States across the country are increasingly trying to address prescription drug affordability. In searching for solutions, some states are focusing on Medicare’s Maximum Fair Price (MFP) determination as one model for state policy action. Established under the 2022 Inflation Reduction Act for the federal Medicare program, this proposed approach is sometimes taken alongside, and sometimes in place of, establishing Prescription Drug Affordability Board (PDAB) upper payment limits (UPLs).
Unfortunately, importing the MFP as a pricing shortcut doesn’t solve affordability problems. As the Rare Access Action Project explains, when removed from Medicare’s statutory framework, MFP functions as a reimbursement ceiling with the same access consequences as any UPL.
MFP – The Leverage Gap
Medicare’s MFP is a coercive mechanism that is statutorily unique to the federal government, not a model of sound pricing policy. The MFP functions only because the federal government occupies a position no state can occupy: the single largest purchaser of prescription drugs in the country. The ultimatum to manufacturers is binary and backed by that scale — accept the government’s terms or be excluded from federal programs entirely. That is single-buyer leverage exercised through statute, and it is already producing access harms. State PDABs have no comparable leverage, a manufacturer can decline a state-imposed pricing requirement without exiting the national market or losing federal coverage.
There is also an operational gap. The federal government has committed roughly $100 million to build the dedicated infrastructure managing MFP’s system of retrospective refunds. Even that investment has not prevented reimbursement delays that are creating cash flow shortfalls, according to the National Community Pharmacists Association. States do not have the budgets or the expertise to replicate or improve this structure.
The mechanism Congress designed for Medicare simply does not apply to individual states.
What a Reimbursement Ceiling Actually Does
MFPs and UPLs cap what a health plan may reimburse, not what it costs to acquire a drug. A state cannot require manufacturers to sell at the capped price. Any gap between acquisition cost and allowable reimbursement shifts onto providers, and then onto patients.
Illinois legislators examining HB 1443 saw that dynamic in real time this year. During bill consideration, an amendment proposed to offer protections to wholesalers that could not source drugs at the MFP price and pharmacies that could not afford to stock them. But as VCC testified, rather than solve the issue, the amendment explicitly acknowledged that wholesalers may not be able to source a drug and pharmacies may not be able to stock it. This is the very description of what an unworkable reimbursement ceiling produces, not a solution.
Health plans and providers have also expressed concerns about UPLs limiting access. Health plans have said they will respond to UPLs with increased utilization management and increased cost sharing, raising barriers that delay or deny access. A VCC-commissioned survey found that all medical specialists surveyed are concerned that PDAB-related administrative burdens will cut into patient care time, and 96% are concerned about patients being switched off stable therapies for non-clinical reasons.
The Bottom Line
States are right to focus on affordability. The error is assuming a federal pricing tool transfers cleanly to state markets. MFP is already producing the opposite of its intended effect federally — patient out-of-pocket costs for drugs subjected to it have risen by an average of 32% as health plans raise deductibles and shift to coinsurance.
At the state level, that same benchmark arrives without federal coverage guarantees, out-of-pocket protections, or the infrastructure that partially holds the federal system together. The result is a reimbursement ceiling with access consequences at every stage of the supply chain, which VCC and others have documented .
Governors across the political spectrum have raised the alarm. Former Virginia Governor Glenn Youngkin cited Maryland and Colorado as states where PDABs “will limit access to life-saving pharmaceuticals.” Nevada Governor Joe Lombardo warned that price caps could mean medications “simply won’t be available.” Most recently, Virginia Governor Abigail Spanberger, a Democrat who made affordability a centerpiece of her campaign, vetoed PDAB legislation this May, finding that PDABs “do not achieve this goal” and are “expensive undertakings that other states have either repealed or are considering repealing due to costs and ineffectiveness.”
Each of these “affordability plans” come with a problematic track record and come at the cost of access, a tradeoff patients cannot afford.