MODEL BILLS
Prescription Drug Affordability Act
Summary: The Prescription Drug Affordability Act establishes a Prescription Drug Affordability Board to review and establish fair and affordable drug costs. (Note that state agencies already review and approve costs for such things as health insurance and the rates hospitals can charge for services.)
This is an update based on the recently revised Maryland law empowering a Prescription Drug Affordability Board (PDAB). You can find out what the Maryland PDAB has been doing so far at pdab.maryland.gov.
SECTION 1. SHORT TITLE
This Act shall be called the “Prescription Drug Affordability Act.”
SECTION 2. FINDINGS AND PURPOSE
(A) FINDINGS—The legislature finds that:
1) Prescription medications are essential to the health and safety of state residents.
2) Many prescription drugs have become increasingly unaffordable for residents, employers, and State and local governments because parts of the prescription drug market exert monopoly or oligopoly pressure, creating unmanageable costs for consumers across wide market segments, leading to a rising, unsustainable, strain on State and commercial health plan budgets and lowering equitable access to life-sustaining medications for residents.
3) Other sectors across widely varying industries, such as research universities, academic and safety net hospitals, public utilities, and telecommunications, often receive public funds and State protections and are regulated routinely to ensure affordability but still maintain their ability to innovate and provide accessible products to many consumers.
4) State and federal agencies have a long history of health care rate setting including for name brand pharmaceuticals, biologics, and generic drugs to manage healthcare costs.
5) All public and private healthcare programs, including Medicaid and state employee benefit programs, set payment rates for generic and patient-protected drugs.
6) The State Medicaid program, state employee health benefit programs, and private health insurers set prescription drug payment rates that drive negotiations and financial transactions through the supply chain, which may be out of state.
7) Taxpayers support the pharmacy benefit for almost [one-third] of state residents already.
(B) PURPOSE—This law is enacted to protect the health and welfare of residents and responsibly manage taxpayer funds.
SECTION 3. PRESCRIPTION DRUG AFFORDABILITY
After section XXX, the following new section XXX shall be inserted:
(A) DEFINITIONS—In this section:
1) “Biologic” means a drug that is produced or distributed in accordance with a biologics license application approved under 42 C.F.R. § 447.502.
2) “Biosimilar” means a drug that is produced or distributed in accordance with a biologics license application approved under 42 U.S.C. § 262(K)(3).
3) “Board” means the Prescription Drug Affordability Board.
4) “Brand name drug” means a drug that is produced or distributed in accordance with an original new drug application approved under 21 U.S.C. § 355(C). This definition does not include an authorized generic as defined by 42 C.F.R. § 447.502.
5) “Current shortage” means a drug listed as current on the federal Food and Drug Administration’s Drug Shortage Database or otherwise determined by the Board to be in short supply in the state.
6) “Drug product” or “prescription drug product” means a brand name drug, a generic drug, a biologic or biolimilar.
7) “Generic drug” means:
a) A retail drug that is marketed or distributed in accordance with an abbreviated new drug application, approved under 21 U.S.C. § 355(J);
b) An authorized generic as defined by 42 C.F.R. § 447.502; or
c) A drug that entered the market before 1962 that was not originally marketed under a new drug application.
8) “Manufacturer” means an entity that:
a) Owns the patent to a prescription drug product or enters into a lease with another manufacturer to market and distribute a prescription drug product under the entity’s own name; and
b) Sets or changes the wholesale acquisition cost of the prescription drug product it manufactures or markets.
9) “Stakeholder council” means the Prescription Drug Affordability Stakeholder Council.
(B) PRESCRIPTION DRUG AFFORDABILITY BOARD
1) There is established a Prescription Drug Affordability Board. The purpose of the board is to protect state residents, state and local governments, commercial health plans, health care providers, pharmacies licensed in the state, and other stakeholders within the health care system from the high costs of prescription drug products. The board is a body politic and corporate and is an instrumentality of the state. The board is an independent unit of state government. The exercise by the board of its authority under this act is an essential function.
2) The five members of the board and three alternates shall be appointed by the governor and confirmed by the Senate.
3) The board members and alternates must collectively have expertise in health care economics and clinical medicine. A member or an alternate member may not be an employee of, a board member of, or a consultant to a manufacturer or trade association for manufacturers.
4) Any conflict of interest, including whether the individual has an association, including a financial or personal association, that has the potential to bias or has the appearance of biasing an individual’s decision in matters related to the board or the conduct of the board’s activities, shall be considered and disclosed when appointing members and alternate members to the board.
5) The term of a member or an alternate member is 5 years. The terms of the members and alternate members are staggered as required by the terms provided for members in Section (D).
6) The chair shall hire an executive director, general counsel, and staff for the board. Staff of the board shall receive a salary as provided in the budget of the board.
7) A member of the board may receive compensation as a member of the board in accordance with the state budget and is entitled to reimbursement for expenses under the standard state travel regulations, as provided in the state budget.
8) Quorum—A majority of the members of the board shall constitute a quorum for the purposes of conducting the business of the board.
9) Meetings—The board shall meet in open session at least 4 times per year to review prescription drug product information. The board may meet in closed session to discuss proprietary data and information.
a) The chair may cancel or postpone a meeting if there is not business to transact.
b) The following actions by the board shall be made in open session: Deliberations on whether to subject a prescription drug product to a cost review under this act and any vote on whether to impose an upper payment limit on purchases and payor reimbursements of prescription drug products in the state.
c) The board shall provide public notice of each board meeting at least 3 weeks in advance of the meeting.
d) Materials for each board meeting shall be made available to the public at least 3 weeks in advance of the meeting.
e) The board shall provide an opportunity for public comment at each open meeting of the board.
f) The board shall provide the public with the opportunity to provide written comments on pending decisions of the board.
g) The board may allow expert testimony at board meetings, including when the board meets in closed session.
10) Conflict of interest—
a) Members of the board shall recuse themselves from decisions related to a prescription drug product if the member, or an immediate family member of the member, has received or could receive any of the following:
(i) A direct financial benefit of any amount deriving from the result or finding of a study or determination by or for the board; or
(ii) A financial benefit from any person that owns, manufactures, or provides prescription drug products, services, or items to be studied by the board that in the aggregate exceeds $5,000 per year.
b) For the purposes of this paragraph, a financial benefit includes honoraria, fees, stock, the value of the member’s or immediate family member’s stock holdings, and any direct financial benefit deriving from the finding of a review conducted under this section.
c) A conflict of interest shall be disclosed:
(i) By the board when hiring board staff;
(ii) By the appointing authority when appointing members and alternate members to the board and members to the stakeholder council; and
(iii) By the board, when a member of the board is recused in any final decision resulting from a review of a prescription drug product.
d) A conflict of interest shall be disclosed:
(i) In advance of the first open meeting after the conflict is identified; or
(ii) Within 5 days after the conflict is identified.
e) A conflict of interest disclosed under this section shall be posted on the website of the board unless the chair of the board recuses the member from any final decision resulting from a review of a prescription drug product.
f) A posting under this subsection shall include the type, nature, and magnitude of the interests of the member involved.
g) Members and alternate members of the board, board staff, and third–party contractors may not accept any gift or donation of services or property that indicates a potential conflict of interest or has the appearance of biasing the work of the board.
(C) POWERS AND DUTIES OF THE BOARD
In addition to the powers set forth elsewhere in this section, the board may:
1) Promulgate regulations for the implementation of this act and enter into a contract with a qualified, independent third party for any service necessary to carry out the powers and duties of the board.
2) Unless permission is granted by the board, a third party hired by the board may not release, publish, or otherwise use any information to which the third party has access under its contract.
(D) PRESCRIPTION DRUG AFFORDABILITY STAKEHOLDER COUNCIL
1) There is a Prescription Drug Affordability Stakeholder Council with the purpose of providing stakeholder input to assist the board in making decisions as required under this section. The stakeholder council consists of 15 members appointed within four months after enactment as follows:
a) 5 members appointed by the Speaker of the House;
b) 5 members appointed by the Senate President; and
c) 5 members appointed by the Governor.
2) The members of the stakeholder council shall have knowledge in one or more of the following:
a) The pharmaceutical business model;
b) Supply chain business models;
c) The practice of medicine or clinical training;
d) Consumer or patient perspectives;
e) Health care costs trends and drivers;
f) Clinical and health services research; or
g) The state’s health care marketplace.
3) From among the membership of the stakeholder council, the board chair shall appoint one member to be the stakeholder council chair.
4) The term of a member is 3 years. The initial members of the stakeholder council shall serve staggered terms as required by the terms provided for members herein.
5) A member of the stakeholder council may not receive compensation as a member of the stakeholder council, but is entitled to reimbursement for expenses under the standard state travel regulations, as provided in the state budget.
(E) DRUG COST AFFORDABILITY REVIEW
1) This section may not be construed to prevent a manufacturer from marketing a prescription drug product approved by the United States Food and Drug Administration while the product is under review by the board.
2) The board shall identify prescription drug products that are brand name drugs or biologics that, as adjusted annually for inflation in accordance with the consumer price index, have:
a) A launch wholesale acquisition cost of $60,000 per year or course of treatment if less than a year or a wholesale acquisition cost increase of $3,000 or more in any 12-month period, or course of treatment if less than 12 months;
b) Biosimilar drugs that have a wholesale acquisition cost that is not at least 20% lower than the referenced brand biologic at the time the biosimilars are launched and that have been suggested for review by the members of public, medical professionals and other stakeholders;
c) Generic drugs that, as adjusted annually for inflation, have a wholesale acquisition cost of at least $100 for a 30-day supply or course of treatment less than 30 days and which increased by 200 percent or more during the preceding 12-month period, as determined by the difference between the resulting wholesale acquisition cost and the average of the wholesale acquisition reported over the preceding 12 months; and
d) Other prescription drug products that may create affordability challenges for the state healthcare system or patients, including but not limited to drugs to address public health emergencies.
3) The board is not required to identify every prescription drug that meets the criteria of subsection (E)(2).
4) The board shall solicit public input on prescription drugs thought to be creating affordability challenges that meet the parameters of subsection (E)(2)(d) of this section. The board shall determine whether to conduct a full affordability review for the proposed prescription drugs after compiling preliminary information about the cost of the product, patient cost sharing for the product, health plan spending on the product, stakeholder input and other information decided by the board.
5) If the board conducts a review of the cost and affordability of a prescription drug product, the review shall determine whether use of the prescription drug product that is fully consistent with the labeling approved by the United States Food and Drug Administration or standard medical practice has led or will lead to affordability challenges for the state health care system or high out-of-pocket costs for patients.
6) The information to conduct an affordability review may include, but is not limited to, any document and research related to the manufacturer’s selection of the introductory price or price increase of the prescription drug product, patient assistance program or programs specific to the product, estimated or actual manufacturer product price concessions in the market, net product cost to State payers, and other information as determined by the board.
7) Failure of a manufacturer to provide the board with the information for an affordability review does not affect the authority of the board to conduct such a review.
8) If the board finds that the spending on a prescription drug product reviewed under this section has led or will lead to an affordability challenge, the board shall establish an upper payment limit (UPL) considering exceptional administrative costs related to the distribution of the drug in the state.
9) The Upper Payment Limit applies to all purchases and payor reimbursements of the prescription drug product intended for use by individuals in the state in person, by mail, or by other means.
10) Any information submitted to the board in accordance with this section shall be subject to public inspection only to the extent allowed under the public information act.
(F) PROTECTIONS AND OTHER BOARD CONSIDERATIONS
1) The board shall examine how a UPL would affect 340B providers.
2) In determining whether a drug creates an affordability challenge or determining a UPL amount, the board may not use cost-effectiveness analyses which includes the cost-per-quality adjusted life year or similar measure to identify subpopulations for which a treatment would be less cost-effective due to severity of illness, age, or pre-existing disability. In addition, for any treatment that extends life, if board uses cost-effectiveness results, they must use results that weigh the value of all additional lifetime gained equally for all patients no matter their severity of illness, age, or pre-existing disability.
3) A UPL is effective no sooner than six months after it has been announced.
4) State regulated health plans shall inform the board of how any UPL-related cost savings are directed to the benefit of enrollees, with a priority on enrollee cost sharing.
5) The UPL shall not be inclusive of the pharmacy dispensing fee or provider administration fee.
6) State licensed independent pharmacies may not be reimbursed less than the UPL.
7) The board may adopt the Medicare Maximum Fair Price (42 USC Sec. 1191(c)) for a prescription drug as the upper limit for that prescription drug product intended for use by individuals in [state].
8) The board shall not create a UPL that is different from the Medicare Maximum Fair Price for a drug that has a Maximum Fair Price.
9) A UPL that is the Medicare Fair Price shall be implemented no sooner than the Medicare implementation date.
10) Medicare Part C and D plans are not required to reimburse at the UPL.
(G) REMEDIES
The office of the attorney general may pursue any available remedy under state law when enforcing this act.
(G) APPEALS
1) A person aggrieved by a decision of the board may request an appeal of the decision within 30 days after the finding of the board.
2) The board shall hear the appeal and make a final decision within 60 days after the appeal is requested.
3) Any person aggrieved by a final decision of the board may petition for judicial review as provided by the administrative procedure act.
(H) PRESCRIPTION DRUG AFFORDABILITY FUND
1) In this section, “fund” means the prescription drug affordability fund.
2) There is a prescription drug affordability fund.
3) The board shall be funded by an assessment on all manufacturers whose products are sold in the state.
4) The board shall pay all funds collected from the assessment into the fund.
5) The state treasurer shall hold the fund separately, and the comptroller shall account for the fund.
6) The fund shall be used only to provide funding for the board and for the purposes authorized under this act including any costs expended by any state agency to implement this act.
7) The fund shall be invested and reinvested in the same manner as other state funds.
8) Any investment earnings shall be retained to the credit of the fund.
9) This subsection may not be construed to prohibit the fund from receiving funds from any other source that does not create the appearance of a conflict of interest.
10) The board shall be established using general funds, which shall be repaid to the state with the assessments required under this section.
(I) REPORTS TO THE LEGISLATURE
1) On or before December 31 each year, the board shall submit to the [Finance Committee of the Senate and the Health Committee of the House of Representatives] a report that includes:
a) Price trends for prescription drug products;
b) The number of prescription drug products that were subject to board review, including the results of the review and the number and disposition of appeals and judicial reviews of board decisions; and
c) Any recommendations the board may have on further legislation needed to make prescription drug products more affordable in the state.
2) On or before [one-time date], the Prescription Drug Affordability Board shall report to the legislature about the operation of the generic drug market in the United States that includes generic physician-administered drugs and considers:
a) The prices of generic drugs on a year-over-year basis;
b) The degree to which generic drug prices affect insurance premiums as reported by health insurers in this state or other states that collect this information;
c) Recent and current trends in patient cost-sharing for generic drugs;
d) The causes and prevalence generic drug shortages; and
e) Any other relevant study questions.
(J) TERMS OF OFFICE FOR INITIAL BOARD AND COUNCIL MEMBERS
1) The terms of the initial members and alternate members of the Prescription Drug Affordability Board shall expire as follows:
a) One member and one alternate member in [202X];
b) Two members and one alternate member in [202X]; and
c) Two members, including the chair of the Board, and one alternate member in [202X].
2) The terms of the initial members of the Prescription Drug Affordability Stakeholder Council shall expire as follows:
a) Seven members in [202X];
b) Seven members in [202X]; and
c) Seven members in [202X].
SECTION 4. SEVERABILITY
If any provision of this act or the application thereof to any person or circumstance is held invalid for any reason in a court of competent jurisdiction, the invalidity does not affect other provisions or any other application of this act that can be given effect without the invalid provision or application, and for this purpose the provisions of this act are declared severable.
SECTION 5. EFFECTIVE DATE
This law shall become effective on July 1, 202X. Board members are appointed by the effective date. The Board can begin work if there is a delay in stakeholder counsel appointments.