Senator Thomas M. Middleton, Chair
Senator John C. Astle, Vice-Chair
Senator Joanne C. Benson
Senator Brian J. Feldman
Senator Stephen S. Hershey, Jr.
Senator J. B. Jennings
Senator Katherine A. Klausmeier
Senator James N. Mathias, Jr.
Senator Nathaniel T. Oaks
Senator Edward R. Reilly
Senator James C. Rosapepe
The American Consumer Institute, a nonprofit educational and research institute, is writing today to express our great concern with House Bill 631. While the legislation’s aim of lowering prescription drug costs is laudable, the bill’s approach would have the reverse effect by limiting drug competition and consumer choice.
Our analysis suggests that the consequences of passing this misguided legislation could be disastrous for the very citizens and businesses beleaguered by rising health care costs. This is simply unacceptable when you consider that prescription medicines already account for 7%-10% of the health expenses for the average U.S. household.
The most significant problem with the legislation is that it targets generic pharmaceutical manufacturers, the industry that holds the key to holding down drug prices. The Maryland legislature would be better served promoting policies that encourage drug competition and curtail larger price increases in monopolized markets.
Under the proposal, a generic prescription drug that goes from $10 to $15 might be labeled as “unconscionable”—to use the bill’s language—by the Attorney General, while it ignores more expensive brand products that can see increases from $1,000 to $1,500. Yet, which price hike damages the working family, seniors, or disabled veterans more, the $5 or $500 increase? The approach is even more problematic knowing that many generic drugs cost far less than $10 a pill. For example, Walmart offers many generic prescription drugs for $4 or less.
By using an arbitrary metric and chilling competition based on it, HB 631 gives a market advantage to the very brand pharmaceutical corporations that are behind the price increases that jeopardize the health and economic stability of Maryland’s residents.
According to the U.S. Food & Drug Administration, generics are typically 80% to 85% less expensive than their brand drug counterparts, a differential that continues to grow, saving American consumers over a trillion dollars in just the last decade. Year after year, while the price of brand-name drugs goes up, the price of generic drugs falls. In fact, a new Express Scripts Drug Trend Report notes that the price of generics has declined, on average, 74% since 2008.
If HB 631 takes effect, generic manufacturers will be reluctant to lower prices in fear of losing the flexibility to raise them for some unforeseen reason. That inflexibility will stifle competition, reduce consumer savings, and impede access to lower costs drugs for Maryland patients – all while protecting the profits of the largest pharmaceutical companies.
In Maryland, families who rely on Medicaid would be especially hard hit by HB 631, where generic drug competition provides almost $700 million in annual savings in the state Medicaid budget. In all, according to the most recent generic drug industry savings data, generic medicines save Maryland’s patients and taxpayers $3.7 billion annually. These are savings that should not be squandered.
My article in this week’s Real Clear Health provides other suggestions on how rising drug prices can be significantly reduced, including steps that the U.S. Congress and some state legislatures are currently considering. Feel free to contact me for more information.
In summary, we see HB 631 as an anti-consumer bill. In our view, there are other far more effective ways to address high drug costs. Each should be examined closely as a potential part of the solution. Marylanders deserve better.
American Consumer Institute
Center for Citizen Research
1701 Pennsylvania Ave., NW, Suite 300
Washington, DC 20006
CC: Eric M. Bromwell
CC: House Speaker, Michael Busch