New developments in prescription drugs are dramatically changing the options people have to treat their health conditions. New antivirals, for instance, can cure hepatitis C, and new gene therapies can correct certain genetic conditions, transforming the lives of many patients. However, these therapies come with high prices, which can be a barrier to patients who need them. To better understand the tradeoffs between drug prices, costs and access, legislators often look for data to inform their decisions.
Legislative interest in pharmaceutical price and cost transparency programs has steadily grown since the first bills were enacted in 2016. Generally, state transparency programs require data be reported to a state agency such as the division of insurance. Conditions and requirements for programs vary by state. As an example, some states require manufacturers to report increases in list prices, while others mandate that health plans disclose the drugs that were prescribed most frequently or for which they spent the most. Certain states also direct pharmacy benefit managers (PBMs) to report the aggregated dollar amount of rebates, fees or price concessions provided by manufacturers.
Although states have implemented data collection strategies, certain cost and pricing information is confidential. Not only are the methods manufacturers use to establish drug prices protected by federal antitrust laws, but contract terms between PBMs, health plans, pharmacies and manufacturers are proprietary. To avoid running afoul of federal law, states may require these organizations to report various aggregated data.
Questions remain whether price transparency efforts are effective policy levers to lower drug prices. Some research has found that price transparency on its own does little to influence prices or overall costs. Another report found transparency laws focused on utilization risk identifying drugs without significant price increases. Other studies show that while transparency laws may not directly lower prices, the information collected may help guide future legislative or regulatory action.
To inform approaches to lowering costs, states are also turning to prescription drug affordability boards, or PDABs, nongovernmental agencies tasked with identifying drugs that pose affordability challenges. Most PDABs are alike in that they use a certain price threshold to identify which drugs to examine, but they differ in funding, authority and structure. For instance, some are empowered to setting spending targets or upper payment limits, while others make recommendations to the legislature. Although no state has yet set upper payment limits for prescription drugs, such limits are used in some states to calculate Medicaid reimbursement for hospitals or nursing facilities.
Among the potential challenges facing PDABs are that the implementation process and the development of methodologies and rulemaking may be time and resource intensive. Some research suggests that these boards may lack the legal authority to promulgate enforceable rules.
Supporters say PDABs aim to regulate the prices of identified drugs in the way a public utility commission regulates rates for energy. Critics argue PDABs encourage governmental price negotiations rather than promoting free market solutions. Other opponents say the boards can limit patients’ access to needed medication.