How states are cracking down on rising prescription drug costs

For many Americans, prescription drugs are too costly. Last year, 28% of U.S. adults struggled to afford their prescription medications. And from 2017 to 2022, state Medicaid spending on prescriptions saw a 47% increase.

The rapid rise of drug prices has been the impetus behind growing state efforts to develop boards or programs to reduce drug costs. Officials from three states where such endeavors are underway sat down last week for a webinar hosted by the Center for American Progress to discuss how they are approaching the task for their constituents. 

One strategy to rein in prescription costs is the development of state prescription drug affordability boards, which, as of January, have spread to 11 states. In 12 other states, legislation to create similar boards is pending, according to the law firm Morgan Lewis. 

Though different in scope across states, prescription review boards are generally responsible for determining if certain drugs are unaffordable to patients and/or health plan payers. Maryland’s board—the nation’s first after it was created in 2019—confirmed late last month that it will officially begin cost reviews on six medications. The selected treatments, which address conditions like diabetes, heart and kidney disease, plaque psoriasis, Crohn’s and eczema, could then be subject to payment limits if deemed unaffordable. 

The cost review process allows officials to determine “whether or not the drug has led or will lead to affordability challenges for the state health care system or higher out-of-pocket costs for patients,” said ​​Andrew York, executive director of the Maryland Prescription Drug Affordability Board. To assess affordability, board members will review public comments from patients and stakeholders and may request cost-related information from drug manufacturers, health maintenance organizations, managed care organizations, pharmacy benefit managers and other sources. 

York said they hope to complete the process in the fall. He also pointed to Colorado, which established its Prescription Drug Affordability Review Board in 2021, and has already finished the cost review process for the drug Stelara, which is used to treat conditions like arthritis and plaque psoriasis. An affordability report released in May from the board found Stelara costs patients an average of $5,875 in out-of-pocket costs annually. Based on those findings, the board decided last month that the prescription is unaffordable, which makes it eligible for payment limits. 

Meanwhile, New Jersey is taking a different approach with its benchmark reporting program, said Shabnam Salih, director of the state’s Office of Health Care Affordability and Transparency, which looks to reduce the rate of health care cost growth. 

Established in 2021 under an executive order, the Health Care Affordability, Responsibility and Transparency, or HART, program, establishes a target rate of growth for health care spending by the state from 2023 to 2027. The order was accompanied by a compact to ensure health care industry stakeholders also work towards reducing spending benchmarks, Salih said. 

The cost growth benchmarks decrease over time, starting at 3.5% annual growth over total health care expenditures in 2022 for 2023 and ending at a 2.8% growth over expenditures in 2026 for 2027. 

“[P]rescription drug cost growth continues to be a challenge nationwide and for New Jersey residents, families, and employers, including the State, and threaten to outpace the growth of the State’s economy and residents’ wages,” the order stated. “[T]he steadily increasing costs of health care and prescription drugs have limited access to quality health care for lower- and middle-income residents and elderly residents alike.” 

The program will leverage insurance claims data to assess spending growth based on factors like total medical expenditures for health care services, the net cost of private insurance for residents or the value of pharmacy manufacturer rebates for individuals. Plus, the program will release annual reports to help policymakers gauge how the state and stakeholders are meeting benchmark goals and identify cost drivers to inform cost reduction efforts. 

On the western side of the country, Nevada is tackling high prescription expenses through the ArrayRx Solutions program. Under the program, states can negotiate lower drug prices with manufacturers through bulk purchases of medications. The state entered the program in 2022, joining Oregon and Washington. Connecticut was the latest state to join last year. 

Individuals can also get state-backed prescription drug discount cards through ArrayRx, with no income, age or citizenship status requirements, said Beth Slamowitz, senior policy adviser on pharmacy at the Nevada Department of Health and Human Services. The card can help patients save up to 80% on generic prescriptions and 20% on name brand medications. 

More than 15,000 individuals in the state use the discount card, Slamowitz said, and the average saving for patients per prescription is $185 to $200. It’s particularly helpful for individuals who are uninsured or have high deductibles under their coverage plans. 

“Most importantly, I think, for Nevada, was that [ArrayRx] maintains sustainability for our pharmacies, because it doesn’t charge fees back to the pharmacy,” she said. Other discount cards, for instance, often incur additional fees when used by individuals, impact the pharmacy’s reimbursement rate. 

ArrayRx provides other programs for participating states, such as a voucher initiative that helps individuals fill their prescriptions at no cost to them and a pharmacy benefit manager oversight program.

“There is no one part of the supply chain, or there is no one part of the [health care] industry that is responsible” for increasing drug costs, Salih said, so it’s “really important for [states] to take a comprehensive and holistic approach.”