Bd. of Public Works OK’s Payout to Drug Companies After Court Overturns State Law

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The State of Maryland will pay nearly half a million dollars to compensate drug manufacturers for legal fees they incurred fighting legislation approved by the General Assembly in 2017.

The measure they fought was an early effort to rein in the price of prescription medications, and it was eventually overturned in court.

House Bill 631 empowered the state Attorney General to go after drug makers who raised prices on off-patent or generic drugs in an “unconscionable manner,” which the measure defined as lacking in basis, such as an increase in production costs.

The bill passed the legislature with bipartisan support and Gov. Lawrence J. Hogan Jr. (R) allowed it to become law without his signature, though he expressed concerns about its legality.

The measure was challenged by a lobbying organization that represents drug manufacturers, the Association for Accessible Medicines. A federal appeals panel in Richmond, Va., ruled 2-1 in their favor, arguing Maryland’s new law violated the Commerce Clause.

Attorney General Brian E. Frosh (D) appealed the decision, but the Supreme Court declined to take the case.

On Wednesday, the Board of Public Works approved a $450,000 payment to the association, compensation for the costs they accrued in their fight with the state.

Lt. Gov. Boyd K. Rutherford (R), serving as the panel’s chairman, called it “unfortunate that we have to get to this point.”

“This was a piece of legislation that was meant well, to address the costs associated with prescription medications,” he said. “We need to be little more careful as we try to do the right things and address challenges, to understand that there are constitutional restrictions. And we can sometimes go too far with good intentions.”

Sen. Brian J. Feldman (D-Montgomery) defended the legislature’s attempt to rein in the rapidly-rising cost of prescription drugs, which have long been a hardship for many consumers.

“At that time, Congress found drug costs were increasing as much as 1000%, but they didn’t act,” he said on Wednesday. “So Maryland decided to do something.”

“We understood at the time that, being the first out of the box, we were going to get opposition from Big Pharma,” he added. “The idea of policymakers pushing these new ideas made sense at the time and continues to make sense. I think it was worth pursing.”

Treasurer Nancy K. Kopp (D), another member of the Board of Public Works, noted that the federal appeals court was divided on whether Maryland’s approach was constitutional.

“I happen to think the court was wrong,” Kopp said. “But I’m not a constitutional lawyer.”

“This price gouging by drug companies has got to be attacked,” she added. “It should be attacked on a national level.”

After the courts struck down HB 631, state lawmakers adopted a different approach in 2019, creating a Prescription Drug Affordability Board to research the issue and recommend ways of forcing reductions in the price of medications.

Hogan allowed that bill to become law without his signature.

The board met for the first time in January and is expected to take a couple of years to begin providing recommendations — and flagging individual overpriced medications — to the legislature. Hogan vetoed a bill this year that would have provided initial funding for the new board.

The Attorney General’s office advised the legislature in 2017 that their bill targeting “unconscionable” price hikes was constitutional. They will provide $100,000 to cover the drug association’s legal fees; the rest will come from the Department of Health.

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