Drug manufacturers in the United States have recently faced mounting public scrutiny and outrage over consistently escalating drug prices. Manufacturers have raised prices of vital medications by more than 6000% in some cases*, outraging Americans who rely on these medications to survive. Price gouging, or the practice of driving up the price of goods in the face of high demand when a product manufacturer has effectively “cornered the market,” is a major issue in the pharmaceutical industry with very real effects on American lives. Some state lawmakers have attempting to enact new laws and regulations to curb this worrisome trend, but so far, these efforts have largely failed.
Understanding Price Gouging With Pharmaceuticals
Most Americans witnessed one of the most recent developments in the fight against drug price gouging with the downfall of Martin Shkreli, the former CEO of Turing Pharmaceuticals who increased the price of a drug intended to treat a rare disease by nearly 5,000%, outraging patients and the general public and earning him the title of the “most hated man in America.” Shkreli is currently in prison for unrelated securities fraud charges and other crimes, but the impact of Turing Pharmaceuticals’ price gouging started an important conversation in the American public sphere about the justifiability of astronomical price increases on important drugs.
Maryland Steps Up To Fight Drug Price Gouging With New Laws
Maryland Attorney General Scott Frosh has been fighting pharmaceutical price gouging since 2017, championing a new bill intended to function as an anti-price gouging law that eventually passed on October 1, 2017. The new law allows the state Attorney General to take legal action against any pharmaceutical manufacturer that enacts an exorbitant or “unconscionable” price hike without justification.
Difficulties With Appeals
Many pharmaceutical manufacturers argue that the cost of developing complex medications justifies these price increases, and the Association for Available Medicines (AAM) fought Frosh’s new bill vehemently. The AAM argued the term “price gouging” was too vague to be included in official legislation and that such a law violates the Commerce Clause of the U.S. Constitution. This clause prohibits state governments from enacting laws and regulations that interfere with interstate commerce.
Unfortunately, these arguments held up in appellate courts, and although U.S. District Judge Marvin Garbis denied the AAM’s request for an injunction, he allowed their lawsuit to continue. A three-judge panel ruled that the lawsuit was justifiable and Frosh’s new law violated the U.S. Constitution’s Commerce Clause. Frosh responded to this decision by petitioning the U.S. Court of Appeals to reverse the decision, but they ruled against him and rejected this appeal on July 24, 2018. Their justification for this decision was that states should not have the right to impose regulations or consumer protection requirements on out-of-state manufacturers, even if those manufacturers intended to sell their products in those states.
Frosh Fights Back
Despite the U.S. Court of Appeals ruling that upheld the AAM’s lawsuit’s claims, Frosh and his team decided to reorganize their efforts and broach the issue with the United States Supreme Court. As of October of 2018, Frosh has helped spearhead the effort to convince the U.S. Supreme Court to reverse the U.S. Court of Appeals’ decision, citing the fact that any 1,000% increase in the price of a drug “defies common sense.”**
In his petition to the U.S. Supreme Court, Frosh argues that his anti-price gouging act contained objective examples of predatory practices among pharmaceutical manufacturers, but the Supreme Court has yet to hear the case.
Although Frosh’s anti-price-gouging law encountered hold-ups in the appellate court system, it served as an important catalyst that encouraged other states to start developing legislation to counteract price-gouging practices in the pharmaceutical industry.
On February 8, 2019, U.S. Senators Kirsten Gillebrand and Sherrod Brown co-sponsored new legislation aimed at fighting pharmaceutical price gouging***. Their new law would penalize any pharmaceutical company that engaged in any unjustifiable price gouging to exploit patients who depend on their products. Some of those patients suffer from cancer, diabetes, drug addiction, and other complex medical conditions requiring specialized medications.
This new law requires all pharmaceutical companies to report all price increases and include clear justification for such increases, such as objective manufacturing cost increases or increasing prices of necessary ingredients and raw materials. The law imposes heavy fines for companies that engage in any type of exploitative price gouging. Congressional representatives Mark Pocan and Marcy Kaptur have also co-sponsored similar legislation in the U.S. House of Representatives.
Pharmaceutical Manufacturers Respond
Many pharmaceutical companies have fought against these new legislative maneuvers, citing the rulings from the U.S. Court of Appeals against Frosh’s new law in Maryland and continuing to cite the U.S. Constitution’s Commerce Clause and protections for interstate commerce.
These companies have also attempted to justify their seemingly absurd price increases. In a recent interview with Financial Times****, Nostrum Laboratories representative Nirmal Mulye defended the company’s decision to increase the price of their drug nitrofurantoin from $474.75 to $2,392. Nitrofurantoin is a common antibiotic treatment for bladder infections and holds a spot on the World Health Organization’s list of essential medicines.
Mulye brazenly argued that selling a product at the highest possible price was a “moral requirement” of doing business, stirring up further outrage concerning predatory practices of American pharmaceutical manufacturers. He went on to further clarify these statements in other interviews, explaining that seeking profitability was an essential part of doing business and keeping a company alive.
Doctors Share Patient Stories To Draw Attention To Drug Price Gouging
The woman’s doctor, Nicky J. Mehtani, reported the woman died of a heart attack shortly thereafter, after missing her required medication. Mehtani argued that neither negligent medical care nor ineffective treatment caused this woman’s death, but rather the predatory practices of pharmaceutical manufacturers pursuing profits at the expense of those who need their products to survive.
The Supreme Court has yet to rule on Frosh’s petition concerning his anti-price gouging law, and the viability of other new legislation aimed at curbing drug price gouging remains uncertain as well.
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