While drug pricing continues to be an important political issue in the United States, it has been state legislatures, not the federal government, that have been able to translate policy proposals into new laws.

Over the last few years, lawmakers at both the state and federal level, as well as enforcement agencies and class-action plaintiffs, have focused substantial efforts on brand name and generic drug pricing. Yet despite continued political pressure, virtually all of the proposed legislation at the federal level to date has failed. Current bills before Congress, such as the one backed by House Speaker Nancy Pelosi—which among other things would give Medicare the power to negotiate directly with pharmaceutical manufacturers—reportedly also face considerable resistance, especially in light of the projected negative impact such legislation would have on biopharmaceutical research and development and the flow of new drug and biologic approvals.

The story is different, however, at the state level. State legislatures are proposing new laws regarding drug pricing at a record pace, and many of these laws are passing. In just the last year, for example, nearly every state in the country has proposed legislation targeting some aspect of drug pricing, with nearly 30 states passing such laws...