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The Colorado Prescription Drug Affordability Board (PDAB) has many patients, patient advocacy groups, and bioscience organizations in the state worried.
As one of the nation’s first PDABs to be created (on June 16, 2021), Colorado’s Board has now taken the next step in the PDAB process: reviewing whether a small group of drugs are “affordable” for patients, and then determining whether they qualify for an upper payment limit (UPL)—meaning that the state would institute a reimbursement limit on the drug for in-state sales. This reimbursement limit essentially creates a price cap on the drug.
But a number of questions arise. Do PDABs and UPLs really do anything to address what patients pay for drugs? Can (or should) states actually have a say in dictating the price of drugs within their border? And what are the unintended consequences of these boards when it comes to patient access to medicine?
To understand what exactly is going on in Colorado, Bio.News examines the ins and outs of Colorado’s PDAB, UPLs, and the unintended consequences of this system.
What is a PDAB?
As we have reported in the past, PDABs are state boards that aim to cap, control, and dictate the price of drugs that manufacturers can charge.
While their makeup varies from state to state, often, PDAB members are civil servants and doctors, and hospital, pharmacy, or clinic CEOs. These board members are not elected, but rather appointed by the governor and legislature.
Currently, there are seven established PDABs in Maryland, Maine, New Hampshire, Colorado, Oregon, Washington, and Minnesota. Legislation for the creation of additional PDABs is also under consideration in a number of other states.
No two PDABs are the same
Notably, no two boards are created the same. “Maryland was the first state to pass a PDAB in 2019,” explains Patrick Plues, Vice President of State Government Affairs at the Biotechnology Innovation Organization (BIO). “And Maryland PDAB’s oversight applied only to state and local purchasers. But comparatively, Colorado was the first state to pass a PDAB that applied to the commercial market as well.”
This distinction is important, in part because these boards have a varying scope of review when it comes to healthcare coverage, reflecting a fundamental misunderstanding of drug market dynamics.
While Maryland’s PDAB oversees only the prescription drugs that the state pays for, such as Medicaid or state employee-funded health plans, Colorado expands far past this scope, overseeing private health insurance, state plans, and everything in between.
However, Maryland may try to copy Colorado. The state legislature is currently considering legislation to change the PDAB’s scope to expand the types of prescription drug plans that would be subject to its decisions.
As Laura Srebnik, Director of State Government Affairs, Southern Region, at BIO, testified in Maryland earlier this year, the board “has not impacted any patient out-of-pocket costs.”
“And expanding it at the moment will just expand a policy that will not help patient out-of-pocket costs, because the legislation does not force rebates to go down to the patients, and it won’t help them with their co-pays,” she continued.
Expanding the scope of these PDABs’ ability to dictate the price of drugs exclusively on the manufacturer highlights an oft-ignored aspect of drug pricing for patients: the many other aspects that affect the cost of drugs in the health insurance pipeline.
Uncertainty for patients
As Bio.News has reported on time and time again, pharmacy benefit managers (PBMs), working in the interest of insurance companies, often garner deep rebates on drugs from manufacturers, all while not passing those savings on to patients. This is important to note in the context of PDABs, because rebates often lower the price of a drug considerably for those buying from manufacturers.
“In Colorado, there’s been a lot of feedback during the PDAB’s review process that, despite the price tag of these groundbreaking medicines, between insurance coverage and patient assistance programs from the manufacturer, they are not actually unaffordable for most Colorado patients who are taking them,” says Brian Warren, Director of State Government Affairs, Western Region, at BIO.
The uncertainty patients are facing reflects a consistent issue with PDAB UPL designations: impacts on access to drugs for patients.
Colorado’s UPL designation
Before understanding the impacts on patient access, it is important to understand a little bit more about the drugs being scrutinized for UPL designation.
Not every state PDAB designates a UPL for drugs. “While states cannot force self-funded plans regulated under the Employee Retirement Income Security Act of 1974 (ERISA) to reimburse at the UPL, it’s likely many would choose to opt into the lower rate. While states are technically not regulating manufacturers, the rationale behind UPLs is that manufacturers will lower their prices to continue selling products in the state,” ADVI explains. Colorado’s PDAB, however, is setting UPLs, which is why any designation of a drug as unaffordable has the attention of so many both in and out of the state.
In August 2023, the Colorado PDAB set out on its initial step in the process selecting five drugs for its first affordability review cycle. While the law is clear on what makes a drug eligible for an affordability review, the process of selecting a few products to review from the many eligible for review was flawed.
Last year, both BIO and the Colorado Bioscience Association expressed concerns with the selection process.
“Our organizations oppose the creation and enforcement of upper payment limits in general due to the negative unintended consequences we believe will occur on patient access to medicines, on health care providers purchasing medicines, and on the market for innovative biopharmaceutical products. Nonetheless, to the extent the Board and the PDAAC are fulfilling statutory obligations, each step should be taken with care to prevent errors. The Board should be using accurate data as well as take careful consideration of the impact on patient access and market dynamics in selecting products.”
Impeding access with no affect to cost
PDABs and any UPLs they set potentially impede access to groundbreaking medicine. Here’s how.
The reality is that no two patients pay the same price for a drug, so what is affordable to one patient is not affordable to another. A Medicaid patient will get different coverage than a private insurance patient. A patient paying at a hospital pharmacy during an emergency will pay a different price for a drug than what they would pay at their local pharmacy in a different situation.
And just as every patient is different, every healthcare system is different. More importantly, when it comes to buying drugs, whether it is a hospital buying from a wholesaler, an insurance company negotiating with a manufacturer, or a pharmacy buying from their distributor, the sale of drugs is not limited to in-state purchases. Many are working with out-of-state companies and organizations in a vast and complex medicine distribution network. The assumption that providers within a state only buy drugs in-state is a fundamentally incorrect assumption inherent in the PDAB system.
“All of the state PDABs have the same problem,” explains Warren. “State law can only apply to the in-state purchases of a drug. So then you have this problem where hospitals and pharmacies have a purchase price based on the national list price, yet they are faced with a reimbursement cap based on the in-state UPL. These providers could lose a significant amount of money simply by providing medicines to patients.”
If a UPL does make it difficult for providers to purchase drugs, patients then must shift into the systems that can figure out how to access UPL-designated drugs.
No simple solution for a complex problem
At the end of the day, these access issues are needlessly disruptive because, as many have said, there is no discernible effect on price.
“Colorado’s PDAB model is one that a lot of states are looking at,” reminds Plues, which is why the conversation around the direction of the Colorado PDAB is important.
“Affordability is a complex issue which looks different for each patient dependent on a multitude of factors, including income level, other financial burdens, treatment options, insurance coverage and plan design, discounts or other patient assistance programs, etc.” wrote the Colorado Bioscience Association in a letter to the Colorado PDAB cautioning against UPL.
“When considering whether to set the very first upper payment limit on a prescription drug, the Board must tread carefully to ensure Colorado does not harm patients in its quest to be the first in the nation to implement this experimental program.”
The simple fact is that drug prices are a national issue, but the repeated simple solution of price controls on manufacturers for complex problems involving insurance companies, pharmacies, state healthcare programs, and everyone in between has been an albatross in the last few years, especially at the state level. As the Colorado PDAB continues down its UPL road, that systemic problem only threatens to get bigger and more complex.
