The Perverse Effects of Maryland Drug-Price Bill

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As President Trump said, health care is “complicated.”

When it comes to health care in America, virtually everyone claims to have the same broad goals: Accessibility to decent care that is affordable and not have it cost businesses and government (read: taxpayers) a fortune.

Good intentions abound, but politically feasible solutions are in short supply, and many bad or simplistic ideas are bandied about by policymakers on both sides of the aisle. A case in point is a Maryland bill that would crack down on “price gouging” by prescription-drug makers. The bill, which passed the House of Delegates on March 20 with an overwhelming, bipartisan margin of 137-4 and will probably be taken up by the Senate in the next few days, seems like a no-brainer. As Maryland Attorney General Brian Frosh said: “We’ve seen in Maryland and all over the country drug prices [are] skyrocketing.

However, the devil is in the details, and devilish it is. The bill, H.B. 631, excludes pricey brand drugs and only targets generic-drug makers, whose medicines save Maryland residents and taxpayers about $3.7 billion a year. If the bill becomes law, the state Attorney General could take generic drug makers to court for price increases that are vaguely described as “unconscionable.” Unconscionable is a legal doctrine used when consumers have no option to purchase an essential product at inflated prices. However, under the proposed Maryland law, it could be invoked when a generic maker increases the price of a pill from 15 cents to 50 cents but not when the manufacturer of a brand drug increases its price from $300 to $500 per pill.

Generics are a proven solution to high drug costs that saved America approximately $227 billion in 2015, including $90 billion for Medicare and Medicaid. Generics account for 89 percent of all prescriptions written, but only 27 percent of U.S. spending on medicines. In short, generics and a new class of off-brand drugs called biosimilars reduce health care costs and get affordable medicines into the hands of patients who need them most.


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