[Updated, 12:26 p.m. ET. This story was updated to reflect that a federal judge rejected a request to block the Maryland law from going forward.]
Lawmakers in Maryland are daring to legislate where their federal counterparts have not: As of Oct. 1, the state will be able to say 鈥渘o鈥� to some pharmaceutical price spikes.
A new law, which focuses on generic and off-patent drugs, empowers the state鈥檚 attorney general to step in if a drug鈥檚 price climbs 50 percent or more in a single year. The company must justify the hike. If the attorney general still finds the increase unwarranted, he or she can file suit in state court. Manufacturers face a fine of up to $10,000 for price gouging.
As Congress stalls on what say is a health concern 鈥� high pharmaceutical costs 鈥� states increasingly are tackling the issue. Despite often-fierce industry opposition, a variety of bills are working their way through state governments. California, Nevada and New York are among those joining Maryland in passing legislation meant to undercut skyrocketing drug prices.
Maryland, though, is the first to penalize drugmakers for price hikes. Its without the governor鈥檚 signature.
The state-level momentum raises the possibility that 鈥� as happened with hot-button issues such as gay marriage and smoke-free buildings 鈥� a patchwork of bills across the country could pave the way for more comprehensive national action. States feel the squeeze of these steep price tags in Medicaid and state employee benefit programs, and that applies pressure to find solutions.
鈥淭here is a noticeable uptick among state legislatures and state governments in terms of what kind of role states can play in addressing the cost of prescription drugs and access,鈥� said Richard Cauchi, health program director at the National Conference of State Legislatures.
Many experts frame Maryland鈥檚 law as a test case that could help define what powers states have and what limits they face in doing battle with the pharmaceutical industry.
The generic-drug industry聽 to block the law from taking effect, arguing it鈥檚 unconstitutionally vague and an overreach of state powers. A federal court judge on Friday denied their request for an injunction.
The state-level actions focus on a variety of tactics:
- 鈥淭ransparency bills鈥� would require pharmaceutical companies to detail a drug鈥檚 production and advertising costs when they raise prices over certain thresholds.
- Cost-limit measures would cap drug prices charged by drugmakers to Medicaid or other state-run programs, or limit what the state will pay for drugs.
- Supply-chain restrictions include regulating the roles of pharmacy benefit managers or limiting a consumer鈥檚 out-of-pocket costs.
A on the books since spring allows officials to cap what its Medicaid program will pay for medications. If companies don鈥檛 sufficiently discount a drug, a state review will assess whether the price is out of step with medical value.
Maryland鈥檚 measure goes further 鈥� treating price gouging as a civil offense and taking alleged violators to court.
鈥淚t鈥檚 a really innovative approach. States are looking at how to replicate it, and how to expand on it,鈥� said Ellen Albritton, a senior policy analyst at the left-leaning Families USA, which has consulted with states including Maryland on such policies.
Lawmakers have introduced similar legislation in states such as , , and . And in Ohio voters are weighing a ballot initiative in November that would limit what the state pays for prescription drugs in its Medicaid program and other state health plans.
Meanwhile, the California legislature passed a bill earlier in September that would require drugmakers to disclose when they are about to raise a price more than 16 percent over two years and justify the hike. It awaits Democratic Gov. Jerry Brown鈥檚 signature.
In June, Nevada lawmakers a law similar to California鈥檚 but limited to insulin prices. a transparency law in 2016 that would scrutinize up to 15 drugs for which the state spends 鈥渟ignificant health care dollars鈥� and prices had climbed by set amounts in recent years.
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But states face a steep uphill climb in passing pricing legislation given the聽deep-pocketed pharmaceutical , which can finance strong opposition, whether through lobbying, legal action or advertising campaigns.
Last fall, voters rejected a California initiative that would have capped what the state pays for drugs 鈥� much like the Ohio measure under consideration. spent more than $100 million to defeat it, putting it among California鈥檚 all-time most expensive ballot fights. is attracting similar heat, with drug companies outspending opponents about 5-to-1.
States also face policy challenges and limits to their statutory authority, which is why several have focused their efforts on specific parts of the drug-pricing pipeline.
Critics see these tailored initiatives as falling short or opening other loopholes.聽Requiring companies to report prices past a certain threshold, for example, might encourage them to consistently set prices just below that level.
Maryland鈥檚 law is noteworthy because it includes a fine for drugmakers if price increases are deemed excessive 鈥� though in the industry that $10,000 fine is likely nominal, suggested Rachel Sachs, an associate law professor at Washington University in St. Louis who researches drug regulations.
This law also doesn鈥檛 address the trickier policy question: a drug鈥檚 initial price tag, noted Rena Conti, an assistant professor in the University of Chicago who studies pharmaceutical economics.
And its focus on generics means that branded drugs, such as Mylan鈥檚 Epi-Pen or Kaleo鈥檚 , wouldn鈥檛 be affected.
Yet there鈥檚 a good reason for this, noted Jeremy Greene, a professor of medicine and the history of medicine at Johns Hopkins University who is in favor of Maryland鈥檚 law.
Current interpretation of federal patent law suggests that the issues related to the development and affordability of on-patent drugs are under federal jurisdiction, outside the purview of states, he explained.
In Maryland, 鈥渢he law was drafted narrowly to address specifically a problem we鈥檝e only become aware of in recent years,鈥� he said. That鈥檚 the high cost of older, off-patent drugs that face little market competition. 鈥淗ere鈥檚 where the state of Maryland is trying to do something,鈥� he said.
KHN鈥檚 coverage of prescription drug development, costs and pricing is supported in part by the .