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NASHP Launches Next Round of Model Acts to Lower Rx Costs – Preventing Generic Price Gouging

As the nation grapples with the pandemic, new research has identified dexamethasone, a low-cost generic drug, as a promising treatment for certain COVID-19 patients. But consumers worry – will its cost remain low? Will new treatments be affordable?

Those worries are justified as consumers recall headlines about price-gouging of insulin and Turing Pharmaceuticals’ notorious price spike of Daraprim, used to treat parasitic infections, from $13.50 to $750 per pill. In 2017, Maryland sought to address the problem by enacting an anti-price-gouging law that was later struck down by the 4th Circuit Court of Appeals.

But the path to effective state health policy is paved by learning from one another. Following the Maryland decision, the National Academy for State Health Policy’s (NASHP) Pharmacy Cost Work Group, which included a Maryland assistant attorney general engaged in the anti-price-gouging case, went back to the drawing board.  States that had implemented laws requiring transparency of drug pricing provided a useful starting point.

To date, 11 states have enacted laws to make drug prices more transparent as an important first step to understanding the black box of drug pricing, but the laws don’t empower states to take action about what they identify. However, the manufacturers’ reported drug price data required by California’s drug price transparency law reinvigorated the group’s interest in laws to address price-gouging. Recent notable generic price hikes revealed in the public data resulting from California’s law include:

#NASHPCONF20 Session: State-Only Summit on New Prescriptions to Lower Rx Costs

12:30-3:30 p.m. (ET) Monday, Aug. 17, 2020 

This kick-off preconference explores five new model laws that NASHP is releasing, including this anti-price-gouging model act.

This “safe harbor” discussion for state policymakers, supported by Arnold Ventures, features:

  • Michelle Mello, JD, PhD , Stanford Law School professor;
  • Rachel Sachs, JD, MPH, Washington University School of Law associate professor;
  • Stacie Dusetzina, PhD, Vanderbilt University School of Medicine associate professor of health policy; and
  • Maine State Rep. Drew Gattine.

Register today.

  • Fluoextine, a generic version of the antidepressant Prozac, jumped from $9 per bottle to $69 in January 2019, an increase of $60 or 667 percent;
  • Guanfacine, a generic treatment for high blood pressure and ADHD, jumped from $29 to $87 per bottle in February 2019, an increase of $58 or 204 percent; and
  • Azacitidine, a generic version of the chemotherapy drug Vidaza, jumped from $105 to $210 in April 2019 per vial, an increase of $105 or 100 percent.

NASHP commissioned a legal analysis, Proposal for Protecting Consumers from Prescription Drug Price-Gouging, to examine the Maryland decision and lay out strategies to ensure a new model anti-price-gouging law would not meet the same fate. In its findings, the appeals court had concluded that because the law was not clearly limited to sales within the state, it would effectively regulate prices outside the state and thereby violate the dormant Commerce Clause.

In NASHP’s new model anti-price-gouging law, provisions are included that carefully limit the law’s reach to in-state sales, in part by requiring manufacturers to identify an in-state registered agent to represent the company. The bill recognizes that many generic drugs are very low-cost and sets appropriate financial triggers to define which drugs are covered and under what circumstances a price would be considered excessive. State attorneys general would be notified by a state agency (e.g., a drug transparency program or a state employee health plan) when a price exceeded thresholds and could then take action. A company found to violate the law would be required to reimburse consumers, either directly or through a state-administered drug discount program, and also face significant penalties for violating the law.

The model act addresses both the substantive issues identified by the appeals court and the political threats that can up-end even the most carefully crafted legislation. State efforts to advance drug pricing laws are commonly met with manufacturers’ claims that they would simply withdraw a drug or drugs from the state’s marketplace if laws they opposed were enacted. Based on that experience, the model act includes a requirement that a pharmaceutical manufacturer must notify the state within 180 days of a plan to withdraw a drug from market in that state and establishes significant penalties for companies that do so.

NASHP’s anti-price-gouging model act is the first in a series of new proposals designed to address both excessive price increases and launch prices. Additional model laws will be introduced throughout the summer and discussed with legal experts during #NASHPCONF20’s Rx summit, restricted to state officials and employees only, which is part of NASHP’s virtual annual conference Aug. 17-19, 2020. NASHP and its Pharmacy Cost Workgroup, with funding from Arnold Ventures, looks forward to supporting states as they advance these models in upcoming legislative sessions.

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