Nine states are considering legislation to create boards to review prescription drug prices and intervene to lower them if drugs become too expensive or if their prices spike. Although the bills’ implications for the 340B program have not been fully fleshed out, Colorado covered entity Denver Health has obtained changes to a bill in that state making it more 340B-friendly.
The bills are primarily based on model legislation created by the National Academy for State Health Policy (NASHP), a nonprofit, nonpartisan forum of state health care policymakers. Many contain nearly identical provisions. They would create what are known as prescription drug affordability boards (PDABs).
Under NASHP’s model, pharmaceutical manufacturers would have to notify these boards if they plan to introduce a brand drug with a wholesale acquisition cost (WAC) of $30,000 per year or more, or if they are raising the price of a drug by more than 10 percent or $10,000 during any 12-month period. Notification also could be triggered, including for biologics and biosimilars, if launch prices or price increases “impose costs on the State health care system that create significant challenges to affordability.”
Generics would come under PDAB scrutiny if they are introduced with a WAC of $3,000 or more annually, or if a manufacturer plans to raise the price of one with a WAC of $10 or more by more than 20 percent during any 12-month period.
Most of the PDABs would focus on all drugs purchases or payer reimbursements for drugs dispensed in each state, whether by mail or in person.
The boards would also be empowered to set upper payment limits for individual drugs if they determine their price has created or will create affordability challenges, although in some of the proposed bills it would have to occur after conducting a study or with the approval of the state’s attorney general or governor. The attorney general in numerous states would also be able to take enforcement actions against manufacturers for jacking up the prices of their drugs.
Eight of the bills pending in the states—in New Mexico, New Jersey, Colorado, Arizona, Minnesota, Oregon, Rhode Island, Virginia—are sponsored by Democratic lawmakers. All are being reviewed by committees and none has been voted on as of yet. A provision to create a PDAB was added into a budgetary bill in Wisconsin. That state’s legislature has Republican majorities in both houses, so whether it will move forward is unknown.
To date, only Maryland has created a prescription drug affordability board. It was established in 2019 and based on the NASHP model legislation. However, Maryland has been an outlier on healthcare finance issues. It began setting statewide pricing for healthcare services beginning in the early 1970s, and it remains the only state to do so.
Were any of the bills to become law, it remains to be seen what direct impact they would have on the 340B program. “If one of these boards sets a price that affects an average manufacturer price or best price, then it could affect the 340B price and the Medicaid rebate price,” said William von Oehsen, principal with the Washington, D.C. law firm of Powers Pyles Sutter & Verville. However, von Oehsen did not believe such a situation would arise often.
Denver Health was concerned enough about the bill pending in Colorado, SB 21-175, that it lobbied for changes during committee hearings on the measure.
“The legislation is silent on what will happen if a hospital, as a purchaser of pharmaceuticals, needs to acquire a drug that this new board places an upper pay limit on, or if the manufacturer will continue to offer the drug for purchase if their pricing places the drug over the Colorado upper price limit,” Denver Health said in a statement to 340B Report.
Denver Health, the state’s biggest safety net provider, was able to get the bill amended to require the state’s board, when reviewing a drug, to consider “the impact on safety net providers if the prescription drug is available” through the 340B program. The health system “would like to see an exclusion for purchases made through the 340B program” before the bill is signed into law.