Life Science Compliance Update

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June 02, 2017

Maryland Law to Restrict Generic Drug Price Increases

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Late last week, Maryland Governor Larry Hogan allowed a law targeted at preventing generic drug prices from increasing by too much. The law imposes fines on generic drug makers who raise the wholesale acquisition cost (WAC) of their products by 50% or more in one year, or if the WAC is more than $80, or if three or fewer drug makers are actively manufacturing and marketing the drug. The Maryland legislation is the first of its kind in the United States.

While Governor Hogan did not sign the bill into law, he did not veto it, thereby effectively allowing it to become law. However, Governor Hogan has concerns about “unintended consequences” as a result of the bill. He wrote a letter to the Maryland Speaker of the House, Michael E. Busch, noting that "this legislation raises legal and constitutional concerns. Also, this legislation only addresses the pricing of generic and off-patent pharmaceuticals, and does nothing to address the cost of patented products and medical devices which may be associated with drug delivery.”

In his letter, Governor Hogan further noted,

[T]his legislation only addresses the pricing of generic and off-patent pharmaceuticals, and does nothing to address the cost of patented products and medical devices which may be associated with drug delivery. This oversight, whether inadvertent or deliberate, is troubling since the patented or brand-name pharmaceuticals make up a significant amount of the market and are often times the most expensive and essential pharmaceuticals.

He went on to say

I am not convinced that this legislation is truly a solution to ensuring Marylanders have access to essential prescription drugs, and may even have the unintended consequence of harming citizens by restricting their access to these drugs. The legislation does have a laudable goal, to combat price-gouging of consumers for life-saving drugs, and I am supportive of that goal.

One group that is against the legislation is the Association for Accessible Medicines. They have argued that average generic drug prices have actually declined and that overall, they help save money for the United States healthcare system. A spokesman for the group said the law was unconstitutional and will “have the unintended consequence of driving away generic manufacturers” from the state.

Maryland Attorney General Brian Frosh, is on record as supporting the measure and stating,

When a drug company doubles or triples - or multiplies by 50 - the price of medication, it imperils the health and finances of patients and their families, and it threatens public health. The new law 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.

Lawmakers have introduced bills in about 30 state legislatures this year, seeking to regulate drug prices, require manufacturers to justify price increases and form purchasing groups with other states to negotiate lower prices, according to the National Academy for State Health Policy, a nonprofit policy group that has drafted model drug-pricing bills for states.

The legislation becomes effective October 1, 2017.

Thank you again to our colleague Nicodemo Fiorentino for keeping us up-to-date on the most recent state actions.

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