Last week, Vermont adopted the first state law that requires drug companies registering the highest hike in prices to justify the rationale for the increase. Vermont policymakers are not alone pursuing laws that address rising drug prices. California and Ohio are eyeing pricing-related bills and ballot initiatives. This begs the question: If several states begin adopting a patchwork of drug pricing laws, what can or will happen at the federal level?

Vermont Governor Peter Shumlin (D) stated that the legislation is about “accountability.” In his statement, Gov. Shumlin said: “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.”

The Vermont law requires the Green Mountain Care Board, in collaboration with the Department of Vermont Health Access to develop a list of 15 drugs on which the state has spent “significant health care dollars and for which the wholesale acquisition cost has increased by 50 percent or more over the past five years or by 15 percent or more over the past 12 months.” The manufacturers of the drugs on the list would then have to justify the increases to the Attorney General. While justifications are required, the law does not prohibit price changes “to the extent permitted under federal law.”

With respect to penalties, the bill allows the Vermont Attorney General to bring an action for injunctive relief, costs and attorney’s fees, and civil penalty of no more than $10,000.00 per violation. Each unlawful failure to provide information shall constitute a separate violation.

The effective date was May 6, 2016, the date of passage by the Vermont House and Senate.

In California, there is SB 1010. According to its sponsor, State Senator Dr. Ed Hernandez (D), the bill would do the following:

  • Drug makers would be required to notify public and private purchasers and provide justification before significant increase in prices.
  • Regulators would have to produce public reports on cost drivers and drug spending.
  • Health plans would be required to provide information on drugs purchasing trends, including the most prescribed, the most expensive, and the highest increases in spending. In addition, health plans must report the percentage of premiums spent on drugs and premium changes related to drug spending.

SB 1010 was endorsed by the Los Angeles Times editorial board and passed by the state Senate by a vote of 24-8.

In Ohio, there is likely to be a ballot measure that would require state health care programs pay no more for drugs than does the U.S. Department of Veteran’s Affairs. This effort is led by the AIDS Healthcare Foundation, which was successful in getting a similar measure on the ballot in California.

While states continue taking steps to deal with price increases, Congress and the Administration have yet to act on the subject in a significant way. Representative Peter Welch (D-VT) hailed the Vermont law and stated that it would be a “boost” to his efforts to increase transparency. With Congress in near stasis and Election Day a few months away, changes in federal law are highly unlikely. This sets the stage for a growing number (and not necessarily consistent set) of state laws. We will be watching this evolving landscape closely.