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Pharmaceuticals and Price Gouging Laws

  • October 25, 2017
  • RPh on the Go

price gougingIn May, Maryland became the first state to pass price gouging laws that fight back to a growing trend of rising costs for generic and off-brand medicines. It passed with overwhelming support on all sides and has been met with open arms by those who need the prescriptions and those who prescribe them. The pharmaceutical industry is planning to fight back against the laws and intimidate other states from passing the same type of laws.

What Exactly Does the Law Do?

The new law allows the Attorney General to present proof that price increases are unsubstantiated, unjustified, and unconscionable. This law comes on the heels of the EpiPen scandal that rocked the medical world. In the case of the new law, the Attorney General can take action if the generic medication has become non-competitive, meaning that three or fewer manufacturers are competing in the same market. This keeps from a single manufacturer becoming a monopoly for a particular medicine.  Secondly, the law requires the Attorney General to allow the manufacturer to explain the increase. If it’s due to increased costs related to raw materials, changes in tariffs or international trade, or difficulties in manufacturing and/or distribution, then the law will not deem the increase as unconscionable or unjustified and stops the Attorney General from taking any legal action.

Why Argue Against the Law?

Protecting the general public from price gouging in the pharmaceutical sector simply sounds like something anyone can support, including manufacturers. It protects them from unfair competitive practices, keeps them in the competition, and allows them to focus on truly helping others rather than solely on their bottom line. Some pharmaceutical groups are fighting the law based on the fact that they feel it unjustly targets generics. While we could all agree that it would be great to see price gouging laws on all medicines, it’s at least a start! Let’s also remind those against the law that there have been cases of manufacturers acquiring generics and then raising prices astronomically. Daraprim was acquired by Turing Pharmaceuticals and the price of the pill went from $13.50 to $750 each.

What States Are Considering Their Own Laws?

Maryland is not the only state that has been focused on price gouging and what they can do about it. California is considering a few laws of their own. SB790 will prohibit any manufacturer or wholesaler from providing gifts to health care providers. We assume this will mean keeping free samples out of their hands as well, which sounds counterintuitive, but will keep a health care provider from becoming brand loyal. AB265 will prohibit manufacturers from offering special discounts if a generic option is available.

Ohio is introducing their bill, Issue 2, that will target the prices that state agencies pay. They are wanting Medicaid and other agencies to pay the same low price that the VA pays, which is typically 20-24% less than other agencies for the same drugs.

In Michigan, there is a proposal to create a Prescription Drug Consumer Protection Board. Drug manufacturers will be required to submit documentation to justify their drug price increases that are over 10% in one year or 30% over five years. If a manufacturer refuses, there will be penalties and fines to pay.

As states begin taking price gouging into their own hands, it will force the rest of the country to follow suit. If states don’t monitor their own medicinal problems, they could see prices rise uncontrollably while neighbors are maintaining healthy price standards.

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