State generic drug price-gouging laws and the court fights over them

Maryland's ban on price gouging for generic drugs took effect on Oct. 1, 2017, after the governor declined to sign it and let it become law anyway. Six and a half months later, on April 13, 2018, a divided panel of the US Court of Appeals for the Fourth Circuit held that the law violated the Constitution "because it directly regulates the price of transactions that occur outside Maryland," the majority wrote¹, and sent the case back with instructions to enter judgment against the state.

Two more states have tried since, with designs that borrowed from Maryland's and tried to avoid its fate. Minnesota's 2023 law has now been permanently blocked for sales that happen outside the state. Illinois's law took effect in January 2024, and a federal judge declined to pause it in September 2025.

These laws are aimed at sharp price increases on old, off-patent drugs. Our account of the generic price spikes of 2013 to 2015 covers the best-known wave. Each state drew its own line between a steep increase and an unlawful one. The sections below compare the three laws.

What Maryland's law said

Maryland's 2017 law, House Bill 631, barred a manufacturer or wholesale distributor from engaging in price gouging in the sale of an "essential off-patent or generic drug." An increase counted as gouging if it was "excessive and not justified by the cost of producing the drug" and left consumers with "no meaningful choice" because of the drug's importance and a lack of competition, according to the Fourth Circuit's summary¹. Drugs qualified as essential if they appeared on the World Health Organization's model list of essential medicines or were designated by the state as essential for treating life-threatening or seriously disabling chronic conditions.

Maryland's Medicaid program could flag increases to the attorney general using two markers: a rise of 50 percent or more in wholesale acquisition cost within a year, and a 30-day supply costing more than $80 at that price. The attorney general could then seek an injunction, restitution and civil penalties of up to $10,000 per violation.

Why the Fourth Circuit struck it down

A trade group representing generic manufacturers and distributors brought the challenge. It argued that the law violated the dormant commerce clause, the doctrine that bars states from regulating commerce that happens wholly in other states. The court found that the group's member manufacturers, only one of which was based in Maryland, typically sell to wholesale distributors, none of which were based in the state, and that "the vast majority of these sales occur outside Maryland's borders." A Maryland law that punished the price of those out-of-state sales was regulating commerce beyond Maryland's reach, the majority held. One judge dissented.

Maryland asked the full court to rehear the case. On July 24, 2018, the court denied the request² by a vote of 9 to 3, over a dissent arguing that the ruling turned the doctrine into a "weapon" against state health laws. The Supreme Court declined to review the case in 2019, according to a Georgetown Law analysis³.

Minnesota tried a narrower version

Minnesota's law, passed in 2023, applied to manufacturers licensed to sell in the state. It defined a generic as excessively priced when its wholesale acquisition cost rose more than 15 percent in one year or 40 percent over three years, and the increase exceeded $30 for a 30-day supply. Penalties were $10,000 per violation per day, and a manufacturer that pulled a drug from Minnesota to avoid the law faced a $500,000 penalty, according to Georgetown's O'Neill Institute³.

That trade group sued Minnesota in July 2023. A federal judge in Minnesota granted a preliminary injunction on Dec. 4, 2023, and the Eighth Circuit affirmed on June 12, 2025⁴. The appeals court noted Minnesota's concession that "a Colorado manufacturer would be penalized if it sold drugs to a New Jersey distributor at prices above those proscribed by the Act and those drugs ended up in Minnesota." The O'Neill analysis called it one of the first major appellate rulings on the extraterritoriality principle since the Supreme Court narrowed that doctrine in a 2023 case over California's pork rules. On Nov. 21, 2025, the district court entered a final judgment⁵ declaring the law "invalid and unenforceable as applied to the sale of generic or off-patent drugs occurring outside of Minnesota" and permanently barring enforcement against the trade group's members for those sales.

Illinois set lower thresholds and a narrower list

Illinois took a different approach. Public Act 103-0367⁶, effective Jan. 1, 2024, covers an essential off-patent or generic drug only if it is actively made and marketed in the US by three or fewer manufacturers. That ties the law to the thin markets described in our piece on why some generics have only one maker. Its percentage triggers are lower than Maryland's, and so is its dollar trigger.

Illinois also lets a court order restitution to consumers and third-party payers, and require a manufacturer to supply the drug to state health plan and Medicaid participants at the pre-increase price for up to a year. The state's Medicaid agency must notify the attorney general of qualifying increases. The trade group sued here too, and on Sept. 26, 2025, a federal court declined to temporarily block⁷ the law, the American Health Law Association reported.

The Illinois case was pending as of November 2026. Other state approaches to generic prices, from price transparency reports to prescription drug affordability boards, are collected on the Law, patents and policy desk.