WASHINGTON — A legal setback in Maryland has state legislatures across the country re-examining their efforts to lower drug prices, with lawyers from Nevada to Illinois combing through bills to ensure they can withstand future challenges from pharmaceutical industry groups.
State lawmakers’ interest has centered on a recently voided Maryland law that would have banned generic drug companies from hiking prices to a degree the state deems “unconscionable.” An appeals court ruled the law unconstitutional last year, and though Maryland’s Democratic attorney general had aggressively contested the decision, the Supreme Court announced on Feb. 19 that it would not hear an appeal.
It is a legal reality that has already forced some legislators to abandon the strategy Maryland pursued. Policy groups working with legislators are also asking lawyers to recheck their work to ensure their bills are not susceptible to the type of legal challenge that doomed Maryland’s effort. With Congress unlikely to deliver the type of wholesale industry reforms progressives have advocated, lawmakers have made the national conversation about high drug prices a priority in their home states, despite the setback.
“We’ll have to find other approaches to this problem,” said Will Guzzardi, a Democratic member of the Illinois House of Representatives who has sponsored legislation nearly identical to the voided Maryland law. “We don’t have to wait for the federal government to take action.”
STAT spoke with more than a half-dozen academics, state legislators, and outside policy consultants who were uniform in their view that the Maryland ruling did not set a damning legal precedent for future bills to lower drug prices.
But the decision could give the pharmaceutical lobby “ammunition to tell reluctant state legislators that this isn’t worth their political capital,” according to Ameet Sarpatwari, the assistant director of the Program on Regulation, Therapeutics, and Law at Brigham and Women’s Hospital in Boston.
“At some point the line between legal and political is gray,” Sarpatwari said. “It’s a problematic precedent but not paralyzing for states that are looking to take action on drug costs.”
High drug costs have emerged as such a potent political force, however, that most state legislatures already pursuing the issue of drug pricing are likely to continue their efforts.
Among them is a proposal developed in conjunction with the National Academy for State Health Policy, which would allow states to install “drug affordability boards” that would determine payment rates for specific pharmaceutical products — a process similar to the manner in which Maryland governs payments for hospital services and procedures.
Another is a proposal backed by the Pew Charitable Trusts that would effectively tax the value of drug price increases that exceed the rate of medical inflation. A third set of bills mirrors legislation pending before Congress that would allow American patients to import drugs from Canada for personal use.
It is these categories of legislation, experts said, that could suffer political fallout from Maryland’s setback.
“Of course pharma will raise the spectre of this everywhere, claiming there’s already been a decision, this is unconstitutional,” said Jane Horvath, a policy consultant who has spearheaded the effort to develop NASHP’s drug-affordability board legislation, which lawmakers in numerous states are advocating. “That’s the 30-second version. Explaining why importation is different, or why rate-setting is different — it’s a lot of work.”
In Maryland’s case, the appeals court ruling centered on the Dormant Commerce Clause — a constitutional principle that bars individual states from regulating trade beyond their own borders. Maryland’s law ran afoul of the U.S. Constitution because it penalized generic drug companies for nationwide price hikes, according to an April 2018 ruling from the 4th Circuit Court of Appeals.
The same legal concept also doomed a New York law to tax prescription opioid laws, in a December court ruling that lawmakers view as less of a threat to future drug-pricing legislation. New York’s bill specifically prohibited drug makers from raising prices in other states to compensate for revenue lost from the tax.
That threat, state lawmakers said, has led state lawmakers and policy consultants to actively review pending legislation in the lens of the 4th Circuit Court’s ruling.
“The reason this Pew proposal is so exciting is that it doesn’t interfere with commerce that happens outside of the state,” Guzzardi said of his legislation to effectively tax large drug price increases. “It’s structured specifically to avoid the kind of constitutional challenges that befell the Maryland bill.”
Experts believe the drug industry would nonetheless file lawsuits challenging most attempts to legislate lower drug prices.
In Maryland, it was the Association for Accessible Medicines — a trade group for generic drug manufacturers — that sued to overturn the “price-gouging” law. The same group joined a lawsuit with a trade group representing drug wholesalers and Mallinckrodt (MNK), a generic drug manufacturer, to challenge New York’s tax on opioids.
The industry trade group PhRMA, similarly, has sued to overturn a law in California requiring that manufacturers give 60 days’ notice for major price increases — legislation written in the hope that greater public knowledge could shame drug companies into tempering price hikes.
With Maryland’s law officially a no-go, policy experts indicated that legislatures would likely turn to second-wave proposals like those being advanced by Pew and NASHP.
“You’ve got very smart lawyers trying to figure out what’s wrong with any law you write,” said Gerard Anderson, a health policy professor at Johns Hopkins University. “You try something and see if it works, and if it doesn’t you reevaluate it and try a second approach. The drug affordability board is a second approach.”
Almost regardless of the mechanism, voters across the country have proven eager for governments willing to aggressively crack down on high drug costs. Polling conducted on behalf of the Illinois legislature showed 94 percent of voters there believed government should step in to address the issue. Eighty-five percent favored legislation requiring drug makers to justify price hikes, 74 percent favored importing drugs from Canada, and 59 percent supported taxing drug price increases.
Guzzardi said he and other lawmakers will push ahead on each of those measures — but expect a bumpy road before those bills become law. “I suspect that in response we’re going to see a lot of lobbying efforts by individual manufacturers and by the industry as a whole,” Guzzardi said. “People just have been beaten down so badly by the high cost of prescriptions and they’re demanding we do something.”