Upper Payment Limits on Drugs Could Alter Patient Access

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Summary

State approaches to PDABs and UPLs vary, but all approaches could impact patient access and affordability.

Overview of PDABs and UPLs to Date

Eight states have enacted prescription drug affordability review boards (PDABs), with or without upper payment limits (UPLs), with the intention of controlling spending on prescription drugs. Unlike the approach for Medicare negotiation enacted under the Inflation Reduction Act (IRA), which aims to limit drug prices in Medicare, state UPLs will limit amounts paid or reimbursed for certain drugs in the state. UPLs may be established for products found to be “unaffordable” to certain purchasers, which may include Medicaid, state employee health plans, and/or state-regulated health plans. UPLs could also regulate how stakeholders such as pharmacies and pharmacy benefit mangers (PBMs) operate in the state, creating spillover effects across markets that they operate in. While no state has implemented a UPL to date, state PDABs approaches to UPLs are likely to vary causing changes to patient access and affordability.

Status of State Laws

Eight states have enacted PDAB laws as of March 2024, with four states (Colorado, Maryland, Minnesota, and Washington) also creating UPL authority. More than fifteen states are debating PDAB bills in their 2024 legislative sessions. The processes used to select drugs for review and the criteria considered to determine “affordability” are implemented through PDAB rulemaking and vary in criteria used for the assessments. For example, drugs may be prioritized

based on wholesale acquisition cost, gross plan spending, price increases year over year, the availability of therapeutic alternatives, and drug shortage concerns. To date, PDABs have offered limited opportunities for stakeholders, including patients, to provide feedback on prescription drug selection and affordability.

Minnesota is the only enacted PDAB to tie any drug found to be unaffordable for state residents to the Maximum Fair Price (MFP), if available. To date, Colorado, Maryland, and Oregon (currently without UPL authority) have entered the affordability review process and Colorado is the first state to move UPL rulemaking forward in 2024.

Potential Outcomes of UPLs on Patient Access and Affordability

While PDABs continue to debate the affordability of select drugs, there has been little consideration given to the implementation method for UPLs. Where UPLs are set and how they are implemented is likely to impact patient access and affordability through changes to plan benefit design as well as via other stakeholders such as providers and pharmacies.

Changes to Plan Benefit Design: How patients access and afford their drugs can be contingent on plan benefit design. This is especially important for patients with chronic conditions, such as those with HIV. UPLs could prompt plans and PBMs to shift benefit design (e.g., formularies, out-of-pocket amounts) due to changes to reimbursement and plan contracting. Benefit design changes that shift drugs into higher tiers or result in removal of a drug from a plan’s formulary may increase patient out-of-pocket costs and alter access to products with UPLs. Further, plans could change the use of utilization management (e.g., step therapy, prior authorization) on UPL products. As a result, providers treating patients with serious chronic conditions may experience increased administrative burdens associated with utilization management processes, and patients may experience delays in accessing prescribed medicines.

Finally, if UPLs were to cause changes to patient cost sharing levels, there could be an increase in requests for manufacturer copay assistance. In turn, this could increase use of copay adjustment programs, such as copay accumulators and maximizers, which also might alter how patients move through their plan benefits (e.g., reaching their maximum out-of-pocket limit).

Changes to Provider and Pharmacy Access and Reimbursement: How UPLs are implemented by a state could further complicate the drug supply chain and the stakeholders within it. Under a UPL, pharmacies and wholesalers within state regulation who are being reimbursed for drugs may need to ensure changes to payment or reimbursement under a UPL apply only to state residents. While the impact of UPLs on pharmacy reimbursement and contracting remains unknown, changes to administrative fees and/or reimbursement could cause disruption.

Additionally, changes to formularies stemming from UPLs could prompt providers to adjust referral, prescribing, and acquisition patterns (e.g., increase in white bagging) for selected drugs. Further, UPLs could alter the traditional provider “buy and bill” system of reimbursement. Providers may pay close attention to how drugs with UPLs could alter reimbursement to determine their effects on standard business practices and mitigate as needed.

The Future of PDABs and UPLs

There are additional considerations for state PDABs as they implement UPLs, including how federal and state efforts to reduce prescription drug costs may intersect. For example, PDABs will need to consider where the maximum fair price for selected drugs could affect UPL implementation in states that seek to tie UPLs to Medicare negotiated rates.

As of early April 2024, no PDABs with UPL-setting authority have identified effectuation plans for a UPL, despite moving forward with affordability reviews of selected drugs. This process continues to raise questions regarding stakeholder impact, including how patients’ access and affordability will change as UPLs are put in place. As PDABs move forward with UPLs in 2024, it remains important to assess how implementation could affect patient access and affordability.

For monthly updates on PDAB and UPL legislation and regulatory efforts, subscribe to State Policy 360. To speak with an Avalere expert about the future of these policies or the intersection of federal and state drug pricing policies, connect with us here.

Funding for this research was provided by GSK. Avalere retained full editorial control.

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