States Try to Rein in Drug Prices | Economics21

The U.S. 4th Circuit Court of Appeals has struck down Maryland’s latest attempt to regulate drug manufacturers. With no federal legislation to address increasing prescription drug prices, many states have moved to address the problem on their own.

Some state measures, such as price transparency and price-gouging legislation, have been counterproductive. Others, such as banning gag clauses that prevent pharmacies from being transparent with their customers, are showing promise.

States care about high drug prices because the growth of prescription drug spending as a share of state Medicaid spending increased from 4 percent in 2013 to 25 percent in 2014, before declining to 6 percent in 2016. States are burdened by prescription drug spending volatility and its effect on balancing their budgets.

Before Maryland’s law was struck down, the Attorney General could require a justifying statement and records from a drug manufacturer if there is a 50 percent price increase for an essential off-patent or generic drug over a one-year period. Manufacturers found to be in violation could face a civil penalty of up to $10,000.

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States Try to Rein in Drug Prices | Economics21.