Health care payers are intensely focused on the cost of healthcare, particularly pharmaceutical costs. States, as large purchasers of health care, are seeking new and expanded ways to reduce these costs.
One means they have recently begun to employ is prescription drug affordability boards. These boards are generally established to set limits on the price the state, and sometimes other entities doing business in the state, will pay for certain medicines.
Across the Country
According to the National Academy for State Health Policy, 10 states currently have laws that allow for affordability review of prescription drug costs. Each state’s law is different, leading to a patchwork of boards and agencies conducting these reviews using a variety of processes.
Beyond assessing affordability, four states have the ability to cap prices of the drugs they evaluate. These price caps are often referred to as upper payment limits. Generally, these limits are meant to apply any time payment is made for a specific treatment within the state.
Cause for Concern
While the entire process from board creation to data collection and affordability assessment has been the target of much criticism, the setting of upper payment limits causes great concern for patients and providers. Unanswered questions include:
- Whether any savings will actually be achieved
- Who benefits from potential savings
- The consequences for patient access.
Some state legislation dictates that all savings achieved should be passed on to consumers but leaves it to health plans to determine how that’s done. Other legislation remains silent on what happens to any potential savings. No state law makes clear that savings from an upper payment limit on an expensive drug should be passed on to the patient who actually is taking the drug.
But will there even be any savings achieved at all? According to a recent study, health plans say that upper payment limits are unlikely to achieve savings, and that any savings are unlikely to be passed on to patients in a meaningful way.
The same study also validates more dire concerns of patients and health care providers – that upper payment limits may actually decrease patients access to the very treatments these boards are attempting to make more affordable.
This is because upper payment limits could affect pharmacy benefit managers’ ability to negotiate discounts and rebates, ultimately impacting the formulary placement for certain drugs or leading to no coverage at all. Further, health plan executives have indicated that upper payment limits will likely lead to greater utilization management for the assessed treatments.
Lawmakers Can Help
With so many questions about their goals and operations, and no track record of success, it’s fair to wonder why so many states might rush to create their own prescription drug affordability boards. Yet NASHP identified 18 states with bills relating to these boards and affordability reviews during the 2024 legislative session.
As states look to health policy changes for 2025, legislators should consider the consequences of prescription drug affordability boards, include patients and providers as part of the policy discussion and look at all cost drivers in the health care system.
By focusing on patient-centered policies, lawmakers can bring down costs and promote better health outcomes.