HEALTH NEWS

Drug Price Gouging Laws May Become a New Trend

Written by Shawn Radcliffe on October 10, 2017

Maryland is the first to go after price gouging of pharmaceutical drugs, but other states are trying to lower drug costs in other ways.

drug price gouging laws

Maryland has permission to go after prescription drug price gouging.

A federal judge gave the go-ahead last week.

Drug makers had attempted to block the state’s first-in-the-nation law targeting extreme increases in generic drug prices.

The ruling adds Maryland to a growing number of states taking action against high drug prices, as Congress lags behind with similar proposed legislation.

Most recently, California Gov. Jerry Brown signed a drug price transparency law that requires pharmaceutical companies to publicly justify steep price increases.

The Maryland law, which took effect on October 1, enables the state attorney general to sue makers of generic or off-patent drugs for an “unconscionable” price increase, one that isn’t justified by the cost of making or distributing the drug.

Manufacturers could be fined up to $10,000 for each violation or be required to roll back price increases.

The attorney general’s office will also be able to request information from companies to help determine if there is evidence of “price gouging.”

The Association for Accessible Medicines, a drug industry trade group, had filed a lawsuit arguing that the Maryland law is unconstitutional because it doesn’t define “price gouging” and would allow the state to intervene in interstate commerce.

U.S. District Judge Marvin Garbis denied the association’s request for an injunction.

But he allowed the lawsuit to move forward based solely on the association’s claims that the law is vague. However, he dismissed the other arguments.

Drug prices rising

Even if the Maryland law is found to be unconstitutional, it’s unlikely to slow down the rising concerns about the high cost of prescription drugs.

A 2016 poll by the Kaiser Family Foundation found that 77 percent of Americans surveyed said the cost of prescription drugs is “unreasonable.”

There’s good reason for consumers’ concerns.

Prescription drug spending in the United States rose sharply in 2014, according to a study in the Journal of the American Medical Association (JAMA).

Price increases were steeper among new specialty drugs, such as those for cancer and hepatitis C.

There have also been several recent cases of extreme price hikes by Turing Pharmaceuticals, Marathon Pharmaceuticals, and other companies.

Action being taken

Although Maryland is the first state to target price gouging, other states have already taken action on the high cost of prescription drugs.

According to a report released in August by the Yale Global Health Justice Partnership, more than 30 states have introduced more than 80 pharmaceutical drug pricing bills.

One of these is a law signed in June by Nevada Governor Brian Sandoval. The law requires pharmaceutical companies and pharmacy benefit managers (PBMs) to justify any significant increases in the price of diabetes drugs.

This includes disclosing the costs of producing and marketing the drug, as well as rebates given to the PBMs by drug companies.

Supporters of the law point out that these rebate savings may not always be passed on to consumers.

Connecticut’s Governor Dannel P. Malloy also signed a law this year that supporters hope will reduce prescription drug costs.

The law bans “gag clauses” in PMB contracts that prevent pharmacists from telling consumers that they can save money by opting for a generic drug.

Those drugs sometimes cost less than the copay for a covered brand-name drug.

Congress makes some progress

As states move forward with legislation to tackle drug prices, Congress seems to be lagging behind, although there has been some recent movement.

One bill that is before Congress right now is the bipartisan Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act.

The bill would increase competition by removing roadblocks to the development of lower-cost generic drugs.

“Generics are indisputably a real solution to out-of-control prescription drug prices,” Will Holley, spokesperson for The Campaign for Sustainable Rx Pricing, told Healthline.

A report by the IMS Institute found that oral generic drugs cost 80 percent less than the brands they replace within five years of being introduced.

Advocacy groups have accused pharmaceutical companies of using anti-competitive practices to keep these cheaper alternatives out of the market.

Another bipartisan bill — the FAIR Drug Pricing Act — introduced earlier this year in the House and Senate attempts to address price transparency.

It would require drug companies to disclose planned price increases, including research and development costs.

Holley also pointed to the need for other kinds of price transparency — such as “how much of the research that went into a new drug was funded by taxpayers.”

Patients for Affordable Drugs estimates that the National Institutes of Health (NIH) spent more than $200 million on basic research on CAR-T therapies, in which a patient’s immune cells are genetically engineered to go after cancer.

In an interview with The Atlantic, the advocacy group’s David Mitchell argued that drug companies developed their drugs using this government-funded science.

This includes Novartis, developer of Kymriah, a treatment for children with relapsed or refractory B-cell acute lymphoblastic leukemia (ALL) — which has a price tag of $475,000.

Many of the state efforts are facing legal challenges. It remains to be seen how drug price legislation will fare in a highly bipartisan Congress.

But price transparency will likely play an important role in keeping drug prices in check.

“There are no silver bullets to high drug prices,” said Holley, “but transparency provides information that allows consumers, providers, and payers to make more informed decisions.”

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