In May, Maryland Attorney General Brian Frosh declared victory when the General Assembly passed House Bill 631, giving him the power to sue certain drug companies for “excessive” price increases. In doing so, unfortunately, Marylanders were misled about these new powers to police drug prices. In reality, this legislation will decrease competition and raise prices, neither of which will benefit patients, employers or taxpayers in the state.
What Mr. Frosh and Maryland legislators who supported HB 631 touted was that this legislation would be the first of its kind in the U.S., empowering an attorney general to determine what, in his or her opinion, constitutes an appropriate price for prescription medicines. This is important, because what proponents have conveniently hidden in their salesmanship of the bill is that Big Pharma was carved out of the bill. Yes, the branded prescription drug industry — whose ads you see non-stop on television, whose drugs are increasingly straining our budgets, making up 74 percent of total drug spending, yet just 11 percent of total prescriptions — was curiously left out of the General Assembly’s plan to “curb” drug spending in Maryland.
After Big Pharma got itself carved out of HB 631, the only drugs left for Mr. Frosh and other Maryland legislators to go after were generic medicines, the only segment of the market that is delivering year-over-year savings and that experienced 59 percent price deflation from 2010-2015 in Medicare Part D, according to the U.S. Government Accountability Office. This public policy might be humorous if it weren’t so tragic. It may also explain why Maryland Governor Larry Hogan refused to sign the bill. As Governor Hogan noted, this “oversight, whether inadvertent or deliberate, is troubling, since the patented or brand-name pharmaceuticals make up a significant amount of the market and are often times the most expensive essential pharmaceuticals.”
Let’s get real. Generic drugs drive savings in the U.S. health care system. In 2016, we estimate that generics saved the state of Maryland $4.1 billion. These astronomical savings arise from robust market competition, which distinguishes it from the patent-protected monopolized branded market. According to data from Express Scripts, the overall price of brand name drugs has risen by 208 percent since 2008, while generic drugs experienced significant price deflation. So Maryland’s new cost-cutting law focuses on the deflationary market and exempts the market with triple-digit inflation.
During the legislative session, manufacturers attempted to work with both Maryland legislators and the Attorney General’s Office to establish clear rules and standards on drug pricing. Because the Maryland drug pricing law fails to include any clear standard for companies to know when the prices they negotiate in the market are “excessive,” the law is unconstitutionally vague. Not only that, and again as Governor Hogan noted, Attorney General Frosh will now also have the authority to police commercial transactions that occur almost entirely outside of Maryland. This is a clear violation of the Commerce Clause of the United States Constitution.
For these reasons, the Association for Accessible Medicines is filing a legal challenge to HB 631 in U.S. District Court to prohibit harm to the national generic drug marketplace and the patients who benefit from it. If this law is implemented as enacted, generic drug manufacturers will have a new incentive to stop manufacturing low-cost medicines and leave the market for fear of being sued for taking undefined “excessive” price increases. Would a 100 percent annual increase qualify? What if that increase were from a nickel to a dime per pill? Under such a scenario the Maryland Attorney General would have the authority to sue.
Who would be hurt most if generic drug competition decreases? Patients. With fewer choices in the marketplace, economics dictate that drug prices will rise, not fall.
If the federal court in Maryland finds HB 631 unlawful, we hope that Maryland lawmakers will look for a more comprehensive approach to health care spending,
Ironically, they would not have to look too far. In another ZIP code not far from Annapolis — in White Oak, Md. — the new Food and Drug Administration commissioner recognizes the essential role generic medicines play in reducing overall prescription drug costs and has made accelerating generic drugs to market a cornerstone of the agency’s recently announced Drug Competition Action Plan. This approach prioritizes sound policy and patient health over political gain. Policymakers in Annapolis would be well-served to consider such a plan.
Chester “Chip” Davis Jr. is president and CEO of the Association for Accessible Medicines; he can be reached at firstname.lastname@example.org.