Federal and state drug pricing reforms, including prescription drug affordability boards (PDABs), represent potential opportunities to address the issue of drug prices. While the intended effect may offer the perception of improved affordability and transparency, navigating the unintended consequences requires a cautious, data-driven, and collaborative approach.

The rising costs of prescription drugs have fueled a heated debate, with both federal and state governments wielding legislative action to attempt to ameliorate the perceived issue. While the intended consequences—lower prices, increased access—are clear, these actions are also leading to unintended impacts, which demand a nuanced approach.

The Inflation Reduction Act (IRA) of 2022 marked a sea change moment for drug pricing reform. For the first time, Medicare has been cleared and instructed to directly negotiate drug prices. Additionally, the IRA also capped insulin costs for Medicare Part D beneficiaries and penalized manufacturers for excessive price hikes. These measures are intended to directly target drug affordability as well as perceived price gouging.

However, unintended consequences of these actions lurk in the details. Reduced revenue for pharmaceutical manufacturers may stifle research and development, potentially slowing the pipeline of new, innovative drugs. In fact, while the Congressional Budget Office (CBO) has conservatively estimated that the law will result in only 1 fewer new drug making it to market in the decade between 2023 and 2032, independent assessments have suggested a much higher number of new drugs not being brought to the US market, estimating as many as 139 fewer drugs coming to market over the same 10 years.1,2 Price negotiations may also lead manufacturers to prioritize profitable medications over lifesaving but commercially less attractive treatments. To strike a balance between increasing affordability and incenting innovation requires careful regulation.

States are also seeking solutions. Florida recently announced its FDA-granted program to import drugs from Canada. Several other states either have approved similar programs or are considering similar actions. Vermont is exploring a single-payer system that negotiates prices for all residents. While these legislative initiatives promise immediate cost reduction, they face significant legal hurdles and concerns about drug shortages and impacts to drug access. Long-term sustainability and scalability remain uncertain.

Multiple states have also established PDABs. These boards, and their affiliated working groups, function as independent bodies to scrutinize medication prices and recommend cost-containment measures. The legislative language in forming these boards and their resulting regulatory intention are driven by the National Academy for State Health Policy (NASHP). NASHP’s Center for State Rx Drug Pricing works with states on model legislation and other strategies to address drug prices.3 There are several states that have enacted legislation and formed PDABs. To date, the state that has progressed the furthest to act is Colorado.

The intention of the PDABs is commonly threefold: increased transparency, informed policymaking, and cost savings. PDABs intend to expose opaque pricing practices, revealing factors such as manufacturer markups and lack of competition. The generated recommendations on drug pricing, negotiation strategies, and alternative treatments may be used to guide further reforms or create price caps or upper payment limits. Last, by advocating for lower prices and promoting lower-cost alternatives, PDABs could potentially reduce health care expenditures for both public programs and individuals.

Like federal pricing legislation, state-level regulation may also have unintended consequences. Price controls or importation programs may impact drug availability as well as supply chains. A spokesperson for Health Canada has even stated that “Canada’s drug supply is too small to meet the demands of both American and Canadian consumers.”4 State-imposed upper payment limits or other price caps may result in manufacturers refusing to supply that drug in those states. Price controls may also negatively impact provider-administered drugs, especially newer specialty medications used in the treatment of cancer. Pharmaceutical manufacturers are also likely to resist PDAB recommendations through legal challenges.

The success of the broader drug pricing reforms, whether federal or state, hinges on considerate implementation with feedback from industry and health care stakeholders as well as ongoing evaluation with fast and flexible course correction.

Last, striking a balance between affordability, innovation, and access to essential treatments will be crucial. Robust data analysis should inform recommendations to avoid unintended disruptions and ensure responsible policymaking. Open communication and collaboration between PDABs, policymakers, the pharmaceutical industry, and health care providers are essential for navigating the complexities of drug pricing.

References

  1. US House of Representatives, Committee on the Budget. Letter to Phillip Swagel, Congressional Budget Office. November 20, 2023. https://budget.house.gov/imo/media/doc/cbo_letter_ira_drug_development.pdf
  2. IRA’s impact on the US biopharma ecosystem. Vital Transformation. Accessed February 12, 2024. https://vitaltransformation.com/2023/05/iras-impact-on-the-us-biopharma-ecosystem/
  3. National Academy for State Health Policy. Prescription drug pricing: drug pricing center. Accessed February 12, 2023. https://nashp.org/policy/health-costs-and-value/prescription-drug-pricing/
  4. Jewett C, Stolberg SG. F.D.A. issues first approval for mass drug imports to states from Canada. New York Times. January 5, 2024. https://www.nytimes.com/2024/01/05/health/drug-imports-canada-florida.html