- While each state PDAB will have a different process for selecting prescription drugs and establishing price metrics, it typically involves four major steps:
1. Identifying eligible drugs – Typically, the state legislation establishing the PDAB outlines the criteria for determining which drugs are eligible for review. This is commonly determined by the wholesale acquisition cost (WAC), with the threshold varying based on the drug category.
2. Selecting drugs for affordability review – The process of selecting drugs for affordability reviews varies across states. Most commonly, it involves considering a range of factors, including the prescription drug products recommended to the boards by stakeholder councils, the pricing of these prescription drug products, publicly available data, and input from the public. It's also not uncommon for the legislation to refrain from specifying the exact selection criteria.
3. Reviewing the affordability of selected drugs – Many state bills outline a multitude of factors for boards to consider during their review process. These typically include the wholesale acquisition cost, availability of therapeutic alternatives, average pricing discounts provided to health plans or PBMs, and the impact of pricing on drug access. In some instances, states delegate the establishment of the review process to the discretion of the board.
4. For drugs deemed unaffordable, establishing price control – The process of setting UPLs varies among states. While many states mandate that criteria for UPL determination must encompass factors such as the cost of drug administration, delivery to consumers, and relevant administrative expenses, none explicitly define "affordable” or an “affordability challenge.”
- The methodology for choosing medications for affordability reviews varies across state PDABs. While certain states opt not to define precise selection criteria, others outline factors that the board may or must consider.
Common factors include considering input from stakeholder councils, the average patient’s out-of-pocket costs, publicly accessible data, and feedback from the public. Additionally, certain states may impose restrictions on the number of drugs subject to review annually, and some incorporate a rare disease carve out, prohibiting the review of drugs intended solely for such conditions.
- Once a drug is selected by the PDAB, the board must then conduct an "affordability review" to determine if the drug is posing or will pose “affordability challenges.” Unfortunately, across all state PDABs, there’s no established definition for “affordability” or what constitutes an “affordability challenge” which can make the analysis difficult. Additionally, certain legislation does not define who the prescription drug is affordable for, although some legislation specifies that the board must consider affordability from the lens of “patients” or the “state healthcare system.”
States adopt diverse approaches for their affordability reviews. Some outline specific factors that boards must consider, while others offer a range of considerations or provide no explicit guidance. Common factors for consideration typically include:
- Prescription pricing elements like wholesale costs, discounts, and rebates
- Average patient copays or out-of-pocket expenses
- The drug’s impact on patient access within the state
- Orphan drug statue
- Assessment of patient assistance programs
- Availability and pricing of alternative therapies
- Input from affected patients or experts
- Information from drug manufacturers
- Review of PBM policies
- Any other relevant considerations determined by the board
- Most PDABs aim to regulate prescription drug costs by implementing upper payments limits (UPLs), which are price caps on the amount that a payer can reimburse for the purchase of a prescription drug within the state that a board determines is unaffordable. It is important to emphasize that this pricing constraint applies to what payers, like private or public health plans, can reimburse PBMs for prescription drugs, not what consumers pay out of pocket. This type of cap may also be limited to specific plans based on the board’s authority. UPLs can be set by the state, by using international reference pricing, or by tying the UPL to the IRA's Maximum Fair Price.
- 1. What are Prescription Drug Affordability Boards (PDABs)?
Prescription Drug Affordability Boards (PDABs) are independent entities established at the state level to address increasing prescription drug costs. These boards aim to assess the affordability of prescription drugs and recommend strategies to make drugs more affordable.2. How do PDABs operate?
PDABs typically comprise a group of experts spanning pharmaceutical economics, health finance, and clinical medicine. They are tasked with evaluating prescription drug affordability in the state, often by analyzing data on drug pricing, cost trends, and the impact of prescription drug expenses on individuals and healthcare systems. Depending on the state, they are equipped with a range of authorities to improve the affordability of drug prices, including monitoring drug prices, implementing price controls, conducting data analysis, reporting on pricing trends and drug markets, and formulating policy recommendations.
3. What states have enacted PDABs?
Colorado, Maine, Maryland, Minnesota, New Hampshire, New Jersey, Ohio, Oregon, and Washington have enacted PDABs or similar drug pricing entities. For more information regarding individual state PDABs, including their model, authorities, opportunities for engagement, and status, view Aimed Alliance’s resource on enacted PDABs.
4. What states are considering PDABs?
In 2024, Connecticut, Illinois, Iowa, Kentucky, Michigan, Nebraska, Rhode Island, South Carolina, and Vermont, Wisconsin, and West Virginia proposed PDAB legislation.
5. Are PDABs effective at lowering drug costs?
Most PDABs work to lower prescription drug cost by setting upper payment limits. This pricing limit applies to what payers, like private or public health plans, reimburse PBMs for prescription drugs, not what consumers pay out of pocket. Consequently, it is unclear what the actual savings generated by PDABs will be for consumer. In fact, early research indicates that UPL implantation may have unintended consequences on plan benefit design, patient cost sharing, and provider reimbursement.
6. How can individuals and communities get involved with PDABs?
Individuals and communities can engage with PDABs by participating in public hearings, submitting comments or testimonies, and advocating for policies that promote prescription drug affordability. By sharing personal experiences as patients and raising awareness about alternative cost-saving measures or legislative solutions to improve the effectiveness of PDABs, individuals can play a pivotal role in shaping the discourse surrounding prescription drug affordability.
For further inquiries or specific information about PDABs, use our resources below or reach out to us at policy@aimedalliance.org.
Resources
Aimed Alliance, Proposed Prescription Drug Affordability Boards & Related Bills (2017-2023)
Aimed Alliance, Enacted Prescription Drug Affordability Boards & Related Bills (2019-2023)
Aimed Alliance, Prescription Drug Affordability Boards 101 Webinar
Aimed Alliance, Prescription Drug Affordability Boards: Opportunities and Alternatives
Aimed Alliance, Prescription Drug Affordability Boards: Opportunities and Alternatives -- One Pager
Avalere, Research Study on Health Plan Perceptions of PDABs and UPLs
- Maximum Fair Price (MFP): The Inflation Reduction Act of 2022 introduced measures to allow Medicare to negotiate the price of prescription drugs for beneficiaries. The price negotiated for Medicare beneficiaries by the Secretary of Health and Human Services is known as the MFP. Some states allow or require that their PDABs use the MFP to establish a UPL for drugs. This enables states to apply federally negotiated prices to state-regulated markets.
Reference Pricing: A strategy that involves using international drug prices as benchmarks to ensure that the maximum price paid for a drug in the U.S. is similar to its cost in other countries. Some states encourage or mandate that their PDABs consider reference pricing when establishing a UPL.
Upper Payment Limit (UPL): Represents the highest allowable reimbursement rate that purchasers within a specific state can provide for a prescription drug product. The UPL does not dictate the manufacturer’s pricing, or what a consumer pays out of pocket, but establishes an upper boundary on what a payer can charge for a drug.
Wholesale Acquisition Cost (WAC): Represents an approximation of the manufacturer’s list price for a pharmaceutical drug when sold to wholesalers, pharmacies or direct buyers. It doesn’t account for any discounts, rebates, or other price concessions that are offered by manufacturers. The WAC serves as a benchmark or reference price for the medication. It’s important to note that this price is not the actual amount paid by wholesalers, pharmacies, or other direct purchasers who benefit from rebates and other price concessions offered by manufacturers.
