Md. prescription drug price bill poses threat, industry warns

ANNAPOLIS — Drug manufacturers warned legislators Wednesday that a proposal aimed at keeping prescription drug prices low could harm Maryland’s biotechnology industry.

The legislation would create a commission to review drug prices in Maryland, but that could decrease outside investment in the state’s industry, advocates said.

“(The legislation would) take away incentives for manufacturers to invent,” Steve Postal, senior director of state policy for Pharmaceutical and Research Manufacturers of America, told the Senate Finance Committee. “(It) will harm the development of new, life-saving medicines.”

The legislation sponsored by Sen. Joan Carter Conway, D-Baltimore City, would create a drug cost review commission, modeled on Maryland’s unique Health Services Cost Review Commission.

This commission would review prescription drug price increases and, if it believes that the price increases would create excessive costs for health care systems in the state, it may reduce the reimbursable rate for the drug.

Patent-protected and brand-name drug manufacturers would be required to notify the commission if the wholesale acquisition cost of the drug would increase by more than 10 percent or $10,000 over 12 months. Notification would also be required if the manufacturer planned to introduce a drug with a price of $30,000 over a calendar year.

Generic and off-patent drug manufacturers would be required to notify the commission if their product’s price would increase 25 percent or more than $300 over a 12-month period.

Similar notification laws have been passed in California and Vermont. They have not yet been challenged in court.

But drug manufacturers warned that passing the legislation could hurt Maryland’s biotechnology sector.

The average drug takes 10 years and $2.3 billion to develop. The legislation could convince investors and manufacturers that Maryland is not a welcoming environment, Patrick Plues, vice president of state government affairs for the Biotechnology Innovation Organization, told the committee.

“It creates a policy environment where it is very difficult for these companies to raise the capital necessary to keep them afloat,” he said. “It will hurt a very unique, vibrant biotech industry right now in Maryland.”

In fact, passing the legislation could act to increase drug prices because manufacturers would have to take on more costs, testified Tami Howie, president of the Maryland Tech Council, which represents the state’s biotech industry.

“It forces companies to spend more money in compliance costs,” she said. “It makes it harder for them to be competitive out in the market.”

At the same time, that compliance process created by the drug commission could have the opposite effect and lower prices, some said.

Creating this review process could encourage drug companies to keep prices low, said Kathleen Hoke, a law professor at the University of Maryland Francis King Carey School of Law and director of the Legal Resource Center for Public Health Policy.

“No manufacturer would want to participate in this process,” she said.

The legislation could also hurt the generic drug industry, advocates for that industry said.

Last year, the legislature passed a prescription drug price gouging bill that only affected generic drug manufacturers. While no companies have been sued by Maryland’s attorney general under that law, the two laws combined could have a destabilizing effect, said Jeff Francer of the Association for Accessible Medicines, which represents the generic drug industry.

“Since last year’s passage of HB 631, the generic drug market has faced significant challenges, (including) incredible price deflation as a result of market dynamics,” he said. “Please take no further action do damage access to affordable generic drugs.”

While the industry opposed the legislation, consumers and their advocates said that something needed to be done to help them with the price of prescription drugs.

Larry Zarzecki, who has Parkinson’s disease, told the panel he spent $8,000 on prescription drug costs last year, despite the fact that he has “good insurance.”

Too often, patients have to choose between their prescriptions and other costs, such as paying their electric bill, Conway said.

“Some people take half doses,” she said. “They can’t afford to buy their medicine, it’s so expensive.”