The Unintended Consequences of State Prescription Drug Affordability Boards

Recently, Health Affairs published a review of State Prescription Drug Affordability Boards (PDABs), covering unanswered questions and unintended consequences. The intent behind PDABs is to lower spending on prescription drugs and improve affordability for patients. In the article, authors looked at key components of PDAB legislation in four states – Colorado, Minnesota, Maryland, and Washington – because those states passed legislation allowing PDABs the authority to set upper payment limits for prescription drugs that are deemed “unaffordable.”

PDAB Composition

In the states reviewed for the article, PDABs are statutorily composed of between five and seven voting members who have knowledge and expertise in health care economics and/or clinical medicine. By way of example, the entire Colorado board is clinicians while Maryland’s board has three members with doctoral training in health policy, health services research, or economics, and one clinician. The budget of the boards vary from $500,000 in Minnesota to roughly $1.5 million in Washington state.

PDABs may receive outside guidance and assistance, often required to be from a qualified independent third party, for specific board duties. Some states set aside hundreds of thousands of dollars annually for such activities.

Identifying Drugs

Each PDAB has criteria established by law to identify certain drugs that are eligible for affordability review, ranging from list prices and list price inflation for brand and generic drugs. For example, brand name drugs are often identified as eligible for affordability review if their wholesale acquisition cost (WAC) exceeds a defined amount per year or course of treatment, or if the WAC increases beyond a certain percentage or amount. Generic drugs, on the other hand, must meet both a price threshold and an inflation threshold to be eligible for a review in all four selected states. Biosimilar drugs are eligible for affordability review if their launch prices are less than a 15-20% discount from the referenced brand drug’s WAC.

Maryland also allows for a drug to be considered for review if it “may create affordability challenges” while Minnesota allows review for drugs that “may impose costs that create significant affordability challenges for the state health care system or for patients.”

Selecting Drugs

The process of selecting drugs for an affordability review varies widely among states and states tend to be less transparent about the selection process than they are about the identification process. Under Colorado law, the PDAB must consider the availability of therapeutically equivalent drugs, input from an advisory council, the average patient’s out of pocket costs, and additional “aggregate data.” Washington law requires similar review, though it omits “aggregate data.”

Minnesota is the least transparent of the reviewed states and the legislation only requires that the PDAB shall consider requests from board members and the public.

Conducting the Reviews

PDABs perform an affordability review for each selected drug to determine whether it is “unaffordable,” with each state having different statutorily-mandated considerations. Each state has different requirements when it comes to price/cost-related factors, access-related factors, and value-related factors. Similar to the requirements under selecting drugs for an affordability review, Minnesota has the least specific considerations, with many factors listed as “not specified” or just broadly “considered in review,” according to the article.

The article further notes that while all four states legislate that PDABs should consider drug prices in their affordability reviews, only two states (Colorado and Maryland) direct PDABs to look beyond drug costs and consider impacts on comprehensive costs of care (including health, medical, and social services costs) for reviewed drugs and their therapeutic alternatives.

Unintended Consequences

The authors of the article note that the long-term impacts of PDAB-established upper payment limits on benefit design, patient access, and innovation are still to be determined. Authors also raise concern that patient access may be impacted if upstream transactions that occur entirely outside of PDAB-states are subject to the provisions of state PDAB regulations. One example of concern is wholesalers, with authors positing that they may be “unable or unwilling to buy a drug if their contracted acquisition cost…is above a state UPL, given that doing so would mean incurring a loss on the transaction.”

As of the writing of this article, eleven states have established PDABs: the four mentioned in the Health Affairs article plus Maine, Massachusetts, New Hampshire, New Jersey, New York, Ohio, and Oregon. The National Academy for State Health Policy created a chart that highlights similarities and differences between nine of the eleven states here.