How are states tackling high drug prices and increasing affordability? Clarivate market access expert Stephanie Hoops discusses the emergence of affordability review boards.
Done waiting for Congress to take action on drug prices, states are increasingly enacting laws that create drug affordability review boards. As is done with utilities or insurance premiums, the boards allow states to develop rate-setting programs for certain high cost drugs.
Although Congress has held off from enacting similar laws, Congressional delegations such as Maryland’s are emerging to push for a federal board.
Several states, including California, New Jersey, Oregon, Minnesota, Missouri, Illinois, Massachusetts and Maryland have created affordability review boards. Many of the laws are modeled on California’s (SB 17), enacted in 2019. The California law forces drug manufacturers to announce large price hikes and give detailed justification for their decision to raise prices. Public reports are posted on the state’s Department of Managed Health Care site.
The trade group PhRMA is challenging the California law as unconstitutional in federal court (U.S. District Court, Eastern District of California, case #: 2:17-cv-02573).
California’s law mandates that manufacturers:
- notify the state of marketing and pricing plans used in the launch of a new drug (and they must provide an estimate of the number of patients that might be prescribed the drug);
- notify purchasers before increasing (by more than 16% in a two-year period) the wholesale acquisition cost of a prescription drug that costs more than $40;
- provide the state with a description of factors that led to the decision to increase a drug’s price, including documentation of increased clinical efficacy of the drug; and
- report to the state when introducing a prescription drug that is priced above Medicare’s specialty drug threshold.
The boards are essentially a move toward European-style pricing policies with a focus on supply-side regulation. However, unlike European competition law, which includes an analysis of profit margins to determine whether a drug is excessively priced, the states are not including defined profit margins in these policies, which could impact incentives to introduce new drugs profitability in a competitive market.
Ultimately, the federal government may impose rules that fall into step with the plethora of emerging state laws. Harmonization of this issue at the national level would help to reduce confusion and administrative costs for companies selling pharmaceuticals, which, as interstate products, would benefit from uniform regulation.
Insights provided in this article were developed by Clarivate analysts, using data and analysis of the managed care landscape in the United States. Clarivate analysts will continue to keep a close eye on the evolving U.S. market access environment.
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