Maryland has become the first state to prohibit unreasonable price increases on essential off-patent or generic drugs.

The anti–price gouging law authorizes Maryland’s Attorney General to take legal action against manufacturers or distributors that raise drug prices in noncompetitive drug markets if the firms can’t prove the legitimacy of their price increases. Companies could face a civil penalty of up to $10,000 for each violation, according to the law, which goes into effect in October.

Maryland Governor Lawrence J. Hogan Jr. (R) did not sign the law, but in a May 26 letter to Maryland legislators, wrote that he would allow the bill to become law without his signature.

Stephen Rockower, MD, president of MedChi, the Maryland State Medical Society, said the medical society has long supported the bill and hailed its passage as beneficial for doctors and their patients.

“It’s been a long time coming,” Dr. Rockower said in an interview. “There have been lots of problems with the huge rising costs of drugs. Manufacturers and pharmacy benefit managers are completely uncontrolled in terms of their pricing. [With this law], we’ll be able to take care of our patients better. It’s hard to prescribe things if it’s going to cost patients $700 a day [for] a drug that used to cost $5 a day. Patients have to be able to afford their medicine, or they don’t take it.”

Chester “Chip” Davis, Jr. president and CEO of the Association for Accessible Medicines, a trade association for manufacturers and distributors of generic drugs, criticized the law.

“By giving the Attorney General unbounded and unprecedented authority to control pricing in a competitive free market, generic companies will be exposed to a level of risk in Maryland that will require them to evaluate whether they want to continue to market affordable medicines within the state,” Mr. Davis said in a statement. “One day, in the not too distant future, [Maryland lawmakers] should be prepared to defend why Maryland was the first state to lead the nation in creating less market-based competition, higher overall prescription drug costs, while also simultaneously increasing the risk of future drug shortages for Maryland’s patients.”

The law has two provisions. It prevents a generic drug manufacturer or wholesale distributor from engaging in price gouging in the sale of an essential off-patent or generic drug, defined as a prescription drug that no longer has market exclusivity and has been designated as essential for treating a life-threatening or chronic health condition by the Maryland Secretary of Health and Mental Hygiene, is actively marketed in the United States by three or fewer manufacturers, and is available for sale in Maryland.

The law also authorizes the Maryland Medical Assistance Program to notify the Attorney General of a price increase when the wholesale acquisition cost of a prescription drug increases by at least 50% in a given year for medications that cost more than $80 per 30-day course.

This first-of-its-kind law is a way to deter manufacturers from exploiting noncompetitive drug markets for short-term profit through unconscionable behavior that “imperils public health and individual welfare,” according to Jeremy A. Greene, MD, PhD, and William V. Padula, PhD.

“Perhaps, [the law will] help reestablish public trust in U.S. policy’s balancing of innovation and access, by reaffirming that older drugs of proven value should be accessible and subject to competition so that they are priced as the commodities they’ve become,” the authors wrote in a perspective published in the New England Journal of Medicine (doi: 10.1056/NEJMp1704907).

Maryland’s law is part of a growing movement among states to address unreasonable pricing spikes in prescription drugs, noted Dr. Greene and Dr. Padula, both of Johns Hopkins University in Baltimore. In April, Louisiana health officials requested feedback about the possibility of invoking an obscure U.S. patent and copyright law to ensure better affordability of hepatitis drugs. In May, the Nevada Senate passed a bill that would force drug makers to publish the list prices they set and the profits they make on insulin, as well as the amount of insulin discounts they give third parties. Additional pharmaceutical price-transparency laws have been proposed in 16 states and Puerto Rico.

Maryland’s law will likely face legal challenges. In his letter to legislators, Gov. Hogan wrote that the legislation raises both legal and constitutional concerns.

“My first concern relates to the provisions of the legislation which directly regulate interstate commerce and pricing by prohibiting and penalizing manufacturer pricing which may occur outside of Maryland,” Gov. Hogan wrote. “These provisions would likely violate the dormant commerce clause of the Constitution. I am also concerned that the definition of ‘unconscionable increase’ and ‘excessive’ are vague, and would likely not stand a ‘vagueness challenge’ under the procedural due process concepts of the 14th Amendment.”

Gov. Hogan added that he is not convinced that the legislation is a solution to Marylanders having better access to medications and that the law may even have the unintended consequences of harming patients by restricting drug access.

agallegos@frontlinemedcom.com

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Maryland passes generic drug anti–price gouging law