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Maryland Enacts Legislation to Lower Prescription Drug Costs

State Legislators Direct the Prescription Drug Affordability Board to Study PBM “Reverse Auction” Recommended by America’s Agenda Chief Economist Mike Kapsa

ANNAPOLIS, MD (May 13, 2019) -- Over the course of this March and April, Maryland lawmakers crafted a bill intended to reign in the  states’s prescription drug spending.  In early April,  Center Maryland, a popular State political website, published a blog post by America’s Agenda Chief Economist Dr. Mike Kapsa titled “To Address Drug Costs, Annapolis Should Look North to Trenton.”  In it, Dr. Kapsa urged Maryland lawmakers to look to the example of New Jersey, the only state in America to actually achieve a major reduction of its pharmaceutical costs.  Maryland lawmakers took notice.

At the time Dr. Kapsa’s blog post was published, Maryland lawmakers were focusing their effort to control drug costs primarily on the idea of capping prescription medicine list prices.   By contrast, Dr. Kapsa, pointed out that New Jersey had created a competitive PBM marketplace or “reverse auction,” where “real price competition between PBMs effectively broke up the PBM cartel (something the Affordability Board in Maryland isn’t looking at.)”  He observed that, by forcing PBMs to bid against one another for the State's business over multiple bidding rounds in an eBay-like, online, reverse auction, New Jersey reaped “a fat $1.6 billion [or 18.5%] in savings for teachers and government workers, alone, without cutting their prescription drug benefits, at all.”

His message caught the attention of legislators – and many other Marylanders, too.  By the end of April, when the revised House Bill 768 was finally enacted into law, it directed its Prescription Drug Affordability Board to study “Using a reverse auction marketplace,”  alongside list price caps and bulk purchasing, as alternative strategies for lowering the cost of prescription drugs. 

The PBM reverse auction strategy was backed initially by New Jersey unions. Their leadership changed fundamentally the drug pricing game in their state, capturing unprecedented  prescription drug savings for New Jersey public workers and taxpayers.  Their example now stands to benefit Maryland workers and taxpayers, as well.

Check out Dr. Kapsa’s blog post.



Emma Hurley Palmer

(805) 559-0122

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