Since 2019, states have been enacting prescription drug affordability boards (PDABs) to address the rising costs of prescription drugs and enhance affordability for patients. However, variability across states and uncertainty surrounding the implementation of PDAB processes raise concerns about the downstream consequences of state governments setting maximum reimbursement rates for drugs. As more states debate PDAB legislation and ongoing litigation challenges aspects of PDAB constitutionality, states with PDABs are beginning ill-defined affordability review processes and rulemaking to cap drug prices. Click here for article.
Legislative Landscape: Four states—Colorado (in 2021 and 2023), Minnesota, Maryland, and Washington—have passed legislation granting PDABs the authority to set upper payment limits (UPLs) for prescription drugs deemed unaffordable. Other states have different approaches, such as recommending policies, negotiating rebates, or conducting affordability reviews without setting UPLs.
Board Composition and Funding: PDABs typically consist of 5-7 voting members with expertise in healthcare economics or clinical medicine. They meet publicly regularly and receive annual budgets ranging from $500,000 to $1.5 million. Advisory councils, independent third parties, and professional assistance contribute to their decision-making process.
Affordability Review Criteria: Eligible drugs for affordability review are identified based on criteria focusing on list prices and inflation. Factors considered include WAC, inflation thresholds, and launch prices for biosimilar drugs. Some states also include broader criteria, potentially subjectively including any drug for review.
Setting Upper Payment Limits: The process of setting UPLs for drugs deemed unaffordable remains unclear. Statutory factors for setting UPLs are predominantly cost-focused, with considerations for drug shortages and external reference pricing. Some legislation prohibits the use of quality-adjusted life years (QALYs) in setting UPLs.
Unintended Consequences: Uncertainty surrounds the impact of UPLs on patient access, provider reimbursement, and manufacturer research and development (R&D). Payers may implement utilization management strategies, and providers could face declining reimbursements. Limiting drug prices at launch may deter R&D efforts, potentially impacting future drug innovation.
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