Maryland’s landmark price gouging law is now in effect. A trade association
that represents generic drug manufacturers had sought to halt its implementation,
but was rebuffed by a federal judge.
Measure to Address Drug Price Increases
The new law,
House Bill 631, bans manufacturers of essential off-patent or generic drugs from engaging
in “price gouging,” which is defined under the law as “an
unconscionable increase in the price of a prescription drug.” An
“unconscionable increase” is further defined as “excessive
and not justified by the cost of producing the drug or the cost of appropriate
expansion of access to the drug to promote public health,” and one
that “results in consumers for whom the drug has been prescribed
having no meaningful choice about whether to purchase the drug at an excessive
process because of the importance of the drug to their health and insufficient
competition in the market for the drug.”
Maryland’s anti-price gouging measure provides that the attorney
general may only enforce the law when an off-patent pharmaceutical market
has become noncompetitive, meaning that three or fewer manufacturers are
actively manufacturing and marketing the drug. In addition, prior to bringing
an enforcement action, the attorney general must provide the manufacturer
or distributor with an opportunity to explain the basis of a price increase.
Increases driven by external factors, such as price fluctuations for raw
materials or active ingredients, logistic difficulties with manufacturing
or distribution, or changes in international trade or tariffs, would not
be deemed unconscionable.
In addition to a financial penalty of up to $10,000 per violation, drug
companies may be required to reimburse consumers and third-party payers
for the illegal price increase and/or make the drug available to participants
in any state health plan or health program for up to one year at the price
it was immediately prior to the violation.
Drug Trade Association Files Lawsuit
The Association for Accessible Medicines (AAM), which represents generic
drug manufacturers, filed a lawsuit seeking declaratory and injunctive
relief to prevent the implementation and enforcement of HB 631. The suit
alleges that the Maryland law is unconstitutional under the Commerce Clause
because it regulates commercial activity that occurs wholly outside the
boundaries of the State of Maryland. It further maintains that HB 631
violates the Due Process Clause of the Fourteenth Amendment because the
statute’s vague prohibition on “price gouging” provides
no meaningful description of what its terms prohibit.
A U.S. District Court judge recently
denied AAM’s request for a preliminary injunction. Judge Marvin J. Garbis concluded that the law did not violate the Commerce
Clause, finding it would not favor in-state over out-of-state drug manufacturers.
Judge Garbis further held that the law would not prevent companies from
making profits, but would only hinder their ability to “extract
excessive profits by price-gouging Maryland consumers on essential drugs
for which there is limited competition.”
Judge Garbis did allow the void for vagueness claim to proceed, stating
"it is at the very least plausible." The Association for Accessible
Medicines has already announced that it plans to appeal the decision to
the U.S. Court of Appeals for the Fourth Circuit. In the meantime, Attorney
General Brian E. Frosh invited the public to begin reporting excessive
drug price increases. "We think it's a big victory for Maryland
consumers," Frosh said. "It really will help protect the health
of people across our state."
Maryland is not the only state seeking a legislative solution to escalating
drug prices. At least 176 bills on pharmaceutical pricing and payment
have been introduced this year in 36 states, according to the National
Conference of State Legislatures.
If you or someone you love has suffered serious harm due to a defective
drug, don’t hesitate to contact
a San Diego product liability lawyer at the Law Offices of Robert Vaage
for a free consultation.