Pharmaceutical drug pricing and reimbursement continues to make headlines nationwide. In a recent development, Maryland’s Prescription Drug Affordability Board (PDAB) finalized its list of selected drugs for affordability review. The board will engage in what it contends will be a comprehensive “cost review” where it will seek public comments, additional information, and data over a 60-day period to determine if the selected drugs will be subject to state-prescribed upper payment limits.

Background

As we’ve previously covered on the blog, in response to rising prescription costs and overall state-level healthcare spending, 11 states to date, including Maryland and Colorado, have created drug affordability review boards to review certain high-cost prescription brand and generic drugs to determine if they should take action to reduce their prices. Another 12 states have pending legislation to create similar boards. At present, Colorado and Maryland are the only states to have selected drugs for affordability review.

In 2019 Maryland’s General Assembly passed a first-of-its-kind law establishing a PDAB. The General Assembly empowered the PDAB to “study the entire pharmaceutical delivery and payment process, access data for drug pricing and utilization, and develop regulations.” It also gave the board the ability to pursue “upper payment limits.” In March 2024, the board selected eight drugs for “cost review”: Biktarvy, Dupixent, Farxiga, Jardiance, Ozempic, Skyrizi, Trulicity, and Vyvanse. The board voted to proceed with review of only six, removing Biktarvy and Vyvanse from the list.

During its May 20 meeting, the board’s executive director noted to fellow board members that selection of a drug for affordability review is not a declaration that the subject drug is in fact unaffordable. Rather, it simply provides the board with an opportunity to gather information on patient costs, as well as other financial metrics, to enable the board to make an affordability determination. Unfortunately, such statements provide no relief for drug manufacturers with products subject to what could be state-mandated upper payment limits.

The board expects to discuss the findings of its cost review for the aforementioned drugs at the next PDAB meeting scheduled for July 22. Based on its review, the board will decide whether the subject drugs have led or will lead to “affordability challenges to the State health care system or high out of pocket costs for patients.”

Once a determination is made, but before the PDAB can set an upper payment limit for any drug, it must finalize its implementation plan and obtain approval of that plan from the General Assembly’s Legislative Policy Committee (LPC). The LPC has 45 days from the date of submission to approve the plan. If the LPC does not approve the plan, the board must submit the plan to the governor and Attorney General for approval.

Even if plans are approved, implementation of upper payment limits may prove difficult. For example, the Colorado Association of Health Plans (CAHP) noted that it has “concerns about the ability of health insurance carriers to alter their drug formularies so that individual drugs can be removed to align with an established [upper payment limit] as well as changing claims systems to allow for single copay amounts specific to one drug.”

As proposed, upper payment limits would create issues with identifying appropriate drug co-pay tiers under the applicable insurance plans and does not account for downstream impacts on state rules and regulations on prior authorizations and step therapy. CAHP went on to state that the “costs associated [with implementation] could well outweigh the potential cost savings.”

It may come as no surprise that one member of the Maryland PDAB stated the board expects to see legal challenges from drugmakers as it attempts to set upper payment limits on drugs covered under state and local government health plans.

Key Takeaways

There remain many unknowns as to whether state-prescribed upper payment limits will survive the test of time. While states (Colorado and Maryland) are moving forward with drug selection and investigation, select manufacturers have filed lawsuits challenging such laws. The outcome of any such litigation cannot be known, and pharmaceutical manufacturers would be well advised to carefully assess their product portfolios and diligently prepare for potential future selection.