## Facts

- Maryland enacted HB 631 to prohibit “price gouging” involving “essential off-patent or generic drugs” made available for sale in Maryland.
- The Act barred manufacturers or wholesale distributors from imposing an “unconscionable increase” in the price of a covered drug.
- The Act focused on upstream sales in the distribution chain (manufacturer-to-wholesaler), where Maryland found alleged price gouging primarily occurred.
- The Association for Accessible Medicines (AAM), representing generic manufacturers and distributors, alleged most covered sales by its members occurred wholly outside Maryland.
- AAM contended the Act applied to out-of-state manufacturer–wholesaler transactions whenever the drug was later made available for sale in Maryland, effectively forcing nationwide pricing decisions to account for Maryland’s standard.

## Issues

1. Whether HB 631 violates the Dormant Commerce Clause by directly regulating transactions that occur wholly outside Maryland under the extraterritoriality doctrine.
2. Whether the Act’s prohibition on an “unconscionable increase” is unconstitutionally vague under the Due Process Clause.

## Decision

- The Fourth Circuit reversed the district court and held HB 631 facially unconstitutional under the Dormant Commerce Clause’s extraterritoriality principle.
- The court concluded the Act directly regulated upstream manufacturer–wholesaler sales that typically occur outside Maryland, based on the drug’s later availability in Maryland rather than the location of the sale.
- The court ordered entry of a permanent injunction barring enforcement of the Act.
- Because the extraterritoriality holding disposed of the case, the court did not need to uphold the vagueness challenge to invalidate the statute.
- A dissent argued the majority extended extraterritoriality too far because the Act did not set prices or explicitly tie in-state prices to out-of-state prices.

## Legal Principles

- Under the Dormant Commerce Clause, a state may not directly regulate commerce occurring wholly outside its borders, including by controlling prices for out-of-state transactions.
- A law is invalid if its practical effect is to control conduct beyond the enacting state’s boundaries, even if the law is framed in terms of in-state availability or in-state effects.
- A statute can be facially unconstitutional when it reaches beyond in-state transactions and directly regulates the terms of out-of-state commercial sales.

## Conclusion

The Fourth Circuit invalidated Maryland’s generic-drug price-gouging statute because, as written, it regulated out-of-state manufacturer–wholesaler sales whenever the products were later made available in Maryland, constituting impermissible extraterritorial regulation under the Dormant Commerce Clause.


Ass'n for Accessible Meds. v. Frosh, 887 F.3d 664 (4th Cir. 2018)