Who will Control Drug Prices: The President, Congress, States, or Big Pharma?

By: Jessica Johnson

High-profile stories of EpiPen prices increasing from roughly $104 to $609 in less than a decade[1] and stories of patients skipping insulin doses to stretch supplies between paychecks have dominated the American news cycle in recent years.[2]  While these stories are breaking headlines, these issues are far from new.[3]  Nearly 60 years ago, Congress held hearings on high drug prices, low price transparency and patent exploitation.[4]  Many legislators championed bills to limit patent exclusivity and increase transparency, but the powerful industry fought back, and reform never came.[5]

Decades later, seven states began taking steps to control drug prices and protect its citizens.[6]  Maryland passed the first-of-its-kind state law requiring health officials to report drug prices, and provided that, if lawyers could prove drastic prices increases, Maryland could stop the increase or levy fines.[7]  The law, however, was challenged by the Association of Accessible Medicine (“AAM”) which claimed that the law was unconstitutional as it violated the dormant commerce clause’s prohibition on in-state regulation that has a discriminatory effect on interstate commerce.[8]  The Fourth Circuit noted Maryland’s noble intentions but curtailed state intervention when it ruled in favor of AAM.[9] 

Maryland then petitioned the Supreme Court for review stating that the Fourth Circuit had misapplied the dormant commerce clause, thus preventing states “from protecting its citizens from abusive and potentially life-threatening commercial practices” occurring within its borders.[10]  Maryland argued that the Fourth Circuit’s ruling had split the circuits because it contradicted the Ninth Circuit’s ruling that California was permitted to regulate the sale of ethanal produced outside the state but sold within California.[11]  The Ninth Circuit said that while the ethanol law may impact other states, the law was permissible as it did not regulate ethanal produced, sold, or used outside California, and imposed no duties on other states to do so.[12]  Maryland asserts that “the Ninth Circuit’s reasons for upholding the California ethanol statute apply with equal force to Maryland’s Anti-Price-Gouging Act.”[13]  The Supreme Court, however, denied cert, once again shifting the onus from the states onto the federal government to act.[14]  It appears that sixty years later, President Trump and the Senate Finance Committee are ready for action.

In May 2018, President Trump proclaimed that “[e]xcessively high drug prices, foreign freeloading, and a system rigged to reward list price increases, are burdening the American people.”[15]  President Trump’s American Patient’s First Act laid out an extensive plan to regulate drug prices and increase competition and transparency.[16]  Additionally, Senator Grassley set multiple drug-price hearings on the Finance Committee’s agenda where on February 26, 2019, multiple pharmaceutical CEOs testified why prices have become so high.[17]  Senator Ron Wyden of Oregon set the tone of the hearing by proclaiming “[p]rescription drugs did not become outrageously expensive by accident. . . Drug prices are astronomically high because that’s where pharmaceutical companies and their investors want them.”[18]  However, the CEOs defended their prices as a side effect of high research and development expenditures.[19]  The 2019 strategy mirrored that of the 1960s hearings, according to Donald Light, a health policy professor at Rowan University, who stated that in the original 1960’s hearings, drug companies “were advised that whenever the senators mentioned high prices, just mention research and how difficult it is, how expensive it is. . . Since 1959, that is the repeated and successful theme of Big Pharma.”[20]

At the recent hearings, the CEOs also attempted to ascribe partial responsibility to the role that insurers and pharmacy benefit managers (“PBMs”) play in driving costs up.[21]  The insurance industry association, American Health Insurance Plan (“AHIP”), rebutted that argument, stating that pharmaceutical companies solely set the price, thus driving insurance copays.[22]  PBMs have long occupied a controversial role in healthcare.[23]  PBMs emerged as a third-party intermediary that would supposedly negotiate a lower drug price between pharmaceutical companies and health plans, and in return would collect a percentage of the savings.[24]  However, drug campiness raised their list prices in order to offer greater discounts which entailed higher profits for the PBM.[25]  The higher list costs particularly impact the uninsured, those whose insurance does not offer drug coverage benefits, those with plans that charge a percentage of the drug price as coinsurance, or those who pay the full drug price until their deductible is met.[26] 

It remains unclear whether more states will attempt to navigate around the dormant commerce clause, Congress will seek enact federal legislation, or Trump will continue to instruct HHS to regulate.  However, it seems that the drug-price battle that started nearly five decades ago will finally produce reform in drug pricing and industry transparency.


[1] Mylan CEO on EpiPen Drug Price Controversy: “I Get the Outrage,” CBS News (Jan. 27, 2017), https://www.cbsnews.com/news/epipen-price-hike-controversy-mylan-ceo-heather-bresch-speaks-out/.

[2] R. Scott Rappold, Spiking Insulin Costs Put Patients in Brutal Bind, WebMD, (July 25, 2018), https://www.webmd.com/diabetes/news/20180725/spiking-insulin-costs-put-patients-in-brutal-bind.

[3] Jay Hancock, Senate Inquiry on Drug Prices Echoes Landmark Hearings Held 60 Years Ago, NPR News (Feb. 22, 2019), https://www.npr.org/sections/health-shots/2019/02/22/696967037/senate-inquiry-on-drug-prices-echoes-landmark-hearings-held-60-years-ago.

[4] Id.

[5] Id.

[6] Jennifer Reck & Trish Riley, As States Take the Lead to Address Drug Costs, Federal Action Follows, Nat’l Acad. of St. Health Pol’y (Sept. 11, 2019), https://nashp.org/as-states-take-the-lead-to-address-drug-costs-federal-action-follows/.

[7] Ian Duncan, Maryland Law Against Price-Gouging by Drug Companies is Unconstitutional, Appeals Court Rules, Baltimore Sun (Apr. 13, 2018),  https://www.baltimoresun.com/news/maryland/bs-md-drug-price-gouging-unconstitutional-20180413-story.html.

[8] Id.

[9] Id.(quoting Judge Thacker:“[t]o be clear, we in no way mean to suggest that Maryland and other states cannot enact legislation meant to secure lower prescription drug prices for their citizens. . . Although we sympathize with the consumers affected by the prescription drug manufacturers’ conduct and with Maryland’s efforts to curtail prescription drug price gouging, we are constrained to apply the dormant commerce clause.”

[10] Petition for Writ of Certiorari, at 28-29, Frosh v. Ass’n for Accessible Medicines, 887 F.3d 664 (2018) No. 18-546, (cert. denied Feb. 19, 2019).

[11] Id.

[12]  Id.

[13]  Id. at 29.

[14] Mary Anne Pazanowski, SCOTUS Passes on Maryland’s Price-Gouging Law, Bloomberg Law, Health Law & Business (Feb. 19, 2019),https://www.bloomberglaw.com/document/XDVTECPC000000?bna_news_filter=health-law-and-business&jcsearch=BNA%2520000001690638d06bafefd7ff23210002#jcite.

https://www.bloomberglaw.com/document/XDVTECPC000000?bna_news_filter=health-law-and-business&jcsearch=BNA%2520000001690638d06bafefd7ff23210002#jcite.

[15] Robin Seaton Jefferson,  Trump Takes First Step Toward Cutting Prescription Drug Costs with ‘American Patients First’ Plan, Forbes (May 16, 2018), https://www.forbes.com/sites/robinseatonjefferson/2018/05/16/trump-takes-first-step-toward-cutting-prescription-drug-costs-with-american-patients-first-plan/#f4c772955ad3.

[16]  Id. (including the following measures to increase competition and control price: FDA evaluation of requiring manufacturers to include list prices in advertising; updating Medicare’s drug-pricing dashboard to make price increases and generic competition more transparent)  measures to restrict the use of rebates, including revisiting the safe harbor under the Anti-Kickback statute for drug rebate).

[17] Drug Pricing in America: A Prescription for Change, Part II, Hearing Before the S. Comm. on Finance, 116th Cong. (2019) (statements from Grassley and pharmaceutical CEOs).

[18] Allison Kodjak, Pharmaceutical Company CEOs Face Grilling in Senate Over High Drug Prices, NPR News (Feb 26, 2019), https://www.npr.org/sections/health-shots/2019/02/26/698136259/pharmaceutical-company-ceos-face-grilling-in-senate-over-high-drug-prices.

[19] Id.

[20] See Hancock, supra note 3.

[21] See Kodjak, supra note 18.

[22] Kristine Grow, AHIP Comments Following the Senate Finance Committee Hearing on Drug Pricing in America, American Health Ins. Plans (Feb. 26, 2019), https://www.ahip.org/ahip-comments-following-senate-finance-committee-hearing-on-drug-pricing-in-america/ 

[23] Jeff Lagasse, Pharmacy Benefit Managers Operate with Lack of Transparency, Expert Finds, Health Finance (Sept. 19, 2018), https://www.healthcarefinancenews.com/news/pharmacy-benefit-managers-operate-lack-transparency-expert-finds

[24] Robin Feldman, Why Prescription Drug Prices Have Skyrocketed, The Wash. Post (Nov. 26, 2018),  https://www.washingtonpost.com/outlook/2018/11/26/why-prescription-drug-prices-have-skyrocketed/?utm_term=.2dc8fc32a097  

[25] Id.

[26] Id.

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