As they grapple with the economic fallout of Covid-19, about one-third of U.S. states are experimenting with price-control measures for prescription drugs. But it’s unclear whether the controls will hold up to legal challenges, according to a first-of-its-kind survey on the state efforts.
The controls revolve around state-created drug affordability boards, which are tasked with reining in state spending on prescription drugs. To date, 17 states have established or are considering legislation to establish such boards, according to the survey, conducted by Washington, D.C.-based Manatt Health . The survey covered all 50 states plus the nation’s capital.
“We may have seen more legislation enacted were it not for the Covid-19 pandemic,” said Sandy Robinson, the survey’s lead author and a managing director at Manatt Health, the health care legal and consulting arm of law firm Manatt Phelps & Phillips LLP.
In a phone interview, Robinson said Manatt decided to conduct the survey after noticing an increase in the number of states enacting affordability boards and related legislation. The moves, she added, come in response to stalled federal efforts on drug pricing.
In addition, many states are facing multibillion-dollar shortfalls as the pandemic stifles economic activity and tax collections. The affordability panels are focused on Medicaid spending – a major slice of state budgets – but also on state-sponsored and state-regulated health plans, such as those covering state, county and local employees.
The most common approach – adopted or being considered by 11 states – involves setting upper payment limits, according to the survey. The 11 are Arizona, Hawaii, Illinois, Massachusetts, Minnesota, Missouri, New Jersey, New York, Pennsylvania, Rhode Island and Vermont.
Six states – Maine, Massachusetts, New Hampshire, New York, Ohio and Washington – have called for negotiating supplemental rebates from manufacturers, over and above any federal rebates as part of enacted or proposed legislation. Less-common approaches include making formulary changes and importing prescription drugs from other countries, a step being considered in New Jersey.
The legislation also asks for information from manufacturers, including a drug’s estimated cost-effectiveness and revenue projections. Most states – but not all – pledge to keep the data secret, according to the survey.
The states rely on cost triggers to decide whether they will act, Robinson said. For patented drugs, for example, a common trigger is an annual wholesale cost for treatment of $30,000. There are other triggers for generics, biosimilars and off-patent, single-source medications.
The big question is whether states can enforce recommendations made by their affordability boards, such as a request for additional rebates, Robinson said. “That’s the part that is untested yet.”
Federal efforts may yet move forward. Both presidential candidates have indicated they would like to see lower drug prices, Robinson said. But, she added, “The actual way that plays out remains to be seen. And what that will result in at the state level is … to a great extent a function of what we see at the federal level.”