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Maryland lawmakers send bill on drug price gouging to Hogan

Baltimore Business Journal
April 10, 2017
Morgan Eichensehr

The Maryland General Assembly has passed a bill intended to fight unwarranted price hikes on “essential” generic drugs.

If signed by Gov. Larry Hogan, the bill would make it illegal for generic drug manufacturers to engage in price gouging — defined as an “unconscionable increase in price” — for certain prescription drugs. Manufacturers would be required to submit documents to the Attorney General’s office proving the validity of any major price increases and those found in violation of the law could be subject to penalties including a $10,000 fine.

Under the provisions of the bill, Attorney General Brian Frosh would be authorized to take legal action against a drug manufacturer if any notable price increase is not considered justified, based on development and distribution costs. The Attorney General would also have the power to sue a company if it does not respond to a complaint satisfactorily.

Frosh recommended the legislation with the intent to push back against rising costs of life-saving medications and “hold drug makers accountable.”

The bill has received both praise and push back from industry interests.

Maryland’s medical society, MedChi, an association made up of local physicians, applauded the passing of the bill.

“For far too long patients have been at the mercy of the [the pharmaceutical industry] in setting prices way above their production costs,” Dr. Stephen Rockower, president of MedChi, said in a statement. “This bill puts some teeth into the fight for the benefit of real, everyday patients, and will lower costs for all of us.”

But the bill has also seen opposition from drug industry players.

The Association for Accessible Medicines, a group representing drug manufacturers, said this bill targets generics companies unfairly. The group argues that it is not generic, but specialized biologic medicines that are responsible for the kinds of price gouging plaguing the U.S. drug market. Generics account for about 90 percent of all prescriptions, but 27 percent of overall drug costs in the country, said Christine Simmon, senior vice president of policy and strategic alliances.

Simmon said the bill’s proposed penalties could have a “chilling effect” on manufacturers, and prevent them from wanting to do business in Maryland. And with less competition comes higher prices, she argued.

“While the bill passed by the [Assembly] may make for a good politics, it not only puts that level of health care savings at risk moving forward, but would actually backfire by raising, not cutting, prescription drug costs,” Chester “Chip” Davis, CEO of the the Association for Accessible Medicines, said in a statement. “This bill will harm both Maryland patients and taxpayers alike and thus should be vetoed by Governor Hogan.”

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