By Andrew Chung

WASHINGTON (Reuters) – The U.S. Supreme Court on Tuesday rejected Maryland’s bid to revive a law aimed at preventing price gouging by pharmaceutical companies, dealing a setback to the power of states to rein in prescription drug costs.

The justices declined to take up Maryland’s appeal of a 2018 federal appeals court ruling that struck down the state’s law, That ruling held that Maryland had regulated wholesale pricing by the companies in violation of the U.S. Constitution’s bar on state-level regulation of interstate commerce.

The Association for Accessible Medicines, a trade group representing generic drug manufacturers such as Teva Pharmaceutical Industries Ltd and Mylan NV, filed the legal challenge against the anti-price gouging law.

Maryland enacted the measure in 2017 after a series of high-profile price hikes by drugmakers including a 2015 increase by Turing Pharmaceuticals of its anti-parasitic drug Daraprim from $13.50 to $750 per pill. The law prohibited what it termed “unconscionable” price increases for essential drugs no longer covered by patents or generic drugs that are sold in the state.

Growing public anger over drug prices and a lack of federal action has led several U.S. states to take the fight against rising prescription drug prices into their own hands.

Maryland said in legal papers that families have experienced significant financial distress over the increases. Industry experts have said the price hikes have been particularly high in medical categories in which there are few companies selling critically important drugs, such as for rare diseases.

At issue was whether the measure violated Supreme Court precedents that constrain states from enacting laws that burden out-of-state competitors. Last year, the Richmond, Virginia-based 4th U.S. Circuit Court of Appeals sided with the companies challenging the law, concluding that it targeted the price a manufacturer or wholesaler charges in the initial sale of the drug, not just the price a Maryland consumer ultimately pays.

The state appealed that ruling to the high court. Maryland said that the 4th Circuit’s decision not only prevents Maryland and other states from reining in abusive prescription-drug prices that harm consumers and public health but that the ruling could call into question other state regulatory efforts.

(Reporting by Andrew Chung; Additional reporting by Nate Raymond; Editing by Will Dunham)