Vermont the First of Many States Looking to Tackle High Drug Prices

States are taking the lead in the fight against rising drug prices. Vermont has passed legislation to regulate yearly drug price hikes and other states have introduced similar legislation.

States are taking the lead in the fight against rising drug prices.

On June 3, Vermont became the first state to enact a drug pricing law when Governor Peter Shumlin signed the legislation into law. Under the new law, state healthcare regulators would keep a yearly list of the top 15 drugs with the highest price increases and those pharmaceutical companies will be required to justify drug price hikes.

“This bill is about accountability," Shumlin said in a statement. "The reality is that we have pharmaceutical companies raising prices on lifesaving drugs five thousand percent. When asked about those outrageous increases, CEOs are literally laughing in front of Congress. That needs to change.”

Companies who land on Vermont’s list will have to submit information regarding all factors that contribute to price increases. Each violation will carry a $10,000 penalty.

Meanwhile, California is creeping closer to passing its own legislation. A bill authored by Senator Ed Hernandez would require drug makers give notice before they raise prices and also would require health plans report how much of insurance premiums is spent on prescription drugs.

The bill has passed the California State Senate by a vote of 24-8, and now it is heading to the Assembly.

“SB 1010 provides a much-needed measure of transparency to prescription drug pricing,” said Art Pulaski, executive secretary-treasurer of the California Labor Federation, which co-sponsored the bill with Health Access California, a statewide healthcare consumer advocacy coalition.

Meanwhile, in Massachusetts, Senator Mark Montigny has introduced legislation that requires companies to report cost and pricing information and even sets a limit if the state determines the price of a drug is “significantly high.” The determination of whether a drug price is considered as such is based on 3 factors:

  1. The prescription drug’s medical benefits
  2. The cost to develop and manufacture the prescription drug
  3. The prices charged by the manufacturer in other countries

If a drug’s price is considered significantly high, then the commission can set a maximum allowable price for the state of Massachusetts.

According to The Pew Charitable Trusts there were at least 11 states that had filed bills requiring drug makers disclose costs to justify their prices as of March 2016.