On April 8, 2019, the Maryland General Assembly passed legislation that which would create the first state Prescription Drug Affordability Board (PDAB) to address the costs of certain high-priced drugs in Maryland. Gov. Larry Hogan has until May 31, 2019, to sign or veto the bill. If he signs the bill or does nothing, the measure will take effect on July 1, 2019.
This effort, initiated during last year’s legislative session, began with the introduction of the National Academy for State Health Policy’s Drug Affordability Review Board Model Legislation. The concept is akin to states’ regulation of consumer payment rates for essential services, such as clean drinking water, safe and consistent electricity, and public transportation. Like prescription drugs, these services are necessary for a safe and healthy life. States act to ensure that these necessary services are affordable to the public without regard to the actual dollar value of their importance to modern life. A prescription drug affordability board looks at valuable drugs and determines at what cost they are affordable – at what cost will everyone who needs the drug be able to afford the drug.
The Maryland legislation that passed is a notable step towards establishing a board that could make informed recommendations to state leadership on future action Maryland may take to address prescription drug costs, even though it represents compromises resulting in changes to the original proposal. As many know, this is how the legislative process typically works. The legislation does create the new Maryland PDAB, which must report to a committee of key legislative leaders for the first several years to get approval to move forward with key phases of its work. The timeline for Maryland’s PDAB activity is as follows:
July 1, 2019: The PDAB is established using state general funds and begins its work.
On or before Dec. 31, 2020, the board must:
- Study the entire pharmaceutical distribution and payment system, as well as policy options used by other states and countries to lower the list price of pharmaceuticals, including:
- Setting upper payment limits;
- Using a reverse auction marketplace; and
- Bulk purchasing of drugs.
Submit findings and make recommendations, as well as provide any legislative language that may be necessary to implement its recommendations, to the state’s Senate Finance and House Health and Government Operations Committees.
- Identify circumstances under which the cost of a prescription drug product may create or has create affordability challenges for the state health care system and patients.
- Promulgate regulations that specify data sources the PDAB will use for its work, including establishing memoranda of understanding (MOU) with states that currently collect data from drug manufacturers and the rest of supply chain, insurers, and PBMs.
- Identify drugs that create affordability challenges in the state by applying the established criteria and deciding whether to do a full review of any of those drugs.
- Produce annual reports for House and Senate committees on drug price trends, the number of drugs subject to PDAB review, and any additional legislation that might be needed to facilitate drug cost containment.
- Make a recommendation for a funding source to sustain the board.
On or before July 1, 2021: If the work of the PDAB in 2020 results in a recommendation that the state pursue imposing upper payment limits to make drugs affordable, the board is required to draft and submit a plan of action to implement upper payment limits for state, local, and county government payers and purchasers to the Legislative Policy Committee of the General Assembly.
On or after Jan. 1, 2022: If the plan of action for upper payment limits is approved, the board may begin to set upper payment limits or establish other approaches to constrain costs of prescription drug products purchased or paid for by state, county, and local governments, including state hospitals, government employee plans, corrections, and Medicaid, etc. The board must also study the impact on availability of drugs subject to the upper payment limit.
On or before Dec. 1, 2023: If the plan of action for upper payment limits was implemented for the drugs purchased or paid for the state, local, and county governments, the board must report to the Assembly its recommendations regarding whether the board’s authority to set upper payment limits should be expanded statewide to all purchases and payer reimbursements.
The legislation also includes appeal and judicial rights for anyone aggrieved by a decision of the PDAB.
One reason for the phase-in of board authority starting with government drug purchases and payments was the concern in Maryland about a possible constitutional challenge after the federal Fourth Circuit Court of Appeals ruled that the state’s 2017 anti-price-gouging drug legislation (HB 631) violated the Dormant Commerce Clause (DCC) of the US Constitution. Although the PDAB is designed specifically to prevail in a DCC challenge, the issue resurfaced during Maryland’s legislative session when the US Supreme Court declined to take up the 2017 case. There are a number of reasons the Supreme Court might not take up a case – including if there is no conflict in opinions among the federal Circuits Courts (which was the situation with anti-price-gouging law, there was only one case and one decision). NASHP and Maryland have documentation and legal analysis of why a PDAB with upper payment limit authority does not violate the DCC.
There may be an advantage to being the first state pursuing an upper payment limit for costly drugs to do so in a phased approach. Maryland’s board will build its analytic capacity to determine the benefit and calculation of the upper payment limit for certain drugs, which is important. The board can apply the process of determining if a specific drug should be reviewed for affordability and then determine whether or not the drug should be subject to a upper payment level and what it should be – even if there is not authority to apply the limit statewide during the first few years.
Using upper payment limits with government-purchased drugs before expanding to all payers may be an appropriate way to pilot the approach in Maryland. However, establishing a PDAB with limited authority and requiring state leadership approval to advance the primary mission of the board is a risk. Another phase-in approach discussed in Maryland before the DCC concerns were raised was to limit PDAB authority to set upper payment limits to a specific number of drugs.
NASHP Note: NASHP will closely follow Maryland’s experience in establishing the PDAB and will receive continued support from the state’s leadership for its mission to implement mechanisms to ensure necessary prescriptions are affordable. For more information, explore NASHP’s Center for Rx Drug Pricing.
Recent legislative committee hearings in Maryland, Florida, and Illinois provide a national snapshot of states’ diverse and innovative proposals to reign in drug costs.
Maryland’s drug affordability review board: Earlier this month, Maryland’s House Health and Government Operations Committee and Senate Finance Committee held lengthy hearings on an innovative bill that creates a state prescription drug affordability review board (see NASHP’s model legislation here.)
The board would review drugs whose price increases met or exceeded a certain threshold and set an upper payment limit if the board found the drug cost to be excessive. During the committee hearings, constituents stressed the urgency of finding a solution for increasing drug prices, and many shared their struggles of choosing between paying bills and purchasing necessary medication. There was also testimony from pharmaceutical industry representatives who voiced their concerns about the bill and said it could hamper innovation.
The committee hearings gave legislators the opportunity to hear details of the proposed bill. One Maryland state senator questioned how the upper payment limit established by the affordability board differed from the state’s anti-price-gouging law that was found to be unconstitutional last year, based on the claim that it regulated commerce beyond state borders. Supporters explained that an affordability review board would not encounter the same legal challenge because it clearly defines its jurisdiction over only drugs sold in the state. Another representative asked whether all drugs would fall under the purview of the board. The sponsor explained that only drugs that meet certain price increase thresholds would be subject to board review. As seven other states explore similar legislation, NASHP has compiled a Drug Affordability Review Board Legislation Q&A that answers many legislators’ questions.
Florida’s drug importation bill: Florida lawmakers are considering implementation of a wholesale drug importation program. Bills filed in both the Florida House and Senate would allow the state to import high-cost drugs from Canada at a lower price. Florida’s legislative process often requires that bills pass through two or three committees before a floor vote, giving lawmakers, stakeholders, and constituents ample time to consider a bill. In March, three House committees met to ask questions about the bill and learn more about importation. During hearings, the bill’s sponsor explained that more than 30 Canadian drug manufacturers are already registered by the US Food and Drug Administration to produce drugs for US markets, and that safety standards in Canada are comparable to those in the United States. Lawmakers had additional questions about cost savings and the supply chain. For more information about importation legislation, read NASHP’s importation Q&A.
Illinois’ prescription drug committee action: The Illinois House of Representatives created a Prescription Drug Affordability and Access Committee to address bills designed to curb drug costs. The committee is currently reviewing 17 bills, including legislation to create a drug affordability review board, similar to Maryland’s, and a wholesale importation program. It is also reviewing a bill that requires health insurers to ensure that at least 25 percent of their plans apply a pre-deductible, flat-dollar copayment structure to their entire drug benefit component. The committee is also considering a proposal to tax drug price increases that exceed the inflation rate. This tax would be paid by businesses that make the first sale in the state and could not be passed through to consumers. Any money collected from the tax will be deposited into a new fund dedicated to prescription drug cost fairness.
To date, the Illinois committee has met multiple times for informational sessions to learn how the drug pricing system works and to hear from consumer advocates and stakeholders. Establishing a specific committee dedicated to identifying solutions to the rising cost of prescription drugs indicates how important this issue is as the state legislature tries to help constituents afford medication and balance the state’s budget.
NASHP is tracking state legislative action across the country as lawmakers schedule more hearings on prescription drug costs. To find out the status of any state’s drug pricing legislation as they move toward enactment, explore NASHP’s Rx State Legislative Tracker. To learn more about NASHP’s prescription drug work, visit its Center for State Rx Drug Pricing.