Posted: December 8, 2023
CSRO continues to hear from practices around the country about biosimilars being “underwater” in terms of acquisition cost versus reimbursement level. Although this issue first emerged with regard to Inflectra, it seems to exist for other biosimilars now as well.
Prescription drug costs continue to be top of mind for state legislators who are hearing about burdensome costs from their constituents. In response, states have begun to use Prescription Drug Affordability Boards (PDABs) to control the cost of drugs for their constituents. Reducing prescription drug costs for patients and the health care system is a topic that generates near universal support at a 30,000-foot level only for that support to fragment rapidly as you drill down to the details of how to accomplish that goal. So where do PDABs fit in and what should rheumatologists know about them?
A PDAB is a board comprised of appointed members that represent stakeholders such as clinicians, pharmacists, insurers, etc. In the vast majority of states where PDABs exist, they are empowered to recommend drug pricing solutions to the legislature and conduct a review of the affordability of certain drugs. The criteria that drugs must meet to be selected for affordability review vary from state to state, but some common parameters such as length of time on the market, overall cost to the state, competitors on the market, and price increases are generally typical selection criteria. Once a drug is selected for affordability review, the board collects information related to the drug’s price from manufacturers, payers, patients, providers, and other stakeholders to help make its determination. For some states, this determination is where the issue ends. However, some states have further empowered their boards to set an Upper Payment Limit (UPL) for drugs determined to be unaffordable.
So, what does it do? The UPL is a price ceiling for all purchases, sales, and reimbursement for a drug. Pharmacists and providers are supposed to be able to purchase a prescription drug for no more than the determined rate. Payer reimbursements for drugs cannot exceed the UPL. The combination of provider or pharmacy reimbursement and consumer cost shares cannot exceed the UPL. Some states are exploring an iteration of this policy, which would apply the Maximum Fair Price determined in federal negotiations for select drugs to state regulated entities. This is where some stakeholders believe that the UPL and PDABs miss the boat – they do not address some of the underlying dynamics concerning formulary construction, rebated pricing, and patient benefit design. However, for providers, and rheumatologists in particular, there is a deeper issue. Compensation for provider administered drugs.
UPLs do not provide a mechanism to compensate providers for the overhead that goes into furnishing provider administered drug services and do not sufficiently protect providers from being underwater on their acquisition costs relative to the reimbursement cap set by the UPL. For example, Colorado, which is the state furthest along in implementing its PDAB, specifically provides that pharmacists and pharmacies are allowed to charge “reasonable fees… for dispensing or delivering a prescription drug.”1 No such allowance is made for providers administering prescription drugs at their site of care. Accordingly, costs such as staff, equipment, and facilities associated with administering the drug would be uncompensated. The likely consequence is the economic inviability of infusing a drug with a UPL applied. This reimbursement concern on its own would be sufficient to cause an access issue for a provider administered drug that has a UPL applied, but the provider may also be exposed on drug acquisition cost as well. Although a UPL limits the purchase price of a drug for a provider, contracting between providers, their group purchasing organizations, wholesalers, and manufacturers is not geographically limited to the state in which the UPL applies. The state may be unable to enforce the UPL elsewhere along the supply chain, leaving supply chain entities unable to offer the prescription drug to providers at the UPL. If left unaddressed, the unintended consequence of UPL application to a provider administered drug could ironically be a reduction in access.
Colorado, Maryland, Minnesota, Oregon, and Washington all have or will have PDABs that allow for the implementation of a UPL. Michigan and Wisconsin are currently considering legislation, and it is likely that more states will take up the issue in the year ahead. Stay tuned for opportunities from CSRO to engage with your lawmakers throughout 2024.
1 3 CCR 702-9 (4.2) (c)(1)
