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Could Massachusetts have the tool to fix high drug costs?

Congress Thursday will weigh in once again on the ongoing saga surrounding drug prices and the CEOs who set them.

But experts say one state official may have found a way to combat the high costs of drugs by using consumer protection laws.

A potential lawsuit in Massachusetts against drugmaker Gilead Sciences over its costly hepatitis C drugs could, if successful, forge a new path for states, which in recent months have actively fought high drug costs, even as Congress has ramped up its own efforts.

“If successful, it would spread quickly,” said Michael Gilleran, a partner at Burns & Levinson who wrote a book on the specific Massachusetts law at hand, known as Chapter 93A. “If it’s done here, the other attorney generals will take the show on the road.”

Massachusetts Attorney General Maura Healey has threatened to sue Foster City, Calif.-based Gilead over its prices for hepatitis C drugs Sovaldi and Harvoni. The drugs cost $84,000 and $94,500 for a course of treatment, respectively.

Healey wrote in a letter to Gilead that their prices may constitute an “unfair trade practice” in violation of state law. She argued that the high prices of the drugs, which effectively cure the disease, make them inaccessible to many in her state.

“Given the ability of these drugs to eradicate a life-threatening infectious disease, these decisions raise serious questions about ethics and fairness that go well beyond a company’s right to recoup a fair and even a substantial profit,” Healey wrote.

Gilead spokeswoman Amy Flood said in an e-mail that the company has requested a meeting with Healey. She said Gilead representatives look forward to addressing questions and concerns.

Flood said the company believes it’s important to help patients, and that “the advent of safe, effective regimens means we can now consider the possibility of eradicating the disease.”

Gilead and other drugmakers say because their products help patients avoid the long-term costs of treating liver disease, they offer a good value.

If the matter does, however, wind up in court, legal experts say the case would present a novel legal theory for arguing against high drug prices.

The Massachusetts law is modeled after the Federal Trade Commission Act and carries triple damages. Unlike the federal law, it allows consumers, businesses and a state attorney general to sue. More than 40 other states have similar laws aimed at protecting consumers and, in some cases, businesses as well, Gilleran said.

In 2002, the law was used to challenge how much physicians were reimbursed for providing certain drugs. In that case, a state judge ruled against AstraZeneca, Schering-Plough Corp., Bristol-Myers Squibb and Johnson & Johnson, saying they violated Chapter 93A by increasing their average wholesale prices to bill Medicare. AstraZeneca alone paid a $12.9 million settlement. Gilleran couldn’t say whether it had affected overall drug prices. The law carries no general authority to declare a price unfair or deceptive, he said.

If Healey filed a lawsuit alleging a violation of that law, she would be “inviting the court to plow new ground,” said Tim Greaney, director of the Center for Health Law Studies at St. Louis University and a former assistant chief in charge of healthcare antitrust enforcement at the U.S. Justice Department.

“It might create an incentive to look at it across the country, especially in an atmosphere as charged as this one,” Greaney said.

Some of the renewed attention on drug prices stems from a decision made by Turing Pharmaceuticals’ former CEO to raise the price of Daraprim, a generic drug used to treat toxoplasmosis. Martin Shkreli raised its price, overnight, from $13.70 to $750 a pill. Since then, Shkreli has been indicted for alleged securities fraud not related to the price increase. Shkreli called the allegations against him meritless.

Still, Congress is demanding answers from the “pharma bro” and his counterparts in other pharmaceutical companies.

On Tuesday, Rep. Elijah Cummings (D-Md.) presented the findings of a review of documents from Turing and Valeant Pharmaceuticals that show the drugmakers have made a practice of buying and then dramatically hiking the prices of low-cost drugs given to patients with life-threatening conditions such as heart disease, AIDS and cancer.

Cummings said in a statement that the documents show “that many drug companies are lining their pockets at the expense of some of the most vulnerable families in our nation.”

High prices, by themselves, however, are generally not considered a violation of antitrust standards, Greaney said.

In fact, federal courts have been reluctant to pursue cases based on excessive prices, said Frederick Abbott, a professor of international law at Florida State University who wrote a forthcoming paper on the topic to be published in the UC Irvine Law Review.

The federal courts believe it’s difficult for the judicial system to establish reasonable drug prices, and that it doesn’t serve as a price control administrator. They also see it as the responsibility of lawmakers to control the effects of the patent system Congress created, Abbott wrote.

Abbott, however, believes high prices can and should be challenged under theSherman Act, a federal antitrust law.

“There are circumstances in which a dramatically high price unfairly takes advantage of consumers and is therefore an abusive monopoly position,” Abbott said.

But he’d be equally happy to see prices also challenged under state laws, as Massachusetts is now contemplating.

John Rother, CEO of the National Coalition on Health Care, called the potential Massachusetts lawsuit “another symptom of outrage over pricing.”

States, such as Massachusetts, have had to be particularly active on the issue because they’re on the hook for paying many of the bills. If Massachusetts, for example, bought Sovaldi for all of its prisoners with hepatitis C, the cost would exceed the state’s entire budget for prisoner healthcare, Attorney General Healey wrote.

States have been trying to deal with the issue in various ways, such as by only allowing patients with the most advanced cases of the disease to get the drugs.

A number of states have also been trying to pass legislation requiring greater transparency from drug companies when it comes to how they set prices. Massachusetts lawmakers have been considering a bill that would require a certain amount of transparency and allow the state’s health policy commission to set price caps on some expensive medications.

“Increasingly, this takes up a larger percentage of states’ budgets,” said Amy Whitcomb Slemmer, executive director of Health Care for All, which helped draft the Massachusetts legislation.

Rother said such transparency efforts haven’t advanced far yet. But he’s optimistic about both the potential Massachusetts lawsuit and state efforts in general.

“I do think the political winds are shifting, and I think the public outrage over some of these prices is going to force some changes of policy at the state and federal levels,” Rother said.



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