Tag Archives: drug prices

States Fight to Control High Drug Prices

On Friday, April 13, 2018, the Fourth Circuit ruled 2-1 that Maryland law HB 631, prohibiting price gouging by generic pharmaceutical companies, is unconstitutional because it violates the dormant commerce clause by directly regulating transactions that occur outside of the state.

The Maryland law prohibites generic drug manufacturers or wholesale distributors from making unconscionable increases to the price of an essential off-patent or generic drug. The Association for Accessible Medicines (AAM), a trade group of generic drug manufacturers, sued the Maryland Attorney General to stop implementation of the law because they said the law violated the dormant commerce clause and the law is impermissibly vague, violating the Fourteenth Amendment Due Process Clause. The Commerce Clause allocates power to the federal government to regulate interstate commerce and constrains states from enacting legislation that interferes with or burdens interstate commerce. The dormant commerce clause limits states from enacting legislation that controls the price of goods outside of the state. The AAM appealed the District Court for the District of Maryland’s decision that granted the State of Maryland’s motion to dismiss AAM’s challenge and denied AAM’s motion for injunctive relief.

The Fourth Circuit found the law unconstitutional because (1) the law is not triggered by conduct that happens inside the state of Maryland, (2) even if it did, the law seeks to control transactions that occur outside of the state, and (3) if other states enacted similar laws, this would impose a significant burden on interstate commerce. The Court did not address whether the statute violated the Fourteenth Amendment because it ruled it unconstitutional under the commerce clause.

Maryland is not the only state working to control high drug prices through legislation. In March of 2018, Oregon passed the Prescription Drug Price Transparency Act, HB 4005. The Oregon law would create new reporting requirements for drug manufacturers related to price increases and patient assistance programs. In 2017, Louisiana, Nevada, California, Maryland, and New York all enacted transparency bills related to drug prices. In 2016, Vermont enacted SB 216 to identify the top fifteen drugs that the state spends the most money on. These states join others that have already put in transparency laws related to prescription drugs like the District of Columbia’s AccessRx law, which requires reporting on gifts to healthcare providers in the District from pharmaceutical companies.

Similar to the Maryland law, laws in other states have been challenged by pharmaceutical and device manufacturer trade groups. The Pharmaceutical Research Manufacturers Association (PhRMA) and Biotechnology Innovation Organization (BIO) have challenged Nevada statute, SB 539, for infringement on patent and trade secrets. The Nevada law requires manufacturers of essential diabetes drugs to report manufacturing costs of the drug, a list of sales representatives who market the drug, payments or donations to nonprofit organization, and other information. In California, PhRMA filed a complaint seeking declaratory and injunctive relief against implementation of SB17, which imposes reporting requirements on pharmaceutical companies for certain price increases on their products sold to state purchasers in California.

The Maryland law was unique because it was the first state law that went beyond reporting and instead explicitly prohibited price increases. The Fourth Circuit decision might scare other state legislatures from passing more aggressive laws to stabilize or lower drug prices. Transparency laws, like the ones passed in 2017, are important because policy makers cannot know there is a problem without the data to examine whether there is one. But there also needs to be more policy action towards potential solutions to keep drug prices down. The Fourth Circuit majority opinion did note that they were sympathetic with consumers who have been affected by high drug prices and that the decision is is not meant to suggest that Maryland and other states cannot enact legislation to secure lower prices for prescription drugs for citizens within their state. Hopefully patient advocacy groups keep pushing for similar state laws and other policy changes to shift the landscape of drug pricing.

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Pharma Transparency Bill Wains in California as Price-Gouging Discussion Gains Momentum Nationally

On August 17, California lawmakers killed a drug price transparency bill, putting to rest a policy that would have major implications on the pharmaceutical industry in the United States’ most populous state. The bill, which was first introduced by State Senator Ed Hernandez (D-West Covina) in February 2016, sought to require drug makers to report and explain any price pharmaceutical increase of ten percent within any given twelve-month period, as well as justify any drug price of at least $10,000 within thirty days of moving to that amount and require insurers to disclose how much money they spent on drugs. While the bill received far-reaching support from healthcare providers, insurers, patient advocacy groups, labor groups, and business groups alike, it was met with fervent opposition by pharmaceutical companies.

According to the Los Angeles Times and lobbying activity filings, Hernandez’s legislation was one of the most lobbied bills of current the session, with at least seventy groups spending  money to advocate for or against it. “It’s probably amongst one of the more heavily lobbied bills — similar to tobacco and the most controversial bills,” the measure’s author, Senator Hernandez, told The Times.  However, by August 17, after four amendments, Hernandez pulled the plug on it entirely, stating that the amendments made it difficult to accomplish the bill’s intention, which would have “shed[] light on the reasons precipitating skyrocketing drug prices.”

The demise of this legislation is another huge win for Big Pharma lobbyist PhRMA, which in October 2015 won a summary judgment ruling in the United States District Court for the District of Columbia, blocking certain hospitals from receiving discounts for pricey orphan drugs. It also comes at a time when pharmaceutical companies, biotech firms, and orphan-drug makers have come under high scrutiny for price gouging, including the 5,455% price increase of HIV and Malaria-treatment medication, Daraprim, from $13.50 to $750 per pill in September 2015. Earlier this month, the uptick of the price of the allergic reaction-treating EpiPen Auto-injector medical device – from $57 to $600 between 2007 and 2016 – as its maker anticipates the arrival of a generic competitor, though, its non-generic, brand name competitor Auvi-Q was recalled in 2015 over dosage concerns.

A proponent for changes to Big Pharma since the 1990s, United States Senate Bernie Sanders (I – VT) made “out of control” prescription drug pricing a key issue during his 2016 presidential campaign. After winning the Democratic nomination, Presidential hopeful Hillary Clinton has carried the torch, speaking out on drastic price increases, sending stocks for EpiPen-maker, Mylan, tumbling.

With little being done by the United States Congress on the issue of drug price transparency, fourteen state legislatures have introduced measures to reign in prices. As of 2016, only Vermont has been successful in passing a bill, while others stall or fail outright, as is the case in California.

The pricing war in California now marches to the ballot in November. Citizens will vote on an initiative that would prohibit state agencies, like Medical (the state’s version of Medicaid) and Medicare from being charged any more for drugs than the United States Department of Veterans’ Affairs.

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Balancing a 5,455% Drug Price Increase with Innovation

By: Nawa Arsala

In a widely-criticized and controversial move, Martin Shkreli of Turing Pharmaceuticals increased the price of the drug Daraprim from $13.50 a tablet to $750. That is 5,455% more expensive than it was only two months ago. The seemingly overnight price increase has caused waves in the political arena, the pharmaceutical industry, and the financial market.

Daraprim is approved by the Food and Drug Administration to help prevent malaria and treat toxoplasmosis, an infection caused by a parasite. It is also used to prevent other kinds of infections, at the discretion of doctors. Although these uses are not explicitly included in Daraprim’s approved labeling by the FDA, doctors are able to prescribe as they see fit, which is known as off-label usage. Courts have deemed that off-label usage by doctors is permissible, and constitutes the practice of medicine. Some of these off-label uses include treating opportunistic infections of HIV. Moreover, Daraprim is also used on cancer patients on chemotherapy, whose immune systems are weakened and get infections. This can explain the outcry from patient advocates, claiming that Turing has raised the prices of a “cancer drug” or a “HIV drug.”

Martin Shkerli, CEO of Turing, has had a rocky and controversial history in the pharmaceutical industry. He began vilifying certain small drugmakers online, while simultaneously selling their stock short. This means that he’d profit if share prices fell. Many in the industry found this behavior as sneaky. In 2011, Shkreli founded the biotech firm Retrophin, which focused on medicines for rare, life-threatening diseases, and orphan drugs. Eventually, Shkreli was publically ousted and sued for arranging a series of backdoor deals using company cash and stock. Shkerli has since countersued demanding that Retrophin pay Shkreli more than $70 million reflecting company stock he’s owed and damage to his image as a businessman. 

In the case of Daraprim, Shkerli argues that the price is actually to the benefit of the patients in the long run because innovation is necessary. The Food & Drug Administration also tends to agree, granting market exclusivity to encourage innovation. Shkerli ascertains that only 2,000 people in the United States are prescribed Daraprim every year. Moreover, while many other life-saving drugs must be taken for life, Daraprim only needs to be taken for about six weeks. He believes this drastically reduces the cost for the drug because only one course is needed. Nonetheless, this could explain why there is currently no generic version, as there is not a substantial financial incentive to manufacture Daraprim to produce a drug that only needs one course, and for so few patients.

The pharmaceutical market has long been a hot-button political issue because it is where a free market economy and public health must agree. There is rising criticism over the cost of health care in general, and particularly drugs. With the upcoming presidential elections, many potential candidates are weighing in on Shkerli’s decision. Democratic presidential candidate Hillary Clinton said “price gouging like this in the specialty drug market is outrageous.” Vermont Senator Bernie Sanders took it a step further by sending a letter to Mr. Shkerli, requesting more information about the drug hike. Shkerli has yet to respond to the letter and Sanders believes he is “holding hostage the patients who rely on this lifesaving medication, as well as the hospitals that administer it, by charging unconscionable prices for a drug on which he has a monopoly just because he can.” Public outcry has called for antitrust laws to remedy the price increase. However, under U.S. antitrust law, a unilateral price increase, when done in agreement or not in response to competition, is almost never actionable.

Ultimately, after worldwide criticism, Shkreli promised to lower the price of the drug. To date, that lowered price remains unspecified. Ed Painter, a spokesperson for Turing Pharmaceuticals recently explained that more than half of Daraprim’s sales “continue to participate in federal and state programs such as Medicaid” and a drug discount program, that often lead to costs that are “as low as $1 per bottle.” Nonetheless, almost four weeks after Shkerli made this promise, the price remains the same. It is important to note that Turing is part of a growing trend of price increases in pharmaceuticals that include massive manufacturers such as Pfizer, Merck and Valaent. Shkerli’s latest response to the backlash was “there have been hundreds of companies that have raised [their drug prices] higher, and they’re not rolling back their prices, so why should we?”

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