The Centers for Medicare & Medicaid Services (CMS) has proposed a new rule with provisions designed to advance value-based purchasing (VBP) arrangements with drug manufacturers. Comments about the proposal are due July 20, 2020.
Removing wasteful drugs from formularies and replacing them with drugs that offer the same benefits at a lower cost, helps state employee health plans and other public purchasers reduce spending without sacrificing value – a critical strategy for savings as states face tremendous budget pressures.
States are experiencing a huge rise in the number of people without health insurance in the wake of mass layoffs resulting from the COVID-19 pandemic and are seeking strategies to protect them from high prescription drug prices. The uninsured are sometimes the only consumers left paying the full list price for a drug, while the insured benefit from drug discounts negotiated on their behalf.
Last week, a California Court of Appeal lifted an injunction that prevented the state from sharing drug manufacturers’ advance notice of drug price increases. The ruling was a win for states working to advance drug price transparency in the face of manufacturers’ sometimes overly-broad claims of trade secret protection for their prices.
Absent sufficient evidence from clinical trials that proves a variety of drugs are effective against COVID-19, many states are providing guidance to limit their use and have begun monitoring them for price increases and shortages. Building on experience from states’ drug price transparency laws, policymakers now have tools to track these drug costs and identify any price spikes that may occur.
Since 2017, nine states (CA, CT, ME, NV, NH, OR, TX, VT, and WA) have passed drug pricing transparency laws that require data from manufacturers related to drug price increases and high-priced new drug launches. Officials in Oregon are building on the capacities of their drug price transparency programs to track changes in the prices of drugs identified as potential treatments for COVID-19.
Because reporting directly from manufacturers is required only once a year, Oregon is using monthly reports from Medi-Span to monitor prices of these potential treatments in the interim. If price spikes do occur, manufacturers will have to submit justifications for those price increases under states’ transparency laws. The National Academy for State Health Policy (NASHP) will soon release additional policy resources for states enabling enforcement action if price gouging is detected.
The table below provides an overview of some of the drugs currently being evaluated as potential treatments for COVID-19. (For a full list of drugs with ongoing clinical trials for COVID-19 treatment, Transparimed, a non-profit that advocates for greater disclosure of clinical trial data, has created a COVID-19 clinical trials tracker.)
|Drugs Under Evaluation for the Treatment of COVID-19|
|Remdesivir||Gilead||Antiviral||Investigational drug not yet on the market.|
|Hydroxychloroquine3||Multiple||Antimalarial, also used to treat lupus and rheumatoid arthritis||32 cents/200 mg tablet|
|Chloroquine Phosphate3||Multiple||Antimalarial||$9.84/500 mg tablet|
Common brands: Zithromax Z-Pak, AzaSite, Zithromax TRI-PAK, Zmax, and Zithromax (Used in combination with hydroxychloroquine)
|Antibiotic||$0.66/250 mg tablet|
Brand: Kaletra (Typically used in combination with ritonavir)
|HIV protease inhibitor||$8.29/200/50 mg tablet (Kaletra)|
Brand: Norvir (Typically used in combination with lopinavir)
|HIV protease inhibitor|| $1.63/100 mg tablet
$8.35/100 mg tablet (Norvir)
(Antibody to the IL-6 receptor designed to reduce lung inflammation)
|Price not available on the National Average Drug Acquisition Cost database|
- Information found in the Drugs@FDA database –https://www.accessdata.fda.gov/scripts/cder/daf/index.cfm
- Prices found in the National Average Drug Acquisition Cost (NADAC) database on Medicaid.gov – https://data.medicaid.gov/Drug-Pricing-and-Payment/NADAC-National-Average-Drug-Acquisition-Cost-/a4y5-998d
- On March 28, 2020, the FDA issued an Emergency Use Authorization (EUA) to allow hydroxychloroquine sulfate and chloroquine phosphate products donated to the Strategic National Stockpile to be distributed and prescribed by doctors to hospitalized teen and adult patients with COVID-19, as appropriate, when a clinical trial is not available or feasible.
The research group 46Brooklyn has released a tool for monitoring price changes that may also be of interest to states. Their Abnormal Drug Price Increase Tracker (ADPIT) identifies generic drugs experiencing “abnormal” price increases, measured by the National Average Drug Acquisition Cost (NADAC) database. Due to the volatility of generic drug prices, it can be challenging to determine if a generic price increase is excessively high or in line with historical data. Some price increases may result from shortages. The ADPIT seeks to capture if an increase is “abnormal” by comparing it to the previous 52 weeks of NADAC data.
States are also monitoring for potential price increases or shortages of drugs that treat respiratory complications related to COVID-19, such as albuterol inhalers. For example, some state employee health plans (SEHPs) are also closely watching changing drug prices during the COVID-19 pandemic. Plan administrators are using historical claims data to identify the previous prices paid for certain antimalarial drugs that may be used for COVID-19. SEHPs hope to use this information to gauge where prices should be for a drug in case it is determined to be an appropriate treatment. They are also making adjustments to their formularies to minimize the impact of shortages, such as for inhalers.
For additional information on states’ drug pricing transparency programs, including their authorizing statutes and current transparency reports, explore NASHP’s Center for State Rx Drug Pricing.
Maryland’s first-in-the-nation Prescription Drug Affordability Board (PDAB), enacted last year, has the authority to set upper payment limits for certain high-cost drugs purchased by state and local government. The board is also tasked with proposing a plan to extend upper payment limits to all purchasers in the state. This Q&A provides an update on Maryland’s implementation of its PDAB.
Who sits on Maryland’s PDAB?
The five appointed members of the PDAB include a pharmacist, clinician, and health policy researchers. They are:
- Van Mitchell, President/CEO of MSI, Inc. and, former Secretary, Maryland Department of Health and Mental Hygiene (PDAB Chair);
- Eberechukwu Onukwugha, MS, PhD, Associate Professor of Pharmaceutical Health Services Research, University of Maryland School of Pharmacy;
- George Malouf, MD, FACS, Optholmalogist in private practice and affiliated with the University of Maryland Capital Region Health Prince George’s Hospital Center;
- Gerard Anderson, PhD, Professor, Health Policy and Management, Johns Hopkins Bloomberg School of Public Health;
- Joseph Levy, PhD, Assistant Scientist, Health Policy and Management, Johns Hopkins Bloomberg School of Public Health.
When does the Maryland PDAB meet?
The board’s first two meetings were in January and February of 2020. Its initial tasks include hiring an executive director and developing a five-year budget and staffing plan. The staff is likely to consist of four to five people. The board will meet at least four times a year to complete its work.
How is Maryland’s PDAB funded?
The board has proposed legislation for the 2020 Maryland General Assembly session to fund its work through assessments on pharmaceutical manufacturers and other entities within the drug supply chain, including pharmacy benefit managers (PBMs), health plans, and wholesalers. The $800,000 allocated from the state’s General Fund to cover the PDAB’s start-up costs must be repaid to the state with the funding source that the board creates.
When will the PDAB begin setting upper payment limits for drugs?
Maryland’s PDAB has a phased-in approach to setting upper payments, beginning with placing upper payment limits on drugs for state and local purchasers before potentially expanding its reach to include all purchasers in the state. Maryland’s PDAB will begin to set upper payment limits for public payers in 2022 — pending approval by the state’s Legislative Policy Committee.
In 2023, the PDAB will recommend whether the assembly should pass legislation to expand the board’s authority to make high-cost drugs more affordable by setting upper payment limits on drugs for all purchasers (both public and private). The law also authorizes the board to explore other strategies to improve drug affordability, including bulk purchasing of drugs and reverse auction, a procurement method in which bidders compete by decreasing prices in response to an invitation to bid until a specified deadline.
Which drugs will the PDAB set upper payments for?
If authorized by the Legislative Policy Committee, the PDAB will begin setting upper payment limits in 2022 for certain high-cost drugs that surpass the price thresholds identified in the 2019 law. The Maryland PDAB will work with other states that are already collecting drug price data through transparency laws in order to establish memorandums of understanding for obtaining information to determine which drugs the PDAB should consider for review. While the thresholds specified in the law that trigger mandatory reviews focus on very high-cost drugs, the board also has the authority to review any drug deemed to cause an affordability issue for Maryland’s health care system or patients.
How are other stakeholders involved?
In addition to establishing the five-member PDAB, the Maryland law also establishes a 26-member advisory council that includes a diverse range of stakeholder opinions. Advisory council members represent brand-name and generic drug manufacturers, PBMs, health care advocates, labor unions, employers, researchers, clinicians, pharmacists, and hospitals. The public will have the opportunity to review and provide comments on proposed upper payment limits before any payment limits are finalized.
Has Maryland’s PDAB faced a legal challenge?
Maryland’s PDAB law has not been challenged as of March 3, 2020. However, once the PDAB begins to set upper payment limits, a legal challenge is expected. Unlike Maryland’s anti-price-gouging law, which was struck down for regulating prices outside the state, the PDAB is clearly limited to setting upper payment limits for purchasers within the state only.
Are other states enacting or considering PDABs?
Maine enacted a PDAB law in 2019. Rather than setting upper payment limits, the Maine PDAB establishes a spending target for prescription drugs for public payers and advances strategies to leverage public purchasing power to meet that target. Strategies can include establishing a common drug formulary, bulk purchasing of drugs, collaborating with other states, and other approaches.
Twelve states are currently considering PDAB legislation, including Arizona, Florida, Illinois, Massachusetts, Minnesota, Missouri, New Jersey, Pennsylvania, Rhode Island, Virginia, Vermont, and Washington.
The National Academy for State Health Policy (NASHP) released the original Model Act to establish a PDAB several years ago, and is currently working on new approaches to setting upper payment limits without having to establish a PDAB. These more streamlined models may be necessary alternatives for states when establishing a PDAB is not feasible.