New Maryland Law to Restrict Generic Drug Price Increases

A new Maryland law to keep generic drug prices from increasing by too much goes a step further than price transparency bills and laws in other states, but it’s leaving some with more questions about its broader impact.

Just before the weekend, Maryland Gov. Larry Hogan (R) allowed the generic drug price gouging bill, HB 631, to become law, though he did not sign the bill and expressed reservations about "unintended consequences."

In a letter to the Maryland Speaker of the House, Hogan wrote: "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."

But Maryland Attorney general Brian Frosh, who supports the measure, told Focus in a statement: "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."

The new law will impose fines on generic drugmakers who hike 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 drugmakers are actively manufacturing and marketing the drug.

The Association of Accessible Medicines (formerly the Generic Pharmaceutical Association) took issue with the bill in early May, telling Focus that it "treats generics like brands on price gouging but carves out brands."

Bernstein analyst Ronny Gal also raised questions, telling investors in a note on Tuesday, "The bill has limited scope as it restricts high price increases for drugs costing >$80/treatment at WAC level (which means future WACs will simply be set higher).  However, it is a long term annoyance for GRx [generic prescriptions] and will have national effect (hard to avoid one state) and is the first state-level restriction of drug pricing we are aware of."

Maryland also considered another bill earlier this year that would require companies to disclose certain drug pricing information publicly and require annual reports to be audited by third parties.

Other States

Vermont led the way with its transparency bill that last December produced a report on specific drugs that saw large increases.

A Nevada bill, meanwhile, targets diabetes treatment prices, which state Democrats say have risen by about 387% between 2006 and 2013. The bill is awaiting a decision from Gov. Brian Sandoval (R) and would require manufacturers of diabetes treatments to reimburse a purchaser for a portion of the price of the drug in certain circumstances; require certain disclosures from companies and authorize the state’s health department to impose an administrative penalty in certain situations.

Ohio is also taking up drug prices, with a ballot measure coming next November that, if passed, would force companies to sell pharmaceuticals in the state at the same price as the federal Department of Veterans Affairs. A similar measure failed in California.

According to the National Conference of State Legislatures, more than 230 bills on pharmaceutical access, cost sharing, pricing and payments have been introduced in 2017 in 39 states.

Bernstein’s Gal noted that state bills targeting drug price increases "are now at the 'annoyance' level, rather than material commercial impact but presumably once a coalition gels at state level and reaps political rewards, more is possible."