In recent years, drug manufacturers and pharmaceutical companies have come under increasing scrutiny and criticism for raising the prices on new drugs for diseases including cancer, hepatitis C, and high cholesterol, as well as older drugs that have long been used as the lynchpin in treatment for other illnesses. Many of these increases are the result of a business strategy where companies buy old drugs and turn them into much more expensive “specialty drugs.” The actions of two companies in particular have brought the issue of drug-price gouging to the forefront of national news. A recent high-profile example of drug-price gouging includes Mylan Pharmaceutical, which raised the price of EpiPens nearly 400% since 2010; the company recently agreed to pay a $465 million fine to settle a joint federal-state lawsuit over claims that it overcharged the government for the emergency allergy treatment. Another instance of price-gouging was the case of Turing Pharmaceutical’s Martin Shkreli, who raised the price of a drug used to fight life-threatening parasitic infections from $13.50 to $750 per tablet. While these are arguably the most infamous instances of alleged price gouging on lifesaving drugs, they are not isolated incidents or the acts of a few bad corporate apples. Indeed, concern has grown as drug prices on older, generic drugs have also soared.
In response, Maryland has passed legislation that addresses the rising cost of older, generic drugs. The new law prohibits manufacturers or distributors from engaging in price-gouging in the sale of an “essential” generic drug. As defined in the statute, generic drugs deemed “essential” include prescription drugs available for sale in the state for which exclusive marketing rights have expired or that appears on a list of essential medicines adopted either by the World Health Organization or designated by the Secretary of the Maryland Department of Health. Under the new law, price-gouging means an “unconscionable increase” in a prescription drug. An “unconscionable increase” is now defined as excessive when it cannot be justified by the cost of producing the drug or the cost of increasing access to the drug to promote public health. Additionally, the increase leaves consumers who have been prescribed the drug no meaningful choice about whether to purchase the drug because of its importance to their health and insufficient competition in the market for the drug. Essentially, generic drug manufacturers can now be subjected to fines if they impose a significant price increase without justifying it to the attorney general. In turn, if the attorney general is not persuaded that the price increase was justified, s/he can ask a judge to order that the price increase not take effect. Violating the law carries a $10,000 fine.
Despite criticism from drug-manufactures, the pharmaceutical industry and lobbyists, advocates for the law say that it was tailored to cover only the most essential generic or off-patent drugs that Americans cannot live without. While concerns about the high cost of prescription drugs and significant price increases will continue to be a topic of national and local debate, Maryland has taken the first step towards reining in what many view as an unethical and abusive practice by drug manufacturers and pharmaceutical companies that takes advantage of individuals who depend on these prescription drugs to live.
1. Andrew Pollack, Drug Goes from 13.50 a Tablet to $750, Overnight, The New York Times, (Sept. 20, 2015),https://www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html.
3. Yancey Roy, EpiPen Maker Mylan to Pay $465M to Settle State-Federal Lawsuit, Newsday.com, (Aug. 17, 2017), https://www.newsday.com/news/region-state/epipen-maker-mylan-to-pay-465m-to-settle-state-federal-lawsuit-1.14070161.
4. Pollack, supra note 1.
5. Andrew Pollack, Drug Prices Soar, Prompting Calls for Justification, The New York Times, (July 23, 2015), https://www.nytimes.com/2015/07/23/business/drug-companies-pushed-from-far-and-wide-to-explain-high-prices.html.
6. Md. Code Ann., Health-Gen. §§ 2-801 through 2-803.
7. Md. Code Ann., Health-Gen. § 2-801(b).
8. Md. Code Ann., Health-Gen. § 2-801(c).
9. Md. Code Ann., Health-Gen. § 2-801(f).
10.Md. Code Ann., Health-Gen. § 2-803(d)(5).
11.Erin Cox, Drug Firms Challenge Maryland Price-Gouging Law, Baltimore Sun., (July 6, 2017), http://www.baltimoresun.com/news/maryland/politics/bs-md-price-gouging-suit-20170706-story.html.
Steve Boyer is a fourth-year evening student at the University of Baltimore School of Law. He will graduate in May 2018 with a concentration in public service. After graduating, he will clerk for The Honorable Glenn L. Klavans in the Anne Arundel Circuit Court for the 2018-2019 term. He looks forward to spending more time with his wife and two daughters as well as reading for pleasure for the first time since 2014. Prior to law school, he received a B.A. in History from West Virginia University in 2009 and a M.A. in Teaching from the University of Notre Dame Maryland in 2014. Steve can be reached at firstname.lastname@example.org. You can also view his LinkedIn profile here.