Maryland General Assembly passes bill aimed at drug 'price gouging'

The General Assembly passed a bill that would give the state attorney general powers to sue drug manufacturers that dramatically raise prices, a first-in-the-nation measure aimed at protecting patients from what the measure brands "price gouging."

The bill was the top priority for health care advocates during this year's session.

The bill allows Maryland's Medicaid authority to let the attorney general's office know when it sees patients being charged higher rates for drugs. The attorney general could then seek an explanation from the drug's manufacturer and take court action to protect consumers. A judge could ultimately order the company to reverse its price hike.

When a company develops a new drug it is awarded a patent, giving it exclusive rights to sell the medicine and recoup the expense of coming up with it. In theory when the patent expires and any company that chooses can produce the drug, prices should come down. The manufacture of so called generic drugs has been encouraged in the United States as a free-market alterntive to the European system of governments negotiating with drug companies to control prices.

In practice, supporters of the bill say, the market doesn't always function as expected and when there's a limited number of suppliers for the drug they can keep prices high or even drive them up.

Dr. Jeremy A. Greene, a professor of medicine at the Johns Hopkins University, said he recently prescribed a patient albendazole to treat a case of the parasite pinworm. It is manufactured for pennies a pill, he said, but the patient was charged $300.

"The business model has been spelled out very clearly," Greene said. "Nothing has been done to stop it."

Traditional anti-trust laws have not proven effective at curbing the power of drug companies that command a large share of the market for a given medicine, Greene said, which is why there is a need for new laws.

During floor debates on the bill, Republicans questioned whether the attorney general's office had sufficient expertise to take on the new role, but ultimately many Republicans in both the House and the Senate voted for the measure.

Advocates say they hope Maryland's bill will have a ripple effect, deterring drug makers from hiking costs across the country for fear of being called to account. Other state legislatures have already moved toward passing similar laws.

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