Maryland Goes a Step Further to Rein in Drug Price Spikes

A Maryland bill to shine more light on prescription drug prices takes the standard for state transparency efforts a step further by not only requiring pharmaceutical companies to offer a peek into their innerworkings but requires annual reports to be audited by third parties.

The bill has drawn criticism from industry groups and others who say such independent audits would be overly burdensome for industry and that the $2500 threshold might include too many drugs as other states have included a $10,000 threshold, though other experts think the legislation is a step in the right direction.

Ameet Sarpatwari, an instructor at Harvard Medical School, told Focus: "The Maryland bill takes a more aggressive approach to pharmaceutical price transparency than previously introduced legislation. Of note, it would place a lower threshold on reporting, require companies to disclose specific types of financial assistance provided for purchasing the drug, and make company reports publicly available online. The effort reflects growing frustration over rising drug prices and inaction at the federal level. It is likely that additional states will press for more actionable data from drug companies. Proactive transparency measures by drug companies will likely not dissipate calls for state pharmaceutical transparency bills. Such measures, while welcome, would likely not yield the uniform, granular information necessary for states to develop and prioritize policy solutions to contain rising drug costs."

BIO on Tuesday also released its testimony used to oppose the bill, citing recent US Food and Drug Administration (FDA) action to allow earlier talks between payers and drug manufacturers on pricing.

On the criticism from BIO, PhRMA and the generic industry’s AAM, Bernstein analyst Ronny Gal said in an investor note published Monday: “We are not sure if [the criticism] is because it is well written (with some help with Johns Hopkins health economists) or because it has odds of passing. At any rate, the industry will fight this at the state legislature and (if lost) the courts. The challenge for the industry is that, even if they win this fight, it is just too easy for a representative in another state to copy the bill.”

A state subcommittee will discuss the House version of the bill (HB 666) on Thursday.

Senate Bill’s Details

Under the bill, manufacturers of an “expensive drug,” meaning one that has a wholesale acquisition cost of $2,500 or more annually or per course of treatment, sold in Maryland must file (1) by 31 March each year, an annual report with the Secretary of Health and Mental Hygiene and (2) a specified notice with the secretary before increasing the average wholesale price or wholesale acquisition cost of the drug by more than a specified amount. Both documents must be posted online.

By 31 December 2018, and annually thereafter, the secretary must publish a summary report of the annual reports and provide a copy to the governor and the General Assembly. And the annual reports must be “audited by an independent third-party auditor before the report is filed with the Secretary.”

Dr. Leana Wen, the health commissioner for Baltimore, said in a hearing on the bill 15 February that patients are having to choose between using drugs that keep them alive and other priorities.

“We have a right to know why these medications are increasing in price,” Wen said in support of the bill, noting that many of the drugs are not new but generic drugs. A GAO report published in September noted that 315 generic drugs have more than doubled in price since 2010.

A newly established Drug Price Transparency Advisory Committee created under the bill also must advise the Secretary on the annual report process and if a manufacturer fails to file an annual report or notice of a price increase, a civil penalty of up to $10,000 for each day the violation continues will be imposed. The attorney general may seek a court order requiring a manufacturer to file an annual report.

Other State Bills

According to the National Conference for State Legislatures, in 2017 so far, Arizona, California, Connecticut, Florida, Illinois, Indiana, Maine, Massachusetts, Montana, Oregon, Rhode Island, Tennessee, Virginia and Washington have all introduced transparency bills on pharmaceutical pricing.

Other states including New Jersey, Nevada and New Hampshire, introduced similar measures in 2016.

And Vermont, which signed its transparency bill into law last June, has already released its first transparency report highlighting some of the largest pharmaceutical price spikes.

Maryland’s SB437

SB437: Fiscal and Policy Note

Editor's note: Article updated on 6/3/19 to note Dr. Sarpatwari is an instructor at Harvard Medical School.