Improving Value

Drugs - Anti-Price Gouging

High and rising prescription drug prices remain a top-of-mind concern for consumers across the country. Pharmaceutical manufacturers and pharmacy benefit managers have come under fire for various practices that stifle competition and raise prices. In recent years, several states have introduced legislation to prevent harmful, and even unethical, activities such as “price-gouging”—when a manufacturer uses its competitive advantage to dramatically increase prices for “essential off-patent or generic drugs.”

Anti-price gouging legislation attempts to discourage manufacturers or wholesalers from increasing the list or wholesale price for certain treatments. For example, proposed legislation¹ in some states would require manufacturers to justify a 50 percent or more increase in a drug’s wholesale acquisition cost, during a 12-month period, to the Attorney General. The Attorney General could then decide whether to bring action against the manufacturer.

As of October 2018, Maryland is the only state to pass anti-price gouging legislation (applicable only to generic drugs), which was eventually struck down on constitutional grounds.² As of this writing, the Supreme Court declined to hear the appeal from the state’s Attorney General.

 

Notes

1. "State Legislative Action to Lower Pharmaceutical Costs," National Academy for State Health Policy (August 1, 2019). 

2. Facher, Lev, "Supreme Court deals a fatal blow to Maryland drug ‘price gouging’ law," STAT (February 19, 2019). 

More on this Topic

• Hub Easy Explainer: Prescription Drug Competition Hampered by Policies, Barriers and Delay Tactics (December 2017). 
• Voice of America: Generic Drug Companies Accused of Price Gouging (May 12, 2019).