The Fight to Make Meds Affordable, How States are Going Beyond Medicare

Amid the incremental progress of Medicare drug-price negotiations, certain states are leveraging newfound authority to curtail expenses across a broader range of prescription drugs. States like Colorado are poised to establish maximum payment thresholds for specific drugs as early as next year.

While the prolonged Medicare drug-price negotiation is the subject of intense debate and legal battles, certain states are forging ahead with comprehensive initiatives to reduce costs for a potentially broader array of prescription medications.

This week, Medicare revealed the initial selection of 10 drugs slated for price negotiation, set to take effect in 2026. This process has prompted at least eight lawsuits from drug manufacturers and industry groups. However, preceding Medicare’s announcement, Colorado made a preemptive move by unveiling a list of five drugs chosen for assessment by its newly formed prescription drug affordability board. This board’s deliberation could establish upper payment limits for those drugs as early as the next year. Notably, two of the drugs chosen by Colorado, namely Amgen Inc.’s rheumatoid-arthritis drug Enbrel and Johnson & Johnson’s psoriasis treatment, Stelara, are also part of Medicare’s negotiation list.

Approximately seven states have instituted prescription drug affordability boards charged with identifying high-cost and high-usage drugs within their respective states, seeking avenues to reduce associated costs. Several other states are also exploring the establishment of similar boards. Michigan Governor Gretchen Whitmer, a Democrat, has created a prescription drug affordability board as one of her primary fall objectives, as articulated in her recent address to state legislators.

Unlike the Medicare negotiation process, some state boards, including those in Colorado and Maryland, have the authority to establish upper drug payment limits. Notably, these state boards are not encountering the same level of legal opposition as Medicare. Moreover, specific state boards enjoy greater flexibility in selecting drugs for cost assessments.

The Maryland board, for instance, can evaluate cost containment strategies for drugs that have recently entered the market. Gerard Anderson, a member of the Maryland Prescription Drug Affordability Board and a professor at Johns Hopkins University, highlighted that the Maryland board aims for a faster cost reduction process than Medicare’s, lacking a two-year negotiation waiting period.

The announcement by Medicare regarding the initial selection of drugs for negotiation could motivate states that have yet to take substantial measures concerning drug pricing. The National Academy for State Health Policy, a nonpartisan group of state policymakers, released model legislation that suggests states could utilize Medicare-negotiated prices as reference points to establish upper payment limits for state and private purchasers. Although this legislation has yet to be enacted in any state, the anticipation is high.

Financial analysts on Wall Street are closely monitoring the potential impact of state boards on pharmaceutical companies’ bottom lines. For instance, Vertex Pharmaceuticals Inc.’s cystic fibrosis treatment Trikafta, chosen for affordability review in Colorado, contributed roughly 90% of the company’s total product revenues in the second quarter. Analysts are cautious about how these boards can effect meaningful changes in pricing strategies and their potential implications on sales.

Colorado’s prescription drug affordability board, established through a 2021 state law, focuses its initial review of affordability reviews on drugs lacking generic or biosimilar competition. The board will assess the affordability of the selected drugs based on factors such as list price, patient copays, nonadherence, utilization management, patient input, and more. If a drug is determined to be unaffordable, a separate vote will determine whether an upper payment limit should be established. These payment limits would apply to the state Medicaid program and state-regulated commercial and employer plans.

While the state-level initiatives coincide with Medicare negotiations, the pharmaceutical industry expresses concern about potential disruptions to healthcare systems and patient access to medications. Representatives from the Pharmaceutical Research and Manufacturers of America emphasize that such policies may not address underlying issues, allowing insurers and pharmacy benefit managers to continue shifting costs to patients.

Healthcare professionals, including doctors, are rallying to advocate for more states to adopt prescription drug affordability boards. As the Biden administration defends Medicare price negotiations in court, some state boards report constructive interactions with drug manufacturers. These industry players have contributed valuable insights into upper payment limit strategies. Many industry insiders believe that state-level approaches to controlling drug costs could eventually influence the Medicare negotiation process, providing a guide for congressional deliberations in the future.

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