Catalyst for Payment Reform

Maryland and California’s Efforts to Combat Rising Prescription Drug Costs

Maryland and California’s Efforts to Combat Rising Prescription Drug Costs

Can states combat rising prescription drug costs?

The rising costs of prescription drugs is a high priority for patients, providers, payers, and purchasers at the state and federal levels.  Kaiser Family Foundation reports 58% of Americans currently take at least one prescription drug.  Of these, 80% think the price of prescription drugs is unreasonable and 25% have difficulty affording their prescription. These numbers are not headed in the right direction.  Estimates project prescription drugs will continue to increase as a portion of overall health care spending from 2017-2026 and out-of-pocket costs for prescription drugs will likely continue to rise.

States seeking to stem the rising costs of prescription drugs are taking legal action to combat drug manufacturers.  Certain states have initiated their own laws to enhance drug pricing transparency in response to the federal government’s lack of action, including California, Louisiana, Maryland, Nevada, New York, and Vermont.  While the pharmaceutical industry and drug lobby have fiercely opposed many of these efforts, states are making headway in opposing soaring prescription drug costs. Maryland and California’s efforts from last year are two examples.

In October 2017, Maryland’s General Assembly initiated a “price gouging” law to promote transparent drug pricing, giving the state’s attorney general authority to take action if the price of a generic or off-patent drug increased in price by more than fifty percent in a one-year period. Under the law, the attorney general could file a lawsuit against the accused drug manufacturer, who would risk fines and price reversal.  The Court ultimately held that Maryland’s law violated terms of interstate commerce regulation as many drug manufacturers and wholesalers impacted were external to Maryland. Although Maryland’s 2017 law limiting “price gouging” was reversed by the U.S. 4th Circuit Court of Appeals in April 2018, the effort has stimulated similar legislative action to enhance drug pricing transparency across the country.

Also in October 2017, Governor Jerry Brown initiated a law in California requiring drug companies to disclose price changes sixty days prior to the expected change. SB 17- Drug Pricing Transparency intends to give Californians insight into when and why medical costs and prescription drug costs go up. It demands that drug companies give notice if they adjust a drug’s price by 16 percent or greater within a two-year period, applicable for any prescription drug with a wholesale cost greater than $40 and requires the manufacturer to disclose why the price adjustment was necessary.  The law’s reporting requirements are expected to begin on January 1, 2019, but will it provide the transparency necessary to affect change?

Despite fierce criticism from the drug lobby in reaction to Maryland’s “price gouging” law and California’s law on drug pricing transparency, state leaders continue to publicly condemn the pharmaceutical industry for a lack of drug pricing transparency.  California Governor Brown ascribes the rising cost of prescription drugs and ensuing chaos as a symptom of growing income inequality across the nation.  As prescription drug costs are projected to continue rising, state efforts are increasingly important.  With 25% of Americans already reporting difficulty affording their prescription, combating drug costs needs to remain a high-level priority for state leaders and increased support from other stakeholders in the health industry may help to escalate the cause.

Want to hear more from the experts?  Listen in as Roz Murray discusses other state interventions with Jaime King from UC Hastings.  

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