State agencies and the federal government can take administrative actions through various programs to curb the rising cost of prescription drugs. This section explores some of these innovative actions.
Implementation of New Laws
A number of states have enacted drug pricing transparency laws requiring manufacturers, pharmacy benefit managers, and other entities to report information explaining high price increases and high-priced new drugs.
Maine Health Data Organization: Prescription Drug Reports websitewith information on 25 drugs that are the costliest and most frequently prescribed, and have the highest yearly cost increase, updated June 2020
2019 law expanding Maine’s transparency program to include reporting from health plans, manufacturers, PBMs, and wholesale distributors: Maine LD 1162/Public Law Chapter 470, enacted June 24, 2019
2017 law requiring the Department of Health and Human Services to develop a list of drugs essential to treating diabetes and requiring certain supply chain entities to report on these essential drugs: Nevada SB 539/Chapter 592, enacted June 15, 2017
Since 2018, multiple states have enacted laws advancing wholesale prescription drug importation programs from Canada. As a first step towards implementation, states must design a safe, cost-saving approach to importation and achieve certification from the US Secretary of Health and Human Services. Read NASHP’s recommended changes to the Administration’s notice of proposed rulemaking for importation of certain prescription drugs from Canada.
The US Department of Health and Human Services and the Food and Drug Administration published two potential pathways for safe importation in July of 2019: Safe Importation Action Plan,July 31, 2019
The US Department of Health and Human Services and the Food and Drug Administration issued a notice of proposed rulemaking (NPRM) that, if finalized, would allow for importation of certain prescription drugs from Canada: NPRM: Importation of Prescription Drugs, Dec. 23, 2019. Comments period closed on March 9, 2020.
US Department of Health and Human Services: Final Rule, published Oct. 1, 2020
Drug Affordability Review Boards
States are implementing drug affordability review boards – impartial entities made up of multiple stakeholders that would give a state the ability to limit how much its residents may pay for a certain high-cost drugs. States are taking various approaches to studying and implementing this model.
States are increasingly looking beyond individual agencies and programs to harness the significant potential of their collective buying power through cross-agency collaboration to purchase prescription drugs.
NASHP is continuing to develop model policies to help states address drugs costs. Read NASHP’s October, 2019 Proposal for a State Purchasing Pool for Prescription Drugs, which would allow individuals and businesses to join a public drug plan, increase the size of the state purchasing pools, and secure lower costs.
Gov. Gavin Newsom’s Executive Order to carve prescription drugs out of Medicaid managed care and move the negotiation and purchasing of drugs under Medi-Cal to the Department of Health Care Services: Executive Order N-01-19, signed Jan. 7, 2019
Several states have enacted laws to authorize use of reverse auctions to negotiate higher value contracts with pharmacy benefit managers (PBMs). The reverse auction process allows states to make apples-to-apples comparisons across bids and leverages competition by requiring PBMs to compete against the lowest bidder over several rounds of bidding.
Several states are implementing a “Netflix” subscription-based payment model that allows a state to negotiate agreements with drug manufacturers for unlimited access to hepatitis C drugs for a fixed, predetermined cost. Below are state resources.
States are executing outcomes-based contracts in the form of direct agreements with drug manufacturers based on a specific drug, agreed-upon outcomes, and various approaches to measurement. These contracts are enabled by state plan amendments allowing states to negotiate supplemental rebates depending on a drug’s performance.
Presentation: Value-Based Programs in Oklahoma Medicaidpresented by Terry Cothran, Director, University of Oklahoma College of Pharmacy, Pharmacy Management Consultants, at NASHP’s annual health policy conference in August 2019
Physician Administered Drugs Alternative Payment Model
NASHP provided a grant to the Colorado Department of Health Care Policy and Financing to develop a new payment methodology for physician-administered drugs based on average acquisition costs.
Massachusetts Enhanced Negotiating Authority: The Massachusetts Executive Office of Health and Human Services has the authority to directly negotiate supplemental rebate agreements with manufacturers for drugs covered by MassHealth. If an agreement cannot be reached and the drug meets certain price thresholds, the drug can be referred to the Massachusetts Health Policy Commission for further review.
New York Medicaid drug benefit budget cap: The New York Medicaid program has the authority to negotiate with drug companies for supplemental rebates if drug spending is projected to exceed the annual spending limit. If the state is unable to reach an agreement, drugs may be referred to the New York Drug Utilization Review Board, which conducts a value assessment of the product.