The Worrisome Rise of Prescription Drug Prices

The increasing and often unaffordable cost of prescription drugs in this country is a near-constant topic of discussion within the healthcare industry. The Biden Administration has pursued several “aggressive legislative reforms” and other agency actions for addressing this issue, from authorizing Medicare to negotiate prescription drug prices directly with drug companies, to approving Florida’s request to import certain prescriptions from Canada at lower prices, to pushing pharmaceutical companies to cap the cost of insulin. 

But states are also taking matters into their own hands – and this week Colorado made history by moving forward with placing a cap on the cost of an expensive popular prescription drug, making it the first state in the nation planning to limit what state-regulated health plans pay for medicine.

This decision was made by the Colorado Prescription Drug Affordability Board, or PDAB. These boards are typically comprised of state-appointed healthcare experts and stakeholders, and use criteria outlined in statutes to identify and evaluate certain drugs and conduct affordability reviews. Some boards, like Colorado’s, have the authority to set these so-called upper payment limits for the drugs they identify as creating an affordability challenge. PDABs are a relatively recent invention, first seen in Maryland in 2019, but have quickly grown in popularity; the National Academy for State Health Policy, which wrote and published the model legislation for these boards, reports that 16 states are considering legislation enacting PDABs in 2024 (so far). 

Colorado is widely considered the most developed PDAB. It completed its initial selection of five drugs on which to conduct an affordability review back in August. This week it declared one of those drugs, an arthritis treatment called Enbrel, unaffordable for Colorado residents, and voted to move to the rulemaking process to establish a payment limit on the drug beginning next year. The Colorado All Payer Claims Database showed that Enbrel costs about $46,000 per patient per year, with patients responsible for about $2,300 of that. A supporter of the vote indicated that in addition to simply cutting costs for any drugs on which an upper limit is placed, the Board’s ability to set limits is a tremendous positive, because manufacturers would likely take the PDAB’s authority into account when setting prices in the first place. There has been no open discussion on what the Board plans to cap the drug’s price at, but there are those expressing concern, warning of potential legal action, and taking actions to limit the scope of the PDAB.

The pharmaceutical industry has repeatedly expressed opposition to upper payment limits, and the response to the vote in Colorado was no different. An industry trade group’s spokesperson expressed concern about the Board not considering other reasons that drug prices have increased, and the Arthritis Foundation has stated that a payment limit would not necessarily influence what the patient pays. Legal experts indicate that pharmaceutical companies could likely cite that upper payment limits violate the Fifth Amendment’s due process clause and takings clause, as well as the Constitution’s commerce clause, which gives Congress the authority to regulate transactions among states. 

In response to the PDAB’s actions, Colorado lawmakers have proposed legislation that would preempt orphan drugs (drugs for rare diseases or conditions) from the PDAB’s purview: drugs like Embrel. Sponsors of the bill have stated that setting payment limits on these drugs could cool innovation and push manufacturers to stop selling the drug due to financial loss. The bill has thus far passed through its first committee and will be headed to the Colorado Senate floor this month.

With an election year, we can definitely expect to see more from states pushing through healthcare legislation where the federal government is perhaps falling short. For other states considering options such as capping drug prices, all eyes are on how Colorado’s PDAB fares these next few months.