A state statute may not regulate commerce that takes place wholly outside of the State's borders, whether or not the commerce has effects within the State. Specifically, a state law may not have the practical effect of establishing a scale of prices for use in other states.
In response to reports of price gouging by pharmaceutical manufacturers in the sale of certain prescription medications, Maryland's legislature passed HB 631 which prohibits, among others, manufacturer or wholesale distributors from engaging in price gouging in the sale of an essential off-patent or generic drug. A manufacturer or wholesale distributor determined to be in violation of the Act may face a number of legal consequences, including a civil penalty of $10,000 per violation or an action to enjoin the sale of the medication at the increased price. The plaintiff, a voluntary organization with a membership that consists of prescription drug manufacturers and wholesale distributors, instituted an action against Maryland’s Attorney-General and Secretary of Department of Health. The plaintiff asserted that the Act violates the dormant commerce clause and is unconstitutionally vague. The defendants filed a motion to dismiss the plaintiff’s suit, which the district court granted as to the dormant commerce clause claim but denied as to the vagueness claim. The plaintiff filed an appeal, arguing that the district court improperly dismissed its claim that the Act violates the dormant commerce clause by directly regulating wholly out-of-state commerce.
Did the district court err in dismissing plaintiff’s claim which argues that HB 631 violates the dormant commerce clause by directly regulating wholly-out-of-state commerce?
The Court held that the district court erred in dismissing the Dormant Commerce Clause challenge to a Maryland statute prohibiting price gouging in the sale of prescription drugs. The Court ruled that the act in question violated the Dormant Commerce Clause, U.S. Const. art. I, § 8, cl. 3, because it directly regulated the price of transactions that occurred outside Maryland. Furthermore, the Court opined that the Act was not triggered by any conduct that takes place within Maryland, and even if it were, the Act controlled the prices of transactions that occurred outside the state. The Court concluded that if the Act is similarly enacted by other states, it would impose a significant burden on interstate commerce involving prescription drugs.