Minnesota Rep. John Lesch's plan to stop Big Pharma's price gouging

Thirteen other states are attempting to thwart Big Pharma's systemic ripping off of consumers

Thirteen other states are attempting to thwart Big Pharma's systemic ripping off of consumers

A few years ago, Mylan Pharmaceutical jacked the cost of a two-pack of EpiPens, a medicine that fights allergic reactions, from $100 in 2007 to $608 by 2016. The responding public backlash forced the company to offer patient rebates and sell a generic version of the drug in $300 two-packs.

This was the example Democratic Minnesota House Rep. John Lesch of Como Park invoked a few days ago when as he pushed anti-price gouging legislation.

Under his plan, the Board of Pharmacy, the Commissioner of Health, or a health insurance plan would be able to tell the attorney general when they see a red flag -- like, say, if a drug price increases by half during the course of a year. The attorney general would then investigate to see if the manufacturer had any valid reason to suddenly raise prices dramatically.

If the company was determined to be gouging, the company could be sued for any damages suffered by consumers who couldn’t afford their medicine. There’s no predetermined penalty, but the company would also be on the hook for the price of the consumers’ attorney.

Lesch has noticed a trend in high-profile companies getting into hot water over specific examples of price gouging, but not a whole lot being done to prevent it in the first place. Even “pharma bro” Martin Shkrelli, who gouged the price on an AIDS medication invented before he was born, was eventually taken down for the seemingly lesser sin of lying to investors.

“Most of these CEOs are more interested in profit than they are in attention,” he says.

Lesch's measure made it through the Minnesota House with flying colors, but he wouldn’t be surprised if pharma lobbyists have something to say about it before it passes the conference committee between the House and the Senate.

He’s not necessarily sure how this will affect the market for pharmaceuticals.

“I’m not an economist,” he says.

Stephen Schondlemeyer, director of the PRIME Institute at the U of M, has thought about this issue a lot. He believes there needs to be more control od medication pricing, whether it means companies get fined for gouging, or payors get an exemption from having to cover drugs that get too expensive too quickly. 

“Drug companies should be rewarded for innovation,” Schondlsays. But that innovation could be changing a capsule into a tablet, and the company could charge “100 or even 1,000 percent” more. There’s no real incentive to make big changes if the little ones already make bank. 

But Schondlemeyer thinks legislators need to be cautious about is setting limits for price gouging. For example – if raising a drug price 50 percent in one year was the only red flag, companies might just raise it 49 percent and wait until next year to do it again.

This sort of legislation has been tried in other states – at least 13 this year – but none have become law yet. Maryland recently tried to enact something similar – right down to the “50 percent in one year” figure -- but the bill was shot down as unconstitutional in the lower courts because the court believed it supposedly overstepped limits on how states can regulate commerce.

Since most manufacturers of generic drugs operate beyond Maryland’s borders, it was decided that once state couldn’t control the prices they charge.