A bill that would create a drug affordability board to review and set limits on the prices of certain prescription drugs has cleared a Senate committee on Tuesday. The bill, SB 22, aims to address the rising costs of prescription drugs and ensure access and affordability for consumers and public payers.
What is a Drug Affordability Board?
A drug affordability board is an entity that has the authority to determine if a drug is unaffordable and set an upper payment limit for that drug in the state. The board would consider various factors, such as the drug’s cost, clinical value, impact on health care spending, and availability of alternatives. The board would also have the power to impose penalties on drug manufacturers that do not comply with the payment limits.
The concept of a drug affordability board is based on the model legislation developed by the National Academy for State Health Policy (NASHP), a nonpartisan organization that provides policy solutions for state health policymakers. NASHP has described the drug affordability board as a “public utility commission for drugs” that would protect the public interest and ensure fair and reasonable prices for prescription drugs.
Why is the Bill Needed?
According to the bill’s sponsors, the bill is needed to address the growing burden of prescription drug costs on consumers, employers, and taxpayers. The bill cites data from the Centers for Medicare and Medicaid Services (CMS) that show that prescription drug spending in the U.S. increased by 26.4% from 2013 to 2018, and is projected to increase by another 40.1% from 2019 to 2028. The bill also cites data from the Commonwealth Fund that show that 29% of U.S. adults did not take their medications as prescribed due to cost in 2019, and that 13% of U.S. adults spent $2,000 or more on prescription drugs in the past year.
The bill’s sponsors argue that the current market-based approach to drug pricing is not working, and that the state needs to intervene to ensure that prescription drugs are affordable and accessible for all. The bill’s sponsors claim that the bill would save money for consumers, employers, and public payers, and would also encourage innovation and competition in the pharmaceutical industry.
How Would the Bill Work?
The bill would establish a nine-member drug affordability board, appointed by the governor and confirmed by the Senate. The board would consist of experts in health economics, clinical medicine, pharmacy, public health, health policy, and consumer advocacy. The board would be supported by a staff and an advisory council that would provide input and recommendations.
The board would have the authority to review and set upper payment limits for the following types of prescription drugs:
- Brand-name drugs that have a wholesale acquisition cost (WAC) of $30,000 or more per year or per course of treatment;
- Generic drugs that have a WAC of $100 or more per 30-day supply;
- Biosimilar drugs that have a WAC of $30,000 or more per year or per course of treatment;
- Any drug that has a WAC increase of 10% or more in one year, or 20% or more in two years.
The board would conduct a public hearing and solicit public comments before setting an upper payment limit for a drug. The board would also consider the following factors in determining the affordability of a drug:
- The drug’s clinical effectiveness and cost-effectiveness;
- The drug’s impact on health care spending and affordability;
- The drug’s availability and accessibility for consumers;
- The drug’s research and development costs and profits;
- The drug’s prices and rebates in other countries and states;
- The drug’s value to patients and society.
The board would publish its decisions and rationales on its website and in the state register. The board would also submit annual reports to the governor and the legislature on its activities and outcomes.
The bill would apply the upper payment limits to all purchasers and payers of prescription drugs in the state, including state and local government agencies, health plans, pharmacies, pharmacy benefit managers, and consumers. The bill would also require drug manufacturers to report certain information to the board, such as the WAC, rebates, discounts, and net prices of their drugs. The bill would authorize the board to impose civil penalties on drug manufacturers that fail to report the required information or comply with the upper payment limits.
The bill would also create a drug affordability fund, which would consist of the fees collected from drug manufacturers and the penalties imposed by the board. The fund would be used to support the operations of the board and to provide financial assistance to consumers who have difficulty affording their prescription drugs.
What are the Pros and Cons of the Bill?
The bill has received support from various stakeholders, such as consumer groups, health care providers, labor unions, and public health advocates. They argue that the bill would lower drug costs, improve health outcomes, reduce health disparities, and increase transparency and accountability in the pharmaceutical industry.
The bill has also faced opposition from some stakeholders, such as drug manufacturers, biotechnology companies, and free-market advocates. They argue that the bill would stifle innovation, reduce patient access, violate federal law, and interfere with market forces.
The bill’s supporters contend that the bill would not harm innovation, as the board would consider the value and benefits of new drugs, and would only set payment limits for drugs that are deemed unaffordable. They also claim that the bill would not reduce patient access, as the board would ensure that drugs are available and accessible for consumers who need them. They also assert that the bill would not violate federal law, as the board would not regulate drug prices directly, but rather set payment limits for purchasers and payers. They also maintain that the bill would not interfere with market forces, but rather correct the market failures and inefficiencies that lead to excessive drug prices.
The bill’s opponents counter that the bill would harm innovation, as the board would impose arbitrary and unrealistic payment limits that would discourage research and development of new drugs. They also allege that the bill would reduce patient access, as the board would create barriers and delays for patients who need new and effective drugs. They also insist that the bill would violate federal law, as the board would effectively regulate drug prices in violation of the supremacy clause and the commerce clause of the U.S. Constitution. They also argue that the bill would interfere with market forces, as the board would distort the supply and demand of drugs and create unintended consequences.
What are the Next Steps for the Bill?
The bill has passed the Senate Health and Human Services Committee by a vote of 5-2 on Tuesday. The bill will now move to the Senate Finance Committee for further consideration. The bill will need to pass both the Senate and the House, and be signed by the governor, before becoming law.
The bill is one of several bills that have been introduced in the state legislature this session to address the issue of prescription drug costs. Other bills include:
- SB 23, which would require drug manufacturers to report the WAC and the net prices of their drugs to the state, and to justify any price increases above a certain threshold;
- SB 24, which would prohibit pharmacy benefit managers from engaging in certain practices, such as spread pricing, clawbacks, and gag clauses, that increase drug costs for consumers and payers;
- SB 25, which would create a prescription drug importation program that would allow the state to purchase lower-cost drugs from Canada and other countries.
The state is also one of several states that have enacted or considered legislation to create a drug affordability board, following the example of Maryland, which was the first state to do so in 2019. Other states that have enacted or considered similar legislation include Colorado, Maine, New Hampshire, New York, Massachusetts, and Ohio.