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Potentially Big Year for Prescription Drug Affordability Boards

March 25, 2024 (7 min read)

The number of states with prescription drug affordability boards could more than double this year if pending legislation is approved.

Maryland became the first state to authorize a prescription drug affordability board, or PDAB, in 2019. Since then, 10 other states have established their own boards: Colorado, Maine, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Ohio, Oregon and Washington.

Now 13 more states have pending legislation to create prescription drug affordability boards, according to the LexisNexis® State Net® legislative tracking system. Those states are: Arizona, Connecticut, Iowa, Kentucky, Michigan, Nebraska, Pennsylvania, South Carolina, Vermont, Virginia, West Virginia and Wisconsin.

The State Net agency documents database, which includes documents issued by state boards of pharmacy, casts some doubt on the likelihood of passage of one of those PDAB bills, Nebraska’s LB 833. NE 2251, minutes from the Nebraska Board of Pharmacy meeting on Feb. 6, indicates the measure is opposed by both the Nebraska Pharmacists Association and the state Board of Pharmacy.

With the steady rise of prescription drug costs, state legislators across the country want to do whatever they can to help residents. But approaches to PDABs vary and there’s often an inherent tension between their objectives of reducing health care system spending and patients’ out-of-pocket costs.

The growing wave of PDABs has manufacturers and others concerned about the implications of these new regulatory bodies.

“2024 is really shaping up to be a big year for PDABs, reflecting widespread interest in affordability of prescription drugs and a variety of approaches that are being taken to address that issue,” said Manatt Health partner Michael S. Kolber in a recent webinar about PDABs.

Scope of State PDABs Varies

PDABs are generally tasked with one or more of the following duties:

  • Determining the affordability of prescription drugs within the state.
  • Negotiating with manufacturers for Medicaid supplemental rebates.
  • Recommending ways to reduce spending.
  • Setting upper payment limits or UPLs for the amount of money the state can spend on prescription drugs.

“PDAB charges and authorities vary significantly from state to state,” Manatt Health’s Jonathan DiBello said in the webinar.

As DiBello explained, there are, broadly, three flavors of PDABs:

  1. Boards that have the authority to set UPLs.
  2. Boards that primarily negotiate supplemental rebates.
  3. Boards that are limited to just recommending spending targets for prescription drugs or strategies for reducing spending.

Massachusetts’ and New York’s PDABs focus on negotiating Medicaid supplemental rebates. Each state has entered into rebate agreements for more than 60 drugs.

The PDABs in Maine, New Hampshire, New Jersey and Oregon can’t set UPLs. Instead, they focus on making recommendations to limit costs.

UPL regulation, as you might imagine, is among the biggest concerns for manufacturers. The PDABs in Colorado, Maryland, Minnesota and Washington all have the authority to set UPLs.

Minnesota is still setting up its board. Washington is poised to identify drugs eligible for an affordability review this spring. Maryland recently identified drugs that are eligible for review and is now in the process of reviewing a handful of drugs.

Colorado, meanwhile, became the first state, in August 2023, to select drugs for an affordability review. And last month, it also became the first state to formally begin efforts to set a UPL for a drug, in this case Enbrel, an injectable drug used to treat rheumatoid arthritis, ankylosing spondylitis, and psoriasis.

Colorado’s PDAB identified 604 drugs as being eligible for review and decided to perform reviews on five of them: Enbrel, Genvoya, Cosentyx, Stelara and Trikafta.

“They focused on the drugs that had the highest utilizers in the state,” Rome said, “at least in this first pass.”

So far the board has performed reviews on Trikafta, which is used to treat cystic fibrosis; Genvoya, for treating HIV; and Enbrel. Only Enbrel was found to be unaffordable. The other two reviews will be coming soon.

“We can see there’s a spectrum in the range of drugs state PDABs target,” DiBello said. “Colorado and Minnesota, at least based on their statutes, are the broadest, targeting drugs purchased by all state-regulated payers. Washington is in the middle, targeting all drugs purchased by state regulated payers, but with certain carve outs. Maryland is the narrowest at this point, targeting only drugs purchased by state or local government or Medicaid.”

Two Big Questions for States and Boards

On the surface, the goal of PDABs is simple: to make prescription drugs more affordable to state consumers.

“But maybe on second thought, it’s not quite as clear as it sounds, at least on two fundamental questions that states have been grappling with and the boards have been grappling with so far,” Rome said. “First is, what does ‘affordable’ mean? And the second is affordable to whom?”

Affordable could mean many different things. It could refer to patients’ out-of-pocket costs, of course. But it could also refer to how much a state is spending on a drug or the cost of a drug relative to therapeutic alternatives.

Ditto for affordable to whom. Should the focus of the boards be on the out-of-pocket expenses to patients? Or to total spending on a drug, which is ultimately borne by all consumers?

“One complication of this is sort of what happens when patient out-of-pocket costs, which might be high for a really expensive drug, are offset by manufacturer patient assistance programs or coupons,” Rome said. “States are really struggling to figure out how to do this. And we’ve seen this example pop up specifically with Trikafta, where patient advocates and the company Vertex were very vocal advocates for the fact that patients who had cystic fibrosis were not being strained to pay for this drug.

“That said, the drug costs $300,000 per year. And so we saw the board sort of grapple with this tension of ‘How do you think about a drug that costs $300,000 a year and is used by a sizable number of people but where maybe the out-of-pocket costs, even if they’re high by the health insurers, might be covered up or offset by the patient assistance programs?’”

Rome said the question of affordability is going to vary from state to state, because the statutory definitions in states are different.

Number of States with Prescription Drug Affordability Boards Could Double This Year

At least 13 states have introduced legislation in the 2023-2024 session that would establish a prescription drug affordability board to help curb the rising costs of prescription drugs. Such boards have already been created in a dozen other states, most of them prior to 2023.

UPLs Big Concern for Drug Manufacturers

Nobody likes it when there’s a patchwork of laws and regulations across the states. But manufacturers seem more concerned about the potential implications of UPLs.

“We are very concerned that when states are using government price setting in the form of an upper payment limit in the states that patients might not be able to access their medicine,” said Leslie Wood, Regional Vice President - State Policy for PhRMA, in the Manatt Health webinar. “We know that patients in society benefit when a variety of treatments are available, because what works for one patient may not work for another.”

She continued: “With setting an upper payment limit there’s a tension between the system and the patient. Just because there’s an upper payment limit set, there’s no guarantee that that will reduce the patient’s cost for medicine. In fact, none of the PDAB laws require a reduction of a patient’s out-of-pocket costs when they purchase the medicine. And upper payment limits could have consequences for other medicines in a therapeutic class because government price setting can discourage new medicines from entering a drug class.”

Expect Industry Challenges to Board Decisions

Kolber predicted there would be some opposition to UPLs from the industry “in all likelihood.”

He said manufacturers could challenge whether PDABs have conformed to state laws around the authorizing legislation or rulemaking procedures. Or he said they could challenge PDABs’ authority under federal law, particularly potential violations of the U.S. Constitution.

“There are actual lives of people who are taking these medicines and benefiting,” Wood said. “And we know there's already problems with patients getting their medicines timely just with the system we have now.”

 The fear is hat PDABs will just complicate things further.

—By SNCJ Correspondent BRIAN JOSEPH

Visit our webpage to connect with a LexisNexis® State Net® representative and learn how the State Net legislative and regulatory tracking service can help you identify, track, analyze and report on relevant legislative and regulatory developments. 


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