In recent years, states have increasingly enacted Prescription Drug Affordability Boards (PDABs). While their intended purpose is to increase affordability, there are concerns that PDABs could ultimately limit access to care, including for products treating rare diseases and rare conditions.

PDABs typically consist of around five members, appointed by the governor, with expertise in health policy, healthcare economics, or clinical medicine. Broadly, PDABs have two main functions: 1) to identify “high-cost” drugs and 2) to recommend or implement policy solutions.

Some PDABs have the authority to set upper payment limits (UPLs), which would govern what purchasers can pay and state-regulated payers (i.e., individual, fully funded commercial, Medicaid) can reimburse for products dispensed or administered to patients in the state. While states cannot force self-funded plans regulated under the Employee Retirement Income Security Act of 1974 (ERISA) to reimburse at the UPL, it’s likely many would choose to opt into the lower rate. While states are technically not regulating manufacturers, the rationale behind UPLs is that manufacturers will lower their prices to continue selling products in the state.

PDABs with UPL authority go through four main processes: identification, selection, affordability review, and UPL determination.

Identification: To identify eligible drugs, PDABs use criteria established in statute. For brand name drugs and biologics, this includes thresholds related to wholesale acquisition cost (WAC) at time of launch and annual price increases. Generics and biosimilars may also be selected for review if they meet certain criteria.
Selection: Unlike the identification process, there are not clear benchmarks that PDABs use to select products for affordability review. Instead, PDABs are required to consider a range of factors established through statute and implementing regulations. These may include pricing metrics, information about therapeutic alternatives, patient out-of-pocket costs, plan and state spending, manufacturer-provided rebates, availability of patient assistance programs, and life cycle information (i.e., patents, revenue).
Affordability Review: The PDAB conducts an “affordability review” of selected products to determine if they present an affordability challenge to consumers and/or the state healthcare system. Like the identification process, the PDAB must consider a range of factors in its review, but there is no structured process beyond evaluation of these factors.
UPL Determination: At this point, it is unclear how PDABs will determine the UPL (no state has progressed to this stage). States do not outline an explicit process for determining the UPL in statute, giving PDABs near free reign to create their own methodology. One state (Minnesota) requires the UPL to be set at the Maximum Fair Price under the Inflation Reduction Act, if applicable.

Despite their smaller patient populations, products treating rare diseases or conditions may be disproportionately impacted by PDABs given that they may be more likely to meet eligibility criteria for selection. Additionally, patients with certain rare diseases or conditions are more likely to have Medicaid coverage. PDABs may select these products given their cost to the state, even if other non-rare products present a greater affordability challenge to consumers generally. Although products treating rare diseases or conditions often have limited therapeutic alternatives, only one state (Washington) currently exempts these treatments from UPLs. Other states require PDABs to “consider” a product’s orphan status in their review but do not specify what this means.  

While PDABs with the authority to set UPLs are likely to have the most impact, there are several other types with more limited authority. This includes:

Medicaid: PDAB recommends Medicaid supplemental rebate amounts based on a review of selected products.
Public Plans: PDAB determines public plan annual spending targets for prescription drugs and recommends policies to meet those targets (may set targets for individual drugs).
Report Only: PDAB issues reports and recommendations regarding prescription drug pricing, including for specific products, but does not have the authority to take further action.

2024 State of Play

Colorado’s PDAB is the furthest along in the process of setting UPLs. The PDAB has conducted affordability reviews for three of five selected products, including one indicated for a rare disease. After sizeable pushback from patients regarding the potential for reduced access, the PDAB ultimately voted that the rare disease product (Trikafta) is “not unaffordable”, meaning it will not move forward with setting a UPL. However, the PDAB indicated that it may reconsider Trikafta in the future if its affordability status changes. In contrast, in February 2024, the Colorado PDAB voted to move forward with establishing a UPL for Enbrel and will do so over the course of the year. This is the first time a PDAB has voted to set a UPL for a selected product.

Other PDABs with UPL authority, in Maryland and Washington, will begin the process of identifying and selecting products for affordability review in 2024, and may choose to move forward with setting UPLs. Minnesota’s PDAB was enacted in 2023 and will likely spend 2024 establishing its processes for identification, selection, and review of eligible drugs, in addition to its methodology for setting UPLs.

While the Oregon PDAB does not have the authority to set UPLs, they will continue conducting affordability reviews of selected products through mid-2024. The PDAB must also create a plan for setting UPLs, which is due to the legislature in September. If the OR legislature expands the PDAB’s authority to allow it to set UPLs, its prior experience in conducting affordability reviews could expedite the process, especially compared to states establishing new PDABs.

Many states have already proposed legislation to establish a PDAB in 2024. Most bills would create a PDAB with UPL authority, few would create PDABs that focus on public payers or only issue recommendations. Additionally, few bills include exceptions for rare disease products, however more states are including provisions that would tie the UPL to the Maximum Fair Price under the Inflation Reduction Act.

Perhaps due in part to substantial stakeholder pushback regarding the selection of Trikafta for affordability review, the Colorado legislature has proposed legislation to create an exception for drugs designated by the Food and Drug Administration as treating a rare disease or condition. In contrast, Washington has proposed legislation to remove its rare exemption after 2027 and remove or lower other eligibility criteria, allowing it to set UPLs for a wider array of products.

Outlook

In all, 2024 is expected to be an active year for PDABs, and activity will only increase in the future as more states pass legislation. While it is still uncertain how individual states will determine UPLs, products treating rare diseases or conditions may face additional challenges as more PDABs are enacted. Given limited exceptions, increased likelihood of meeting eligibility criteria, and potential for greater Medicaid spending, rare disease products may be disproportionately impacted by PDABs. If UPLs result in reduced access, patients with rare diseases will have fewer therapeutic alternatives to turn to. Additionally, if PDABs broadly target rare disease products, there may be a negative impact on innovation, particularly due to the increased investment required to develop these treatments.

The Federal and State Policy team will continue to follow this issue and key changes that may impact your business. Get in touch to gain expert insights and strategic counsel on the evolving healthcare landscape.