the First Amendment claim, finding HB 4005 constitutional as a regulation of commercial speech.
PhRMA had argued that the law compelled non-commercial speech or forced manufacturers to endorse a political message. But the court held that the law’s reporting requirement is a regulation of commercial speech, not non-commercial or ideological speech. This is because the required disclosures (detailed information about drug prices, etc.) are product-specific economic facts tied to commercial transactions.
The court decided that these requirements should be reviewed under "intermediate scrutiny," not strict scrutiny. Under this standard, the law only needs to directly advance a substantial government interest and not be more extensive than necessary. The court found that Oregon’s interests (transparency, accountability, and helping purchasers negotiate better drug prices) were substantial. It also found that the reporting requirement directly advanced those interests and was appropriately tailored. Because of this, the Ninth Circuit ruled that HB 4005 does not violate the First Amendment.
Fifth Amendment Claim Fails Too
PhRMA also argued that any disclosure of trade secrets under the public interest exception would always amount to a regulatory taking under the Fifth Amendment. To decide this question, the court of appeals applied a test for regulatory takings from a prior case called Penn Central. The test looks at factors like reasonable investment-backed expectations, economic impact, and the “character of government action” (basically asking what kind of action the government is taking and how it affects property owners).
The judges emphasized that pharmaceutical companies operate in a highly regulated industry and should expect that some information might be subject to disclosure, especially since Oregon law has long allowed trade secret disclosure when public interest requires it. They also pointed out that not every possible disclosure would destroy all value in a trade secret; the actual impact would depend on specific circumstances and what information was released.
Ultimately, the court concluded that none of the Penn Central factors supported PhRMA’s facial challenge. The law did not upset reasonable expectations or guarantee a total loss of economic value, and it was more about adjusting economic benefits and burdens for the public good than physically seizing property. Because PhRMA failed to show that every possible application of the public-interest exception would be unconstitutional, their facial takings claim could not succeed, either.
Victory for Price Transparency?
The decision signals that giving consumers and public agencies access to detailed information about drug pricing is a fair and sensible way to tackle rising costs. State officials, including Attorney General Dan Rayfield and Rep. Rob Nosse, see this as a win for Oregonians struggling with high drug prices. Still, with further litigation possible, the fight over HB 4005 isn’t quite finished yet. For now, though, Oregon is one step closer to shining a light on what drives prescription drug prices — and helping consumers make more informed choices at the pharmacy.
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