Maryland Bill Seeks to Stop Generic Drug Price Gouging

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By Bronwyn Mixter

A Maryland bill would start investigations and impose fines to stop generic drug companies from increasing their prices exorbitantly.

The bill (H.B. 631) would prohibit a manufacturer from engaging in “price gouging” in the sale of an “essential off-patent or generic drug.” Specifically, it would empower the Maryland attorney general to sue a generic manufacturer that institutes unjustified price increases. The bill, introduced in January, has more than 80 sponsors, including Democrats and Republicans.

The Maryland House of Delegates passed the bill on March 20. A date hasn’t been set yet for the Maryland Senate to vote on the bill.

Drug prices are under heavy scrutiny by lawmakers, consumers, medical professionals and President Donald Trump. On Jan. 31, the president told drugmakers at a White House meeting they are charging too much for their products. The increased focus on drug prices was spurred by situations in which pharma companies jacked up the the prices of established, generic drugs.

Bill Specifics

The bill would require the state Medicaid program to notify the Maryland attorney general when a company increases a generic drug’s wholesale acquisition cost or price charged to the Maryland Medicaid program by 50 percent or more. The drugmaker would have to be one of three or fewer offering the drug on the market. The rule would be triggered only for drugs that cost more than $80 for a 30-day supply.

The generic manufacturer then would be required to submit certain information to the attorney general about the price increase.

“The bill would grant the Attorney General considerable discretion in pursuing so-called and poorly defined ‘price gouging,’” Stephanie Trunk, a health-care attorney with Arent Fox LLP in Washington, told Bloomberg BNA in a March 27 email. “Essentially, in the event the Average Manufacturer Price (AMP) or the Wholesale Acquisition Cost (WAC) of an essential generic drug increased by a certain threshold in the prior 23 years, the Attorney General can chose to require the manufacturer of such drug to provide a report substantiating the price increase.”

If the attorney general believes the price increase isn’t justified, he or she can pursue a case against the manufacturer for price gouging, Trunk said. The bill also would impose a civil penalty of up to $10,000 for each violation.

“Of particular note is that the reporting trigger would not only be a WAC increase, which is the list price of a drug and completely controlled by the manufacturer, but also an increase in AMP,” Trunk—a Bloomberg BNA advisory board member—said. “Particularly for generic drugs, AMP can increase solely related to changes in customer mix and customer purchasing patterns, which is not something within a manufacturer’s sole control.”

Trunk counsels pharmaceutical and device manufacturers, distributors and their customers, including pharmacy benefit managers, on regulatory, reimbursement and compliance matters.

Generic Industry’s Opposition

The bill “ignores the real cause of increasing prescription drug costs,” the Association for Accessible Medicines (AAM), formerly the Generic Pharmaceutical Association, said in a position paper on the bill. It “only applies to generic drugs, not much more expensive brand-name and specialty drugs that cost Maryland patients and tax-payers billions of dollars per year.”

The AAM said brand name and specialty drugs cost Maryland patients over $3.5 billion, while generics saved Maryland $3.7 billion in just one year alone.

The bill’s standards on when a price increase is “unjustified” are vague, the AAM said.

“Given the vague standards set forth in the the bill, companies would perpetually be at risk of facing prosecution for taking actions that normally occur during the course of business within the competitive free market,” the AAM said.

A group representing branded drugmakers also expressed concerns. Caitlin A. Carroll, a spokeswoman for the Pharmaceutical Research and Manufacturers of America (PhRMA) told Bloomberg BNA in a March 27 email that while her group has “concerns with the scope of the legislation as written, PhRMA has been working with Maryland legislators and the Attorney General's office to ensure the bill remains focused on preserving a competitive generic marketplace.” Carroll added, “We support efforts to establish an objective criteria and process by which the Attorney General’s office can address egregious behavior.”

To contact the reporter on this story: Bronwyn Mixter in Washington at bmixter@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

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