A Favorite State Solution for Lowering Drug Prices Doesn't Actually Work
Prescription drug affordability boards aren't worth the effort.
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Virginia Gov. Glenn Youngkin this week vetoed — for the second time — a bill that would create a state prescription drug affordability board. The board, known as a PDAB for short, would have been tasked with analyzing and setting payment limits on the price of certain drugs covered by state health plans.
Virginia Democrats are miffed to see this bill, which had bipartisan backing, met with a veto again. “Big Pharma has gotten away with charging hardworking Virginians outrageous prices just so they can stay alive,” said Democratic Del. Karrie Delaney, one of the bill’s champions.
I get the frustration, given the economic reality and political salience of high prescription drug prices. But I also don’t believe in the prescription drug affordability board model, for reasons I will explain below, and would urge state legislators to look elsewhere for solutions to the pricing power of the prescription drug industry. PDAB’s are simply too long on hope and short on results for patients.
To date, nine states have created some version of a prescription drug affordability board. Some are quite unambitious, tasked with only making recommendations to the legislature to lower drug prices. Weak!
Four, though — in Maryland, Minnesota, Colorado, and Washington State — have actual power to set prices, known as upper price limits, or UPLs, for drugs that meet certain criteria.
Alas, Maryland really encapsulates why I’m skeptical of this approach — the results, from all of its efforts, just aren’t there. Maryland was the first state to approve a PDAB, back in 2019, and it has yet to take action on a single drug, thanks to a long, laborious process of securing funding, getting up and running, and then working through the process to legally identify its targeted medicines.
Even if it does get a drug through the process, its mandated prices won’t apply to those who have private insurance, as Maryland’s UPLs are limited to people who have public insurance. (An effort to expand the board’s jurisdiction to all insurance plans was rejected by the legislature this year.)
Colorado, meanwhile, has identified two drugs — Enbel and Stelara — that would fall under its board’s jurisdiction, but has yet to announce prices for them, and has been taken to court by Amgen, Enbel’s manufacturer. Even without that, the Colorado process requires a 180-day comment period following the identification of a drug, followed by a six-month implementation wait before the price is set.
New York took a different approach, allowing its board to negotiate rebates for drugs paid for by the state Medicaid program. It has negotiated higher rebates on just two drugs and reportedly saved another $24 million — out of $1.3 billion the state spent on prescription drugs during that time.
The PDAB approach, then, suffers from what I call the “commission punt”: Lawmakers punting the decisions they should be making to some other body, so they can claim they’ve done something while the hard work actually occurs elsewhere, or more likely just doesn’t occur at all.
The problem with the commission punt is that, even if the commission has some real powers, like some of the PDABs do, it sets up another, separate regulatory process that can be corrupted or captured by industry or tied up in court for who knows how long. Lawmakers slog through getting their bill passed — and the pharmaceutical industry fights the creation of PDAB’s tooth and nail, to be clear — only to create another slog of a process somewhere else in the government, where the industry again fights tooth and nail to prevent any concrete steps from being taken.
Maybe some other states will crack the code and create a drug affordability board that works within a reasonable timeframe and in a way that is noticeable by the masses, but it hasn’t happened yet. Instead, there’s been a lot of noise and gnashing of teeth, and the same old prescription drug prices that existed before.
Contrast this to the approach lawmakers have taken on some other popular, outrageously priced drugs such as insulin, epipens, and inhalers, where they simply capped the amount a patient can be charged. That approach has the benefit of not outsourcing the decision to another governmental body or process, but simply having legislators, who are accountable to constituents, declare that some medications are too important to leave up to the pricing power of the consolidated pharmaceutical market. Lawmakers themselves can do what the PDAB would do, without going to all the trouble, expense, and time of setting up a PDAB.
But even that approach still amounts to whack-a-mole, requiring legislators to consider one drug or a bundle of drugs at a time. It doesn’t systematically change the industry’s practices to lower prices across the board. Systemic changes, though, do exist.
For example, in 2021 West Virginia approved a law requiring that pharmacy benefit managers (PBMs) — the middlemen of the pharmaceutical system — pass on to patients 100 percent of the drug rebates they negotiate with drug manufacturers and face penalties if they don’t comply. That measure has lowered both direct point-of-purchase drug costs and health insurance premiums in the state, as a state analysis showed earlier this year.
Several state have also proposed structurally separating PBMs and pharmacies — i.e., making it illegal for PBMs to also own pharmacies, such as the PBM Caremark and CVS operating as one corporation — which would help patients by ensuring that independent pharmacies, which typically have lower prices, continue to exist and remove some of the conflicts of interest that encourage PBMs to inflate the cost of drugs.
I prefer that sort of change, which goes at the guts of why drug prices are so high, rather than setting up a separate, janky process to consider drug costs one by one.
UPDATE: The Delaware legislature passed and Gov. Matt Meyer signed into law the bill my colleague Laurel Kilgour wrote about last week that will empower corrupt corporate insiders.
SIMPLY STATED: Here are links to a few stories that caught my eye this week.
The Colorado Senate approved a bill banning undisclosed, mandatory junk fees, and the Colorado House approved a bill eliminating algorithmic price coordination among landlords.
“Michigan’s largest corporate subsidy program, the Strategic Outreach and Attraction Reserve, has yet to create a single job more than three years after its creation.”
Private equity firms are rolling up companies that provide services to the disabled.
Minnesota Democrats have introduced a “bill of rights” for trailer park residents, who have also been victimized by private equity rollups.
Arkansas Gov. Sarah Huckabee Sanders signed into law a bill requiring PBMs to promptly reimburse pharmacies for their dispensing costs.
Scalpers in Miami are selling DMV appointments.
The Idaho legislature voted to weaken regulations at child care centers.
Texas, New York, and California are all considering expanding their film/TV production tax credit programs.
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— Pat Garofalo