Rising prescription drug prices drive up overall health care costs and increase out of pocket spending for consumers. Although the pharmacy provisions of the Inflation Reduction Act will reduce federal spending on prescription drugs and provide relief to Medicare beneficiaries, states continue to seek out innovative solutions to mitigate the impact of high drug costs beyond Medicare. Prescription drug affordability review boards (PDABs) are one such solution of great interest to state policy makers.

In 2017, NASHP released its first model bill to create a state-based PDAB. Since then, six states (CO, MD, ME, NH, OR and WA) have enacted PDABs, and the model legislation is under consideration in a number of other states. PDABs can be used to limit – and even lower – prescription drug costs by imposing upper payment limits (UPLs), a ceiling on the amount that a payer can reimburse for the purchase of a drug the PDAB determines to be unaffordable. NASHP provides technical and policy support to policy makers interested in PDABs, and regularly convenes the six states that have established PDABs to share insights and learn from each other.

Since 2017, state officials and NASHP have gained experience implementing key policies to lower prescription drug prices. In collaboration with our Pharmacy Cost Work Group and officials leading implementation in states with enacted PDAB legislation, NASHP developed a revised PDAB model that reflects lessons learned, best practices, and shared experience. The model also incorporates experiences from states that have implemented comprehensive drug price transparency laws. The model now reflects improvements in the following ways:

• Mandating data reporting by health plans to provide the PDAB with actionable, state-specific drug pricing data
• Aligning health plan reporting with federal law to minimize burden on payers
• Clearly defining and simplifying the data needed by the PDAB to identify potential drugs for affordability review
• Addressing health disparities including the impact of high drug costs on underserved populations
• Specifying mechanisms to fund the PDAB’s operations

The model proposes a PDAB independent of the executive and legislative branch, consisting of five appointed members. These members include experts in health policy, health care economics, and/or clinical medicine. Model language encourages the PDAB to engage with a broad range of impacted stakeholders and to contract with a qualified third party for additional analytical and technical support, if needed. NASHP also provides additional technical support and consultation to states developing PDABs.

NASHP’s new model proposes to fund the PDAB through an annual assessment on entities that profit from the sale and distribution of drugs, including prescription drug manufacturers, health plans and carriers, pharmacy benefit managers, and prescription drug wholesale distributors. The model legislation also permits PDABs to receive grants or direct appropriations, in addition to requiring a state to make an initial appropriation of funds to cover the PDAB’s start-up costs.

Affordability challenges in the prescription drug market heighten existing health disparities and exacerbate inequitable outcomes across communities. When performing an affordability review under the revised model bill, PDABs are required to consider how the cost of a drug contributes to inequities, and to incorporate how an upper payment limit may prevent or alleviate health disparities across communities.

As it has with other model bills, NASHP has designed this model PDAB bill to withstand legal challenges that manufacturers and other business interests may bring forward. NASHP has a legal analysis by Professor Rachel Sachs at Washington University School of Law, and a detailed Q&A document to answer questions that state policy makers may have when reviewing the model.