Life Science Compliance Update

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April 17, 2017

Maryland Sends Bill to Governor on Drug Prices

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The Maryland House recently passed a bill – House Bill 631 – with the goal of “prohibiting a manufacturer or wholesale distributor from engaging in price gouging in the sale of an essential off-patent or generic drug.”

Under the legislation, the Maryland Medical Assistance Program is instructed to notify Maryland Attorney General if a generic drug’s price spikes by 50% or more in one year, or if its price increases while there are three (or less) companies making the prescription. Once the Attorney General Receives that notice, he or she is able to request a report from manufacturers, detailing production costs, rationale for the price hike, and 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. That court can also impose a fine of up to $10,000.00 for each violation under the law.

Chester Davis, Jr., President and CEO of the Association for Affordable Medicines, has issued a statement asking for a veto of the bill, stating, “it is threatening the savings patients and taxpayers receive from affordable generic drugs.” He further notes, “in 2015 generic drugs delivered $227 billion in savings to the U.S. healthcare system, and $1.6 trillion in savings over the last decade. For that same calendar year, generic drugs comprised 89% of all prescriptions written in the United States, but accounted for only 27% of total prescription drug costs.”

Davis expresses concern about unintended consequences, “While the desire to take action against bad actors in the industry is understandable, what has been utterly lost in the debate over prescription drug costs in Maryland this session is the law of unintended consequences; namely, that by giving the Attorney General this unbounded and unprecedented level of authority to control pricing in a competitive free 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.”

The current Maryland Attorney General, Brian Frosh, applauded the legislation. In a statement released by his office, he stated that the legislation gives Maryland a “necessary tool to combat unjustified and extreme price increases for medicines that have long been on the market and that are essential to our health and well-being.”

Maryland Governor Larry Hogan has not yet signed the bill.

Other State Actions

In New York, Governor Andrew Cuomo has proposed the idea of creating a board to control the costs of drug by allowing that board to determine a “fair price.” This idea has been introduced several times before the Legislature, each time soundly defeated.

Last year, California voters turned down a ballot initiative that would have limited industry’s power to create their own pricing. Now, industry is preparing for a fight in Nevada. A state senator recently introduced a measure to control prices on certain drugs, and the industry is enlisting lobbyists for the fight, according to the publication.

At the national level, President Donald Trump has repeatedly pledged to lower costs through increasing “competition,” while Congress considers proposals for drug importation and Medicare price negotiations. Rep. Elijah Cummings, an influential congressman from Maryland, has been involved in those talks and met with Trump to share his importation proposal earlier this year.

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