AMGEN INC., Plaintiff and Respondent, v. HEALTH CARE SERVICES, Defendant and Appellant.
B296563 (Los Angeles County Super. Ct. No. 18STCP03147)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION ONE
Filed 4/9/20
CERTIFIED FOR PUBLICATION
APPEAL from an order of the Superior Court of Los Angeles, Mitchell L. Beckloff, Judge. Reversed.
Hueston Hennigan, Moez M. Kaba and Lauren McGrory Johnson for Plaintiff and Respondent.
U.S. Chamber Litigation Center, Janet Galeria; Gibson, Dunn & Crutcher, Blaine H. Evanson and Shaun A. Mathur for Chamber of Commerce of the United States of America and National Association of Manufacturers as Amici Curiae on behalf of Plaintiff and Respondent.
Downey Brand, Annie S. Amaral; Arnold & Porter Kaye Scholer, Robert N. Weiner, Jeffrey L. Handwerker, and R. Stanton Jones for Pharmaceutical Research and Manufacturers of America as Amicus Curiae on behalf of Plaintiff and Respondent.
Shook, Hardy & Bacon, Amir M. Nassihi, Joan R. Camagong; GlaxoSmithKline and Marc Leonard Moore for GSK as Amicus Curiae on behalf of Plaintiff and Respondent.
Shook, Hardy & Bacon, Amir M. Nassihi, Joan R. Camagong for ViiV Healthcare as Amicus Curiae on behalf of Plaintiff and Respondent.
Plaintiff and respondent Amgen Inc. (Amgen) submitted a price increase notice by e-mail to defendant and appellant California Correctional Health Care Services (CCHCS) and the other approximately 170 registered purchasers. When Reuters News made a request under the California Public Records Act (CPRA) (
Amgen also moved for a preliminary injunction, which the trial court granted. CCHCS appeals from that order.
While this appeal was pending, the trial court sustained CCHCS’s demurrer to the mandamus cause of action with leave to amend. Amgen chose to dismiss its action instead.
On appeal, CCHCS argues the trial court abused its discretion when it found, among other things, that Amgen had made a sufficient showing that its price increase notice met the definition of a trade secret despite its disclosure to more than 170 registered purchasers and an unknown number of customers of pharmacy benefit managers. CCHCS further contends the trial court erred in finding that the balance of hardships favored Amgen. Amgen argues the appeal is moot following its dismissal of the underlying mandamus action, and that the trial court correctly ruled that limited disclosure of the price increase notice to noncompetitors did not deprive the information included in the price increase notice of its trade secret status.
We exercise our discretion to decide this otherwise moot appeal. The issues this appeal raises are capable of repetition bеcause there will be future price increase notices. In addition, the issues are likely to evade review because a pharmaceutical manufacturer has little reason to continue to prosecute a mandamus action after obtaining a preliminary injunction for the 60-day period before a price increase becomes public.
On the merits, we agree with CCHCS. Amgen has failed to demonstrate that once it disclosed its price increase information pursuant to Senate Bill
Second, Amgen has failed to explain why, even if the price increase information were not disseminated to competitors, the registered purchasers, who sit opposite Amgen аt the bargaining table, are not themselves capable of taking economic advantage of that information, thus inflicting the very harm Amgen claims a preliminary injunction would prevent. Indeed, as detailed below, the purpose of
Given Amgen’s failure to show its price increase information was still a trade secret after disclosure to the registered purchasers, we further conclude that the trial court abused its discretion in finding that the balance of harms favored Amgen.
Accordingly, we reverse the trial court’s order granting the preliminary injunction.
FACTUAL AND PROCEDURAL BACKGROUND
A. Health and Safety Code section 127677
The Legislature passed Senate Bill No. 17 in 2017 to increase transparency into pharmaceutical pricing. The bill’s author stated, “Expensive drugs and steady price increases are becoming commonplace with little transparency for astounding prices,” and explained that Senate Bill No. 17 would “shin[e] a light on drugs that are having the greatest impact on our health care dollar.” (Sen. Rules Com., Off. of Sen. Floor Analyses, Unfinished Business of Sen. Bill No. 17 (2017–2018 Reg. Sess.) as amended Sept. 5, 2017, p. 8.)
Among other things, Senate Bill No. 17 requires pharmaceutical manufacturers to provide advance notice of price increases to statutorily defined purchasers, including state purchasers and health insurers. (
The manufacturer must provide the notice to “each purchaser described in [Health and Safety Code] Section 127675” who “registers with the [Office of Statewide Health Planning and Development] for the purpose of this notification.” (Health & Saf.
Purchasers described in
Neither
CCHCS provided the trial court with a list of approximately 170 individuals registered to receive the price increase notices. The registered recipients represented over 70 public and private entities, such as the California Department of Public Health, the County of Los Angeles, CalPERS, Blue Shield, Kaiser Permanente, and CVS Health.3
B. Amgen’s disclosure
On November 15, 2018, Amgen provided notice pursuant to
The attachment consisted of a chart of 13 drugs, listing for each the earliest date of a price increase, the current wholesale acquisition cost, and a range of possible increases in both dollar amounts and percentages, with zero as the bottom of each range.4
On December 3, 2018, CCHCS informed Amgen by letter that it had received a CPRA request from Reuters News seeking all price increase
On December 11, 2018, Amgen filed a complaint and petition for writ of mandate “seek[ing] declaratory and injunctive relief” to prevent CCHCS from disclosing its price increase notice. Amgen claimed its potential price increases constituted trade secrets privileged under
Amgen’s writ petition was directed solely at protecting the confidentiality of the proposed price increases disclosed in the price increase notice; Amgen acknowledged in later filings that “[i]f Amgen in fact implements an increase in the [wholesale acquisition cost] for any particular product, that increase can be disclosed.”
The trial court granted Amgen’s unopposed ex parte application for a temporary restraining order. Amgen then moved for a preliminary injunction, which CCHCS opposed.
In support of its motion, Amgen submitted a declaration from an employee, Rachelle Wan (Wan). Wan declared that “Amgen invests substantial resources in developing its pricing strategy” and “spend[s] considerable time, effort, and money determining and properly calibrating Amgen’s prices for its products, as well as making decisions about which products may see price changes and what possible changes may be implemented.” According to Wan, “Amgen diligently protects the confidentiality” of its drug pricing strategy, including through employee training and limiting which employees have “access to information regarding drug prices and potential price changes.” Wan attested that Amgen released the information to the registered purchasers “solely for the purpose of complying with”
Wan contended that public disclosure of Amgen’s potential price changes would put it at a “significant competitive disadvantage by providing Amgen’s competitors valuable non-public information and insights about Amgen’s
The trial court issued a written ruling in Amgen’s favor on February 1, 2019. The trial court found that Amgen had
demonstrated a reasonable probability of prevailing on the merits of its writ petition. Citing Wan’s declaration, the trial court found that Amgen had sufficiently demonstrated that the information in its price increase notice contained trade secrets. Specifically, the trial court found that Amgen had made reasonable efforts to maintain the secrecy of its potential price changes, and the pricing information had “independent economic value” in that Amgen “expended time, effort, and money” in setting the prices and its “pricing strategy provides [Amgen] with a competitive advantage over competitors.”
The trial court rejected CCHCS’s argument that disclosure of the pricing information to the registered purchasers vitiated any trade secret protection, because “the law compelled [Amgen] to make the disclosure,” and “there is no evidence the pricing information in the Notice is ‘generally known to the public’ or [Amgen’s] competitors.” The trial court also rejected CCHCS’s argument that the CPRA trade secret exemption under
The trial court acknowledged that one of the goals of Senate Bill No. 17 was to “ ‘improve data transparency’ ” regarding drug pricing, but found this goal “is not thwarted through recognizing a manufacturer’s trade secret information for up to 60 days before the price increase is effectuated.”
Finally, the trial court found that “the balance of relative harms [in granting the injunction] tips in [Amgen’s] favor.” Despite Amgen’s disclosure of the pricing information to the registered purchasers, “there is no evidence those purchasers
have not voluntarily comрlied with [Amgen’s] request to maintain the confidentiality of the information,” and “the audience to whom [Amgen] actually disclosed the pricing information was not [Amgen’s] competitors. Therefore, public dissemination of the pricing information could be harmful to [Amgen] notwithstanding [Amgen’s] compliance with SB 17.”
CCHCS timely appealed from the grant of the preliminary injunction. Amgen applied ex parte to stay the trial court proceedings pending resolution of the appeal, which CCHCS opposed. The trial court denied the ex parte application.
The trial court subsequently sustained CCHCS’s demurrer to the mandamus cause of action with leave to amend.6 Amgen
did not amend, instead voluntarily dismissing its action, thereby abandoning its attempt to prevent CCHCS from рroviding the price increase notification to Reuters News. Amgen represents on appeal that the dismissal did not “jeopardize[e] its trade secrets because it had already implemented the proposed price changes for the drugs listed in the SB 17 notice.”
DISCUSSION
I. This Appeal Is Not Barred by the Mootness Doctrine
As an initial matter, Amgen argues that its voluntary dismissal of the underlying action dissolved the preliminary injunction CCHCS seeks to challenge, and thus the appeal should be dismissed as moot. As CCHCS notes, however, we “retain[ ] discretion to decide a moot issue if the case presents an issue of ‘ “substantial and continuing public interest” ’ and is capable of repetition yet evades review.” (Citizens Oversight, Inc. v. Vu (2019) 35 Cal.App.5th 612, 615; Conservatorship of Wendland (2001) 26 Cal.4th 519, 524, fn. 1.)
This is such a case. The issues involved are capable of repetition. We reasonably can expect that Amgen will provide price increase notices in the
The issues raised by this case are not limitеd to the parties before us. Amici curiae GlaxoSmithKline LLC and ViiV Healthcare US state that they “have each been notified by state agencies on three separate occasions that third parties were
seeking disclosure of the advance price increase submissions,” and both have taken legal action to prevent the public agencies from disclosing the submissions.
Amgen suggests the dispute at issue in this case is unlikely to recur because the contents of Amgen’s future price increase notices may change—for example, Amgen may no longer include a range of possible price increases, instead listing only a specific increase—which in turn may affect the trade secret analysis. Because our resolution of this appeal does not turn on the contents of Amgen’s notice, we reject this argument.
The issues in this case also are likely to evade review. As Amgen has made clear, its goal in this litigation was to prevent disclosure of its proposed price increases for the 60-day period before Amgen implemented the new prices. Once Amgen implemented the price increases, it could (and did) dismiss its reverse-CPRA action without jeopardizing its purported trade secrets. Nothing prevents Amgen from taking a similar approach to future price increase notices, in which case the trial and appellate courts would never reach the merits of the case.7
We further conclude that the interrelation of trade secret protections and
multiple legal actions taken by drug manufacturers to prevent disclosure of their price increase notices, the filing of three briefs by amici curiae in this case, and the fact that the disclosure in the case was sought by a prominent news organization.
Amgen argues that CCHCS “cannot invoke the discretionary exception to mootness because it voluntarily chose not to preserve the status quo pending this appeal” when it opposed Amgen’s request to stay the trial court
Fair is inapposite. As set forth above, the controversy at issue in this case is likely to arise again between these parties, and the appeal was rendered moot not through CCHCS’s inaction, but by Amgen’s decision to dismiss the underlying case, something CCHCS could not have prevented even had it agreed to stay the proceedings in the trial court.
Amgen’s other cited cases do not support the proposition that application of the mootness exception depends on the appellant taking action to preserve the status quo. Instead, the courts in those cases declined to apply the exception because they were not persuaded the issues in the cases were likely to recur. (See Building a Better Redondo, Inc. v. City of Redondo Beach (2012) 203 Cal.App.4th 852, 867 [no exception to mootness applied because “the appeal of the judgment in this case presents
fact-specific issues that are unlikely to recur”]; Santa Monica Baykeeper v. City of Malibu (2011) 193 Cal.App.4th 1538, 1551 [declining to apply an “exception for recurring controversies” to an otherwise moot appeal because the recurrence of issues concerning a particular construction project in future undefined projects was speculative].) Amgen also cites Wilson & Wilson v. City Council of Redwood City (2011) 191 Cal.App.4th 1559, but that case did not address any exceptions to the mootness doctrine.
We proceed to the merits of CCHCS’s appeal.
II. The Trial Court Abused Its Discretion by Granting the Preliminary Injunction
CCHCS raises several contentions on appeal. Two are dispositive. We agree that the trial court abused its discretion when it concluded that (1) Amgen had sufficiently shown its price increase notice is a trade secret despite its disclosure to the registered purchasers, and (2) Amgen sufficiently demonstrated it would be harmed if CCHCS disclosed Amgen’s price increase notice to Reuters News and other members of the public during the 60-day notice period under
“[A] preliminary injunction is an order that is sought by a plaintiff prior to a full adjudication of the merits of its claim.” (White v. Davis (2003) 30 Cal.4th 528, 554, italics omitted.) “To obtain a preliminary injunction, a plaintiff ordinarily is required to present evidence of the irreparable injury or interim harm that
it will suffer if an injunction is not issued pending an adjudication of the merits.” (Ibid.)
Trial courts “ ‘evaluate two interrelated factors when deciding whether or not to issue a preliminary injunction. The first is the likelihood that the plaintiff will prevail on the merits at trial. The second is the interim harm that the plaintiff is likely to sustain if the injunction were denied as compared to the harm that the defendant is likely to suffer if the preliminary injunction were issued.’ ” (ITV Gurney Holding Inc. v. Gurney (2017) 18 Cal.App.5th 22, 28–29 (ITV Gurney).)
“We review a trial court’s application of these factors for abuse of discretion.” (ITV Gurney, supra, 18 Cal.App.5th at p. 29.) “However, if the ‘likelihood of prevailing on the merits’ factor depends upon the construction of a statute or another question of law, rather than evidence to be introduced at trial, our review of that issue is independent or de novo.” (Marken v. Santa Monica-Malibu School Dist. (2012) 202 Cal.App.4th 1250, 1261 (Marken).)
B. The California Public Records Act
Under the CPRA, “every person has a right to inspect any public record” except records that are “exempt from disclosure by express provisions of law.” (
do not dispute that the price increase notice that Amgеn sent to CCHCS is a public record.8
Here, Amgen bases its reverse-CPRA action on
The exemptions in
It is not clear to us that the trade secret evidentiary privilege is a broad prohibition on disclosure akin to the constitutional right to privacy or
Although the Legislature expanded the reach of the evidentiary privileges by incorporating them into the CPRA as exemptions, those exemptions, like all exemptions under
In light оf the above, it is not a foregone conclusion that the trade secret privilege under
C. Amgen has failed to show a probability of success on the merits
CCHCS contends the trial court abused its discretion by concluding that Amgen had sufficiently shown that its price increase notice was a trade secret despite its disclosure to the registered purchasers. We agree.
“ ‘[W]hether information constitutes a trade secret is a question of fact.’ ” (Global Protein Products, Inc. v. Le (2019) 42 Cal.App.5th 352, 367.) The party claiming the trade secret privilege under
In applying
Our focus here is on the first prong,9 which recognizes the self-evident principle that a trade secret must, in fact, be secret. (See 1 Milgrim on Trade Secrets (2009) § 1.03 [“Indispensable to an effective allegation of a trade secret is proof that the matter is, more or less, secret. In the absence of secrecy the property disappears”].) This is because the “intrinsic value” of a trade secret “is based upon, or at least preserved by, being safeguarded from disclosure.” (Pillsbury, Madison & Sutro v. Schectman (1997) 55 Cal.App.4th 1279, 1287; see also DVD Copy Control Assn., Inc. v. Bunner (2003) 31 Cal.4th 864, 881 [“ ‘Trade secretsare a peculiar kind of property. Their only value consists in their being kept private’ ”].)
Thus, “[p]ublic disclosure, that is the absence of secrecy, is fatal to the existence of а trade secret. ‘If an individual discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret, his property right is extinguished.’ ” (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 304 (
Amgen does not dispute that it disclosed its price increase notice to over 170 registered purchasers. The disclosure did not stop there, because those registered purchasers who were pharmacy benefit managers were required by statute also to inform their “large contracting public and private purchasers,” whether or not those contracting purchasers themselves were registered.10 (
Amgen provided no evidence that the recipients of the price increase information, whether registered purchasers or purchasers contracting with pharmacy benefit managers, wereunder any contractual obligation to maintain its confidentiality, nor does Senate Bill No. 17 impose any confidentiality obligations.11 In contrast, other provisions of Senate Bill No. 17 exprеssly impose confidentially requirements for certain information disclosed to the government. For example,
Given the price increase notice’s disclosure to an unknown number of recipients, none of whom was bound to keep it in confidence, it would not appear that Amgen’s price increase notice could be called “secret.”
The trial court found to the contrary, relying on the proposition that disclosed information nonetheless may retain trade secret status so long as it is not “generally known to the public or to other persons who can obtain economic value from its disclosure or use.” (
The trial court found “no evidence the pricing information in the Notice is ‘generally known to the public’ or [Amgen’s] competitors.” The trial court further noted “there is no evidence those purchasers have not voluntarily complied with [Amgen’s] request to maintain the confidentiality of the information,” presumably referring to Amgen’s placing the term “Confidential” in both the subject line and text of the e-mail transmitting the price increase notification.
In so concluding, the trial court misapplied the burden of proof and abused its discretion. As the authorities cited above indicate, disclosure to others, who have no obligation to maintain confidentiality, will destroy a trade secret. As the party asserting the trade secret privilege, it was Amgen’s burden to establish that its price increase notice remained confidential despite disclosure to the registered purchasers and “large” customers of pharmacy benefit managers. At a minimum, this would have required some evidence that the рurchasers did not, and would not, disclose the information to the general public or to those “who can obtain economic value from its disclosure or use.” (
Amgen argues that at the preliminary injunction stage, it need only show “ ‘a reasonable probability’ that it would prevail on the merits.” This is so, but in the absence of any evidence whatsoever that Amgen’s price increase notice maintained itsconfidentiality after disclosure to the registered purchasers and others, the trial court had no basis to find Amgen had a probability of prevailing on that critical issue, much less a reasonable one.
The trial court’s finding that Amgen’s disclosure was “compelled” does not affect our conclusion. The question here is not why Amgen disclosed its price increase notice, but whether that disclosure rendered the notice no longer confidential.
Even assuming arguendo that the registered purchasers did not disseminate the price increase notice further, we would conclude that Amgen has failed to show that the notice maintained its purported trade secret status. Amgen has not explained why the registered purchasers, who directly or indirectly sit on the opposite side of the negotiating table from Amgen, are not themselves
Among other things, purchasers aware of upcoming price increases can seek less expensive alternatives from Amgen’s competitors, to the purchasers’ economic benefit and Amgen’s detriment. Indeed, the legislative history of Senate Bill No. 17indicates that this was precisely what the Legislature intended to happen. (See Sen. Health Com., Analysis of Sen. Bill No. 17 (2017–2018 Reg. Sess.) Mar. 14, 2017, p. 8 [advance notice provision “gives purchasers . . . time . . . to seek other alternatives, including obtaining alternative formulations of drugs for which there are therapeutic equivalents”]; Assem. Com. on Appropriations, Analysis of Sen. Bill No. 17 (2017–2018 Reg. Sess.) as amended July 20, 2017, p. 4 [“the advance price notification will help [the purchaser] . . . find alternatives to costly drugs . . . and prevent unnecessarily high payment for drugs, such as those with short-term price hikes where an alternative formulation can achieve the same result”].)
In short, Amgen has failed to explain how its purported trade secret maintained its confidentiality and concomitant value to Amgen when it was disclosed to over 170 purchasers who had the incentive to use the information to their benefit and Amgen’s detriment, and were not subject to any restrictions on using or further disseminating the information.
Amgen’s cited cases, some of which the trial court relied upon as well, are unavailing. We discuss each in turn.
Masonite, supra, 42 Cal.App.4th 436 held that air emissions information submitted to government regulatоrs did not lose trade secret protection when those regulators, who were statutorily bound to maintain the confidentiality of the information, inadvertently disclosed the information to two environmental organizations.12 (Id. at pp. 450–451.) Thus,despite the disclosure, the
The Masonite court reasoned, “We do not equate limited, unsanctioned acquisition of confidential information by a third party, such as occurred here, with more general, authorized dissemination to the public or competitors which results in loss of trade secret privileges. The public agencies which received the . . . information were not entitled to distribute it further, so Masonite maintained the protection afforded by law to prevent disclosure of designated trade secrets to the general public and competitors.” (Masonite, supra, 42 Cal.App.4th at p. 451, fn. omitted.) Although not applicable in that case, the Masonite court found the trade secret definition in
The government’s inadvertent disclosure in Masonite is not analogous to Amgen’s disclosure under Senate Bill No. 17. Masonite stands for the proposition that the government’s erroneous disclosure of information that it is statutorily bound to keep confidential does not convert the information into a publicrecord, at least when the inadvertent disclosure is “limited” and made to “noncompetitors.”
Here, Amgen, not the government, disclosed the price increase notice to the registered purchasers. Amgen did so in compliance with a statutory regime that, far from protecting Amgen’s price information, required that it be disclosed to a long list of potentially adverse recipients with no limitations on those recipients’ use or further dissemination of the information. Amgen cannot claim to have been unaware of the possible consequences of its disclosure, including the loss of trade secret protections; trade groups opposed Senate Bill No. 17 precisely because it “requires the disclosure of commercially sensitive pricing information” “without confidentiality protections.” (Assem. Com. on Appropriations, Analysis of Sen. Bill No. 17 (2017–2018 Reg. Sess.) as amended July 20, 2017, p. 4 [summarizing joint letter of Pharmaceutical Research and Manufacturers of America, Biotechnology Innovation Organization, California Life Sciences Association, and Biocom].)
Also, as we have explained, Amgen has failed to make any showing that the registered purchasers were not akin to competitors who could derive economic value from Amgen’s pricing information, or that the purchasers
Amgen also quotes DVD Copy, supra, 116 Cal.App.4th 241, which stated, “Publication on the Internet does not necessarily destroy the secret if the publication is sufficiently obscure or transient or otherwise limited so that it does not become generally known to the relevant people, i.e., potential competitors or other persons to whom the information would have some economic value.” (Id. at p. 251.) DVD Copy does not in fact apply this principle, conсluding instead that the evidence indicated the Internet disclosure in that case likely reached millions of people. (Id. at p. 252.) Thus, DVD Copy gives no guidance as to what it means for a publication to be “sufficiently obscure or transient or otherwise limited” that it does not destroy trade secret protections. Also, as we have explained, Amgen has failed to show that the registered purchasers were not “other persons to whom the information would have some economic value.” (Id. at p. 251.) DVD Copy therefore does not undercut our conclusion that Amgen has failed to show that its price increase notice remained a trade secret after disclosure to the registered purchasers.
Amgen cites American Defense Systems, Inc. v. Southern California Gold Products, Inc. (C.D. Cal. May 14, 2009, No. CV 07-7134) 2009 WL 10671854, at page *3 for the proposition that “limited disclosure for [a] specified purpose ‘cannot be considered tantamount to placing plaintiff ’s trade secrets in the public domain.’ ” In that case, however, the trade secret holder had a contract with the federal government “which explicitly prevent[ed] general or public disclosure of trade secrets.” (Ibid.) Thus, the trade secret hоlder providing its products to the government under the terms of that contract didnot vitiate its trade secret protections. (Ibid.) Amgen has demonstrated no such obligation of confidentiality here.
Amgen cites Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1522 (Morlife) for the proposition that information that is “ ‘not readily ascertainable, but only discoverable with great effort’ ” can be a trade secret. Morlife did not concern the legal effect of the disclosure of trade secrets; instead, it addressed whether the information in a roofing company’s customer list was “ ‘readily ascertainable’ through public sources” such that it could not constitute a trade secret in the first place. (Id. at pp. 1521–1522.) Assuming arguendo that principle applies here, it is of no help to Amgen. Even if Amgen’s price increase notice were not readily ascertainable by the
Amgen contends in its supplemental briefing and emphasized at oral argument that recipients of the price increase notice did in fact have “a duty to maintain the secrecy and limit use of Amgen’s trade secrets” under the trade secret misappropriation statutes. (See
As we have discussed, nothing in Senate Bill No. 17 requires purchasers to maintain the confidentiality of price increase notices. The fact that CCHCS, in light of Amgen’s unilaterally marking its price increase notice confidential, notified Amgen before responding to the CPRA request, does not establish that CCHCS was obligated to do so. It is telling that in that same letter, CCHCS stated that it had “not identif[ied] a legal basis for nondisclosure,” and intended to disclose the price increase notice absent a court order. CCHCS’s letter cannot be read to concede any confidentiality obligation. Even if it could, we would not be bound by any such concession given the absence of any supporting language in Senate Bill No. 17.
Furthermore, there is no language in Senate Bill No. 17 limiting the purposes for which recipients may use the price increase notice. Indeed, reading limitations into the statutory scheme would be inimical to its purpose, given that one of the intended goals of Senate Bill No. 17 was to allow the purchasers to find less expensive alternatives for the drugs listed in the price increase notices. This would include use of the information in the price increase notice in negotiations to accomplish that goal, including negotiations between purchasers and Amgen’s competitors.
Amgen cites federal cases in support of its misappropriation argument. All these cases are inapposite, because they involve confidentiality obligations arising from agreements or express statutory mandates. (See Jerome Stevens Pharmaceut. v. Food & Drug. Admin. (D.C. Cir. 2005) 402 F.3d1249, 1252 [federal law prohibited disclosure of trade secrets at
Amgen argues that a holding that it lost trade secret protection by complying with
We note again that Amgen has not challenged the constitutional validity of Senate Bill No. 17, either on appeal or below, but instead relies solely on
Amgen also argues that interpreting Senate Bill No. 17 as we have would “create perverse incentives encouraging non-compliance.” To the extent Amgen claims that the advance notice requirement is bad policy, that is for the Legislature to decide. We note again that the Legislature enacted Senate Bill No. 17 over the pharmaceutical manufacturers’ express objection that the
The parties debate at length whether the Legislature intended the price increase notices to be publicly available beyond those statutorily entitled to receive it. Whatever theLegislature’s intent, the effect of disclosure to the registered purchasers and customers of pharmacy benefit managers was the loss of secrecy essential to meeting the first prong of the UTSA trade secret definition. If the Legislature did not intend that effect, the Legislature may of course address the issue. Again, to the extent Amgen urges that we impose limitations on disseminating the price increase information once received by the registered purchasers and “large” pharmacy benefit manager customers, that is the Legislature’s prerogative and not a matter fоr judicial fiat.
D. The trial court abused its discretion by concluding that the balance of harms favored Amgen
The trial court’s balancing of harms relied on the same reasoning as did its analysis of the trade secret claim: Because Amgen had disclosed its pricing information only to the limited number of registered purchasers, and not to the general public or its competitors, further dissemination of the information would be harmful to Amgen during the 60-day period defined in Senate Bill No. 17, tipping the balance of harms in its favor.
As set forth above, Amgen has failed to show that disclosure to the registered purchasers and pharmacy benefit manager customers had not already placed Amgen’s price increase notice in the hands of those who would use it to their advantage and Amgen’s detriment, thus causing the very harm Amgen sought to prevent with its preliminary injunction. The trial court’s finding that “the audience to whom [Amgen] actually disclosed the pricing information was not [Amgen’s] competitors” did not factor in this patent consequence of Amgen’s disclosure or that this consequence was what the Legislature intended inenacting
Amgen’s claim of harm is undercut further by the fact that it ultimately discloses its purpоrted trade secret publicly when it implements its price increases 60 days after notifying the registered purchasers. To the extent a competitor can divine “pricing strategy, internal decision-making, internal forecasts,” and “roadmap[s] for Amgen’s potential actions” from price listings, as Wan asserted, the competitor can do so once the prices are public.
We also observe that Amgen’s rival drug manufacturers are subject to the same advance notice requirements. Thus, whatever competitive disadvantage Amgen might suffer by disclosing its prices early is shared by its rivals. Amgen argues that some of its competitors may not comply with the notice requirements, but this is pure speculаtion.
Amgen contends that some of the information in its price increase notice may not become public after 60 days and therefore should be entitled to protection. Wan stated in her declaration, “Pursuant to SB 17, Amgen may implement the price increases at any point after notice or Amgen may decide not to implement the price increases at all. Furthermore, Amgen mayincrease prices by any amount within the specified range contained in Amgen’s notices.”
Assuming arguendo Wan correctly characterized the requirements of Senate Bill No. 17, she provided no evidence suggesting that Amgen actually has, or would, avail itself of these options. Her assertions appear to us to be mere argument. They also appear to be internally inconsistent. Given Amgen’s concern for the harm public dissemination of its pricing may cause, it seems unlikely Amgen would announce any prices it was not going to implement within 60 days. Indeed, were Amgen to disclose a proposed price increase and later retreat from implementing that increase, that conduct could call into question Amgen’s claim that it had made “efforts that are reasonable under the circumstances to maintain . . . secrecy.” (
Amgen argues that “public disclosure of trade secret information constitutes irreparable harm as a matter of law.” This argument presupposes that Amgen’s price increase notice remained a trade secret after its disclosure to the registered purchasers and customers of pharmacy benefit managers. As we have already explained, we disagree with that assertion.
The order granting the preliminary injunction is reversed. California Correctional Health Care Services is awarded its costs on appeal.
CERTIFIED FOR PUBLICATION.
BENDIX, J.
We concur:
ROTHSCHILD, P. J.
WEINGART, J.*
* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.