Maryland Enacts First-of-Its-Kind Price-Gouging Law for Pharmaceutical Companies

By denying an injunction filed by a generic-drug industry trade group, a U.S. District Court allowed Maryland to implement the first law penalizing drug manufacturers for price gouging.

The law – the first of its kind in the U.S. – mandates intervention by the Maryland state attorney if a pharmaceutical company raises the price of a generic or off-patent drug by 50 percent or more in a single year. The company must then justify the price hike; if the attorney general still finds the increase unwarranted, he or she can file suit in state court to have it reversed. Manufacturers may face fines of up to $10,000 for violations. The law does not apply to branded drugs still under patent.

When the law was introduced, the Association for Accessible Medicines (AAM), a generic-drug industry trade group that represents companies such as Teva Pharmaceutical Industries and Novartis AG’s Sandoz unit, filed a lawsuit claiming unconstitutionality because the law intervenes in interstate commerce and does not define price gouging. On September 29, a U.S. District Court judge overruled the injunction, and the law went into effect October 1.

The trade group said it will file an appeal immediately. “This law will hurt patient access to safe, affordable generic medicines in Maryland and the rest of the U.S. and will create untenable uncertainty for generic-drug makers who may be left with no choice but to abandon markets altogether,” said Jeff Francer, general counsel for AAM, in a statement.

This recent action demonstrates that states are willing to legislate pharmaceutical pricing even when federal counterparts are not. “There is a noticeable uptick among state legislatures and state governments in what role states can play in addressing the cost of prescription drugs and access,” said Richard Cauchi, health program director at the National Conference of State Legislatures. This year, 176 bills related to pharmaceutical pricing and payment were introduced in 36 states. California passed a law requiring drug makers to justify price increases of more than 16 percent in two years, and New York passed a law limiting what its Medicaid program will pay for drugs. Michigan proposed a similar law, which would require pharmaceutical companies to justify “excessive” price hikes and allow the attorney general to investigate if deemed necessary.

Source: Reuters, September 29, 2017; The Washington Post, September 29, 2017.