Drug Makers Not Off the Hook as States Continue to Take Action to Control Drug Prices
Earlier this month, two states – Maryland and Nevada – passed legislation aimed at controlling drug prices. The two laws are being touted by proponents as decisive action against pharmaceutical manufacturers. Opponents note that the laws have limitations and are really more of an annoyance for drug makers and will not do anything to help patients access or afford their medicines. Notably, both measures were enacted without the governors’ signatures (who are both Republican) but neither governor vetoed the legislation.
The Maryland law, which is aimed at preventing generic drug prices from increasing by too much, goes a step further than price transparency bills and laws in other states. The new law will, among other things, impose fines on generic drug makers (i) who hike the wholesale acquisition cost (“WAC”) of their products by 50% or more in one year, (ii) if the drug’s WAC is more than $80, or (iii) if three or fewer drug makers are actively manufacturing and marketing the drug.
Although the law will not go into effect until October 1st, advocates are already collecting ammunition to enforce the law. The Maryland Citizens’ Health Initiative launched a website shortly after the legislation was enacted to collect examples of price increases that could potentially be used to build future cases against manufacturers after the law takes effect.
The Nevada law mandates transparency from both manufacturers and pharmacy benefit managers (“PBMs”) – the middlemen in the drug pricing process. Specifically, the law requires manufacturers of diabetes drugs, such as insulin, whose drug prices have increased by more than a prescribed amount over the previous year to report the costs of producing and marketing the drug, as well as any rebates offered. Additionally, PBMs are required to submit a report to the state including the total amount of all rebates they negotiated with manufacturers in the previous year and the total amount of rebates retained by the PBM.
The law also requires manufacturers to announce price hikes and permit purchasers to file for partial reimbursement if a price increase exceeds the medical care component of the Consumer Price Index, or if the price is above a “foreign price cap” that calculates drug prices outside of the United States. The legislation also requires pharmaceutical sales representatives to annually report details of interactions with doctors, including who they visited and what samples or gifts they handed out. Any companies that do not comply with the legislation can be subject to administrative penalties.
Maryland and Nevada are the only states that have succeeded with passing drug pricing legislation this year. However, Vermont passed drug pricing transparency legislation last year and Ohio is taking up drug prices with a ballot initiative 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. Additionally, at least thirty other states have introduced bills addressing the rising cost of drugs. This increase in state legislative action fits with the wave of criticism that has been leveled against the pharmaceutical industry in the aftermath of the 2016 presidential election. States efforts, and the effect on the pharmaceutical industry, will continue to be an area to watch in the coming months.