Connecting state and local government leaders
At least 11 states are developing drug cost review boards to identify and address costs of expensive medications.
Pharmaceutical manufacturers traditionally raise drug prices in January, and this year was no different. More than 700 medications saw a 4.5% price hike over the last month, according to the research nonprofit 46brooklyn.
And while that 4.5% increase is lower than previous years, the trend of prescription drugs becoming less affordable for more individuals continues. That’s why some states are looking to rein in accelerating drug prices.
They are concerned about the rapid growth in drug prices because they pay for prescriptions for their Medicaid programs, said Dr. Georges Benjamin, executive director of the American Public Health Association. A December analysis from KFF Health News, for instance, found that net spending on Medicaid prescription drugs grew from $29.8 billion in 2017 to $43.8 billion in 2022.
States are also employers and contribute a substantial amount of their revenue—about 10% to 12%, Benjamin said—toward paying the insurance costs of their employees, so “they want to get the best deal that they can.”
For state and local governments, high drug prices can impact how much money is available for other priorities. “The more government has to pay for drugs for existing employees for their health care programs, that's less money that they can pay for fixing roads, education and other social needs,” he said.
Lower drug prices also benefit workers who pay what their government health insurance doesn’t. If a medication is too expensive, many will ration it or not take it at all.
When essential medications like insulin—which cost $9 in 1972 but now can cost as much as $300 per vial—are unaffordable, patients could start rationing their supplies or completely skip prescribed doses to defer paying for another refill, Benjamin said. In fact, a 2021 report from the Centers for Disease Control and Prevention found that about 9.2 million Americans took a prescription incorrectly to save money.
People might think they’re saving money by reducing their prescription intake, he said, but not taking the dose as prescribed can reduce the medication’s effectiveness or prevent adverse medical conditions, creating a “vicious cycle.” Skipping doses, for instance, can land someone in the emergency room, leaving them with a giant medical bill and maybe even additional expensive prescriptions.
When health care and medication costs are too high, patients risk incurring medical debt, said Maureen Hensley-Quinn, senior program director at the National Academy of State Health Policy, or NASHP. That individual debt can also drain public dollars if governments have to cover the cost of community members’ unpaid bills.
To address the sharp climb in drug prices over the last decade, at least 11 states have moved to create prescription drug affordability review boards in recent years, according to NASHP.
While they vary in scope across states, drug boards generally “review certain high-cost drugs … to understand what is driving some of the costs of these drugs, but it’s also to try to get an understanding of the overall value to the consumer that these drugs bring,” said Hensley-Quinn. Some boards also have the authority to implement cost-reduction efforts on high-cost drugs for public and private sector consumers.
“States that are trying to address these high [drug] costs are doing so to both ensure access to these critical drugs for the people that need them, but also … to address the overall increasing health care costs,” she said.
Maryland, for example, was the first state to establish a drug review board when lawmakers passed HB 768 in 2019. The state’s Prescription Drug Affordability Board is responsible for reviewing the price of medications and implementing cost-reduction efforts on high-cost drugs purchased by the state and local governments for public sector employees’ health insurance plans.
“Many prescription drugs have become increasingly unaffordable for Maryland residents, employers and state and local governments because parts of the prescription drug market exert monopoly and oligopoly pressure … leading to a rising, unsustainable strain on state and commercial health plan budgets and lowering equitable access to life-sustaining medications for Maryland residents,” lawmakers wrote.
The board is tasked with evaluating the affordability of new prescription drugs that cost $30,000 or more per year or course of treatment, existing brand name medications that increase in price by $3,000 or more per year or course of treatment, existing generic drugs that increase in price by 200% or more per year or course of treatment, and any that drug that creates affordability challenges to the Maryland health system, according to the bill.
Last month, the board developed a framework for evaluating prescription drug prices for public sector workers, Maryland Matters reported. It is starting with a list of more than 2,000 drugs that could be eligible for cost reductions. In their evaluations of affordability, officials will consider data from drug manufacturers, public comments and insights from industry stakeholders.
Once the board determines which drugs it considers unaffordable, it may implement an upper payment limit on those prescriptions purchased by government entities for state and local insurance plans, including plans offered by state institutions, higher education organizations, state hospitals and state or county correctional facilities. But advocates are calling for the state to expand prescription cost reviews for all consumers statewide.
Colorado, Illinois, Michigan, Nebraska, Vermont, Virginia and Wisconsin have also recently introduced legislation allowing prescription review boards to set upper payment limits as a drug cost-reduction effort.
Colorado, whose prescription drug review board was created in 2021, was the first state to identify a list of drugs for price evaluation in August 2023. The state selected a handful of drugs used to manage conditions like psoriasis, HIV, autoimmune diseases and cystic fibrosis for all residents, not just public sector employees.
Late last year, however, the board decided against implementing an upper payment limit for the drug Trikafta, which is used to treat cystic fibrosis and estimated to cost on average $234,439 per patient each year. Since the drug manufacturer provides patients a substantial amount of financial assistance to mitigate out-of-pocket costs, Hensley-Quinn said, the board ultimately decided against establishing an upper payment limit for Trikafta.
Prescription drug review boards are in the early stages of development across states, but many are watching how Maryland implements its program, she said. “There is a consumer protection role that government has, and if someone is sick or has a chronic illness, and they can’t take the medication they need to manage their illness, that affects multiple issues of their lives.”
With unmanaged illnesses, for example, people can struggle to make it to work, take care of their families or live independently, Hensley-Quinn said.
Drug costs are not just a financial issue; they also impact patients’ overall well being. “State officials want to make sure residents are living the best quality of life that they can,” she said.