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Maryland Attempts to Control Drug Prices
Posted on July 21st, 2017 by Betsy Davis in Pharma R&D
Consumer concerns over the price of drugs remain high, so it’s not surprising that Maryland recently passed a bill aimed at controlling costs. House Bill 631 prohibits “a manufacturer or wholesale distributor from engaging in price gouging in the sale of an essential off-patent or generic drug” and authorizes the Maryland Medical Assistance Program to notify the state’s Attorney General if there is a significant increase in price. The AG can then ask the manufacturer to provide a report laying out the reasons for the price increase, along with information on production costs and any efforts made to expand access.
“If the Attorney General determines that the company violated the pricing law, he or she can request that a local circuit court force it to roll back the price and return money to consumers,” explains Thomas Sullivan in Policy and Medicine, pointing out that the court can also impose a fine of as much as $10,000 for each violation.
The bill enjoyed the bi-partisan support and is likely to be popular with voters who might initially like the idea of any measures that appear to reign in prices. Writing for The Baltimore Sun, Ian Duncan said that supporters of the bill argue that the market does not always function as expected because when there is a limited number of suppliers for a drug, that allows them to keep prices high or even increase them. In an open letter to Maryland governor Larry Hogan asking him to sign the bill, blood cancer patient David Mitchell, who is co-founder and president of Patients for Affordable Drugs, expresses his hope that the legislation will “stem the tide of skyrocketing drug prices” for people like him whose treatments cost hundreds of thousands of dollars.
Nonetheless, the bill has its fair share of critics. Eric Sagonowsky of Fierce Pharma reports that the Maryland Public Policy Institute is “skeptical” and doesn’t think the bill is guaranteed to help consumers. Sagonowsky also notes that the pharmaceutical industry pushed back against an earlier version of the bill considered by the state senate that would have forced companies to file a report outlining all spending on any drug (branded or generic) costing more than $2,500 annually.
Though the current bill may be slightly less offensive to pharma, it is still taking heat from the industry. In a statement urging the governor to veto the bill, Chester Davis, Jr., President, and CEO of the Association for Accessible Medicines, strongly criticized the notion of giving the Attorney General such power to control pricing in a competitive market. “Generic companies will be exposed to a level of risk in Maryland that will require them to evaluate whether they want to continue to market affordable medicines within the state,” said Davis.
“And if the new level of risk presented by the legislation compels several manufacturers, all competing in the same therapeutic market, each on its own, to decide that the risk is too high, they will look to stop manufacturing or marketing certain medicines. If that happens, it will mean less competition, not more, and that will translate into fewer options and ultimately higher health care costs, none of which is a good for Maryland patients and taxpayers.”
In a piece in Real Clear Health, Andrew Yarrow acknowledges that the Maryland bill is well-intentioned, but that it will have a “perverse” effect on the development and sale of affordable generic drugs. “Since generic makers operate on a narrow margin and prices fluctuate with demand, the threat of litigation for charging what is subjectively deemed an ‘excessive’ price could drive generic makers out of business or deter companies from bringing new drugs to market. This would reduce competition and innovation, likely drive up prices, and could even create drug shortages.”
Whether or not Governor Hogan is convinced remains to be seen. Bills aimed at controlling drug prices have already been defeated in New York and California, but even if Bill 631 does go down in Maryland, this type of legislation is likely to keep popping up unless pharma can get its message out to politicians and voters.
All opinions shared in this post are the author’s own.
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