State lawmakers, like their federal counterparts, are focused on addressing the high and growing cost of prescription drugs. One strategy to lower pharmaceutical prices that is growing in popularity at the state level is prescription drug affordability boards (PDABs). Policymakers hope that granting these new regulatory bodies varying authorities — like capping payments on drug spending by states and increasing transparency — can help make medicines more affordable for consumers and release pressure on state health care budgets. However, their effectiveness remains an open question as most have been established recently.
What Is a Prescription Drug Affordability Board?
PDABs are independent bodies empowered to analyze the high cost of drugs and suggest effective ways to lower spending. The scope of a PDAB’s authority varies from state to state. Board members are generally appointed by the governor and are experts in health care and economics. Members also can be clinicians, insurers, and consumer advocates.
In 2019, Maryland became the first state to establish a PDAB. The Maryland law requires the board to review both state and commercial health plans’ use of prescription drugs and make recommendations to state officials on ways to make them more affordable for residents.
Currently, six states (Colorado, Maine, New Hampshire, Ohio, Oregon, and Washington) have followed Maryland and enacted laws establishing PDABs. According to the National Academy for State Health Policy, a number of other states (Arizona, Connecticut, Illinois, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, and Virginia) have introduced legislation that is currently pending. In one state, Wisconsin, the legislation failed to win enough support from lawmakers to be enacted.
PDAB recommendations usually apply to commercial health plans, state employee health plans, and Medicaid; sometimes their reach is limited to a subset of payers. The types or classes of drugs PDABs scrutinize vary by state. However, the boards generally focus on high-priced drugs, which may be defined by a specific threshold — for example, brand-name drugs and biologics with a launch price of $30,000 or more per year.
However, some states have given their PDABs more expansive authority to drive down drug prices. Following Maryland’s lead, Colorado and Washington have included a unique provision in their laws that enables the board to set upper payment limits on certain high-cost drugs after conducting an affordability review. Although this provision does not restrict how much a manufacturer can charge for certain drugs, it instead limits how much commercial and public payers in a state can pay, ultimately ensuring that out-of-pocket costs for consumers are reduced.
State Considerations in Establishing Prescription Drug Affordability Boards
In addition to the scope of a PDAB’s authority, states have considered other factors when designing boards, including:
- Ensuring sustainable funding. Some states appropriate funding out of their general revenues to support operations. New Jersey has proposed to appropriate $1 million from the state budget for initial setup and operational costs. Other states have utilized other mechanisms — for instance, New Hampshire funds its PDAB through fees imposed on drug manufacturers, wholesalers, pharmacy benefit managers, and insurers.
- Appointing members. Most governors and state legislative leaders appoint members to the PDAB. Under their statutory authority, boards can then recruit and appoint experts to an advisory council representing different stakeholders (e.g., industry, consumer groups). The experts can then carry out the boards’ responsibilities of identifying solutions to address drug affordability and the overall mission to reduce high-priced drugs for consumers. States can require board and advisory council members to meet certain requirements, such as having no conflicts of interest.
- Gaining access to data. To make informed decisions, PDABs need access to data on drug prices, costs, and utilization, but these data are often proprietary and not readily available. State transparency laws can help serve as a foundation for ensuring a PDAB has accessible and reliable data. Industry players have mounted legal challenges to state-led efforts to increase drug pricing transparency, calling into question PDABs’ ability to obtain information that may be critical to their mission.
Where Are We Now?
Most states that have passed legislation to establish a PDAB are still operationalizing their boards, but some have moved forward with developing policies to lower drug costs. Maine’s PDAB released its first annual report in March 2022. It includes a mix of administrative and legislative recommendations on ways to lower prescription drug prices for the state’s public payers. The recommendations include checking for wasteful drugs listed on formularies (e.g., high-cost brand or generic products when less expensive generics are available, newly approved drugs that add no clinical value beyond existing treatments). Other recommendations include utilizing pharmacy benefit managers that are transparent in their pricing models, prohibiting price gouging, and penalizing unsupported price increases.
Prescription drug affordability boards have the potential to be a valuable tool in the fight against high prescription drug costs, although their overall effectiveness remains to be seen. It will take time, as well as data, to understand the impact of these boards and to determine if they’re effective in achieving their goals. Much will depend on their ability to obtain resources, expertise, and data, and ultimately their ability to produce solutions that can compel lower prices.