Publications / Policy Memo

State Drug Price Transparency and Price Gouging Laws: Why They May Raise Health care Costs

By and / 3.13.2018

In October 2017, Governor Jerry Brown of California signed a “drug price transparency bill,” requiring pharma and biotech companies to give advance notification of significant price increases and provide specific justifications. Brown hailed the bill as a big step toward holding down spending on health care. “Californians have a right to know why their medical costs are out of control,” said Brown.

Many other states are finding the pharma industry to be a tempting target, especially with all the media attention given to a small number of high-profile price hikes. In Maryland, a new “price-gouging” law restricts generic and off-patent medicines from “excessive and not justified” price increases. Nevada has tackled the cost of diabetes medicines such as insulin, requiring drug makers that have raised list prices by a significant amount to release data about the costs of making and marketing the drugs. Other states like New York, New Hampshire, and Maine are considering legislation that would take various approaches to controlling drug pricing as a solution to rising health care costs.

But a new study by the Progressive Policy Institute suggests that state-level drug price laws potentially harm competition and boost drug costs, while doing very little to slow down the overall growth of health care costs. First, we describe the range of state-level drug price laws – both the ones that have been enacted and the ones that are under consideration.

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