Maryland and Colorado Say the Price Isn’t Right: State Drug Affordability Review Boards Seek Drug Upper Payment Limits

Following federal lawmakers’ initiative to lower prescription drug prices under the Inflation Reduction Act of 2022, several states have taken similar steps to limit certain drugs’ prices. Drug affordability for consumers is a top priority for federal and state lawmakers and regulators because it is a bipartisan issue that directly impacts consumers’ wallets. With negotiations between the federal government and drug manufacturers over 10 drugs’ prices for Medicare beneficiaries well underway under the Inflation Reduction Act, 11 states, including Maryland and Colorado, have created drug affordability review boards to more directly tackle rising prices for both brand and generic drugs.[1] And another 12 states have pending legislation to create these boards.[2] 

In 2019, Maryland’s General Assembly passed a law creating a Prescription Drug Affordability Board (“PDAB”), a first in the United States.[3] Seeking to rein in drug costs, the Maryland General Assembly empowered its PDAB to “study the entire pharmaceutical delivery and payment process, access data for drug pricing and utilization, and develop regulations” toward both ends.[4] It also gave PDAB the ability to pursue “upper payment limits.” Md. Code, Health-Gen. § 21-2C-13.

Maryland’s PDAB has wasted little time in acting on its newly-vested authority. It recently selected eight drugs for “cost review,” including: Biktarvy, an HIV drug; Dupixent, an asthma treatment; Farxiga, a diabetes, kidney disease, and cardiovascular disease treatment; Jardiance, a diabetes treatment; Ozempic, a diabetes treatment; Skyrizi, a treatment for plaque psoriasis, psoriatic arthritis, and Crohn's disease; Trulicity, a diabetes and cardiovascular disease treatment; and Vyvanse, an ADHD medication.[5] Before PDAB can set an upper payment limit for any of these drugs, it must finalize its implementation plan, which will need to win approval from the Maryland General Assembly’s Legislative Policy Committee.

Colorado joined Maryland’s efforts in 2021 when its legislature created its own PDAB.[6] Like Maryland’s, Colorado’s PDAB has the power to set an upper payment limit on certain drugs after an “affordability review.” C.R.S.A. §§ 10-16-1406, 10-16-1407. In February 2024, the board declared Enbrel unaffordable, finding the average annual out-of-pocket cost for patients was over $3,900 a year.[7] But that same month, it determined Genvoya, an HIV drug, was affordable.[8] Similarly, in late 2023, the board found that Trikafta, a cystic fibrosis drug, was affordable.[9] Colorado’s PDAB will next consider whether Cosentyx, a multi-disease treatment, and Stelara, a plaque psoriasis and psoriatic arthritis treatment, are affordable.[10]

Maryland and Colorado’s PDABs and their decisions to pursue upper payment limits will have wide-ranging impacts in the health care industry and on several stakeholders. Drug manufacturers may resort to litigation over the boards’ efforts to cap their drugs’ prices, as Amgen has done with respect to Colorado’s Enbrel affordability review.[11] Alternatively, drug manufacturers may consider withdrawing flagged drugs from select state markets to avoid price caps and deter other states from following Maryland and Colorado’s lead. Manufacturers considering withdrawal, however, may face practical challenges, as some states, such as Colorado, have erected regulatory hurdles to discourage this possibility. C.R.S.A. § 10-16-1412 (describing notice of product withdrawal process). Drug manufacturers will have to proactively engage with the state concerning drug prices, including monitoring Maryland’s and Colorado’s PDABs, seeking stakeholder representation on the states’ applicable advisory councils, and submitting comments regarding the boards’ affordability reviews.

Health plans also need to weigh the impact of state drug affordability boards’ actions on their businesses and members. The Colorado Association of Health Plans expressed concerns over health plans’ ability “to alter their drug formularies so that individual drugs can be removed to align with an established [upper payment limit] as well as changing claims systems to allow for single copay amounts specific to one drug.”[12] That said, Colorado permits health plans to “elect” to “subject its purchases of or payer reimbursements for prescription drugs in Colorado” to the state’s PDAB law. C.R.S.A. § 10-16-1413. Maryland’s and Colorado’s upper payment limits could also significantly disrupt health plans’ business relationships with drug manufacturers if manufacturers withdraw their products from states where health plans’ members rely on those medications.

Key Takeaways

• PDAB affordability reviews apply to both brand-name and generic drugs;
• Drug manufacturers may consider litigation challenging Maryland’s and Colorado’s PDABs, as well as withdrawing their flagged products from those markets; and
• Health plans may need to review and update their formularies and agreements with drug manufacturers should Maryland and Colorado successfully limit drug prices, as well as consider whether to participate in the PDAB law.

If you have any questions regarding Maryland’s and Colorado’s recent attempts to cap drug prices or the issues discussed in this alert, please reach out to any of the attorneys named below.