Pursuing Value-Based Prices for Drugs: A Comprehensive Comparison of State Prescription Drug–Pricing Boards

Early View Original Scholarship Pharmaceutical and Medical Device Policy Health care costs

Policy Points:

  • In the absence of federal action on rising prescription drug costs, we reviewed the details of five states that have enacted prescription drug–pricing boards seeking to lower drug prices based on products’ value. Within these states, six such boards are currently authorized; they have similarities but vary in terms of structure, authority, scope, and leverage.
  • As of June 2021, only one of the boards in our sample has conducted pricing reviews; legislators in other states can learn from the successes and challenges of existing boards.
  • Prescription drug–pricing boards represent a novel and promising way to curb state spending and pay for value in prescription drugs but face legal and political barriers in implementation.

Context: Rising prescription drug costs are consuming a growing proportion of state and private budgets. In response, lawmakers have experimented with a variety of policies to contain spending and achieve value in prescription drugs. As part of this series of reforms, some state legislatures have recently authorized prescription drug–pricing boards to address the high prices of brand-name prescription drugs and assess the value of those drugs.

Methods: We identified state prescription drug–pricing boards in the United States, defined as any agency authorized by a state legislature to review specific drugs and pursue value-based drug prices. To describe the characteristics of the boards, we obtained public records of authorizing legislation, guidance documents, and board meeting minutes. We compared the boards’ powers and responsibilities and analyzed completed pricing reviews.

Findings: Six state drug-pricing boards in five states met our definition; their design varied substantially. Two of the boards (New York Medicaid and Massachusetts) have authority over drug rebates paid by state Medicaid programs, one (New York Drug Accountability Board) has jurisdiction over state regulated commercial insurance, and another three (Maine, Maryland, and New Hampshire) oversee non-Medicaid, state-funded insurance. Three boards are authorized to require manufacturers to confidentially submit information related to the pricing and clinical effectiveness of reviewed drugs to inform value determinations. Only one board (New York Medicaid) had completed pricing reviews as of June 3, 2021.

Conclusions: Boards’ structure, scope, and statutory leverages to compel manufacturers to negotiate lower net costs are key factors that influence whether and to what extent boards can achieve cost savings for states. Though legal constraints may limit the effective reach of prescription drug–pricing boards, these agencies can enable states to address rising prescription drug costs, in part by virtue of their very existence. To overcome practical limitations, states seeking to implement similar policies can build on the experiences and designs of current boards.

Keywords: prescription drugs, drug costs, Medicaid, cost savings, technology assessment, state government.

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Citation:
Bendicksen L, Rome BN, Avorn J, Kesselheim AS. Pursuing Value-Based Prices for Drugs: A Comprehensive Comparison of State Prescription Drug-Pricing Boards. Milbank Q. August 6, 2021.