LUGPA Policy Update: Addressing Prescription Drug Costs Through Prescription Drug Affordability Boards

April 2024 

State lawmakers are actively confronting the challenge of escalating prescription drug costs. One approach gaining momentum at the state level is the establishment of Prescription Drug Affordability Boards (PDABs). These regulatory bodies, endowed with varying authorities, are dedicated to easing the burden on consumers and state healthcare budgets by addressing the soaring prices of pharmaceuticals.

PDABs are independent entities tasked with analyzing the escalating costs of prescription drugs and proposing strategies to decrease spending. Their authority varies across states, and board members are typically appointed by the governor and include experts in healthcare and economics, including clinicians, insurers, and consumer advocates. PDABs review state and commercial health plans, offering recommendations to enhance affordability.

PDABs and the implementation of Upper Payment Limits (UPLs) are designed to reduce government spending on prescription drugs and enhance patient affordability. However, introducing UPLs can have significant downstream effects on various stakeholders.

UPLs have the potential to significantly shift drug pricing dynamics such as Wholesale Acquisition Cost (WAC), Average Sales Price (ASP), and Average Manufacturer Price (AMP), thereby affecting the calculations for Medicaid best prices and the 340B drug pricing program. Consequently, manufacturers may increase their reliance on patient support programs to mitigate the escalating out-of-pocket costs for patients.

UPLs may prompt payers to adjust cost-sharing and formulary tiering, potentially restricting patient access to vital medications. This could lead to challenges such as changes in preferred medications and mid-year formulary adjustments. Additionally, altered drug pricing could result in reduced provider reimbursement. Concerns about PDABs compound these issues, including potential limitations on patient access to medications, uncertainty about drug costs, and a failure to address high patient out-of-pocket expenses. Furthermore, there are concerns that PDABs may hinder innovation and the development of new medicines, further complicating the healthcare landscape.

Maryland was the first state to establish a PDAB in 2019. The law mandates the board to review the use of prescription drugs by state and commercial health plans and provide recommendations to state officials on measures to enhance affordability for residents.

Introduced across 16 states, these bills have raised concerns in state legislatures due to a lack of consideration for their broader impact on the healthcare system. Insufficient input from patients, providers, and industry groups underscores the need for enhanced transparency and stakeholder engagement in the policymaking process.

PDAB policies and UPL regulations can profoundly impact independent healthcare providers, who often operate with smaller profit margins than larger healthcare systems. Alterations in formulary coverage and pricing metrics can affect the availability and affordability of medications for independent providers and their patients. Policymakers must prioritize addressing the distinct challenges encountered by independent providers to ensure fair access to affordable medications for all individuals.

PDABs have recently come under increasing legal scrutiny. In March, Amgen, the manufacturer of Enbrel, filed a lawsuit against Colorado's Prescription Drug Affordability Board, contesting the board's decision that the medication is unaffordable for the state's patients. The lawsuit argues that the law granting the board authority is unconstitutional and infringes on federal patent law and interstate commerce.

This case mirrors challenges by generic drugmakers against price-gouging laws in other states. While these measures aim to contain costs for state-funded programs, legal scrutiny has been raised, as seen in previous court cases involving similar laws in Maryland, Illinois, and Minnesota.

LUGPA remains committed to monitoring the development of PDAB laws and ensuring that reforms do not hinder our members' ability to operate their practices.Top of Form