Maryland ‘Price-Gouging’ Legislation Goes to Governor

In a lopsided 137 to 2 vote on April 10, 2017, the Maryland House of Delegates passed HB 631, which outlaws “price gouging” by manufacturers and wholesale distributors of certain “essential off-patent or generic drugs.”  Price gouging is defined as “an unconscionable increase in the price of a prescription drug.”

The legislation applies to drugs for which exclusive marketing rights have expired, that have been designated essential medicines, and that are manufactured for sale in the US by 3 or fewer manufacturers.  Under the legislation, Maryland Medicaid may notify the Attorney General when covered drugs with a WAC of more than $80 per 30-day supply or per course of treatment experience an increase in WAC or price paid by Medicaid of at least 50% within the preceding year.  The Attorney General may then require the manufacturer to itemize and disclose the production cost data, including any increases in input or manufacturing costs that justify the price increase.  The Attorney General may also demand from a manufacturer or wholesale distributor records relevant to determining whether price gouging has taken place.  The Attorney General is required to treat all submitted information as confidential commercial information under the Maryland public records law unless the manufacturer or wholesale distributor waives the confidentiality of the information.

The bill allows the Attorney General to seek court orders compelling compliance by any manufacturer or wholesale distributor failing to provide a required statement or produce requested records.  The Attorney General may also petition the Circuit Court to restrain or enjoin the alleged price gouging, require reimbursement to consumers (including third party payors), “lock in” the pre-increase price for participants in state health plans or programs, and impose civil penalties of up to $10,000 “for each violation,” which appears to refer to each act of price gouging.  However, before seeking a court order other than one requiring the release of information, the Attorney General must offer the manufacturer or wholesale distributor the chance to meet to justify the price increase.

This legislation appears more drastic than much of the drug pricing legislation pending in states across the country, as it imposes penalties for “unconscionable” price increases rather than just for failing to report data.  Just as concerning, the legislation fails to offer any standards controlling or guiding the determination of whether pricing is “unconscionable”.

The legislation, which was previously passed by the Senate, is now in front of Governor Larry Hogan, who is a supporter of the bill and is expected to sign it.

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