State affordability boards seeking to limit what health plans pay for prescription drugs are confident they will withstand legal challenges as Colorado battles what’s expected to be the first in a long line of pharmaceutical industry lawsuits.
The Colorado Prescription Drug Affordability Board is facing a lawsuit from
The PDABs in Maryland, Minnesota, and Washington also have the authority to set UPLs, and are watching the Colorado litigation as they move ahead with their own work. Nine additional states boards don’t have the authority to set UPLs, but can analyze cost and affordability data to make recommendations to states on potential policies to lower prescription drug costs.
While board members are closely consulting state attorneys general and other legal teams as they move forward with UPLs and cost analyses, they say they aren’t threatened by litigation—a common tactic used by the pharmaceutical industry to challenge state prescription drug laws.
Board members and policy consultants say legislation establishing PDABs was informed by litigation over state drug pricing laws, and that the failures of pharmaceutical giants thus far in challenging the Medicare Drug Price Negotiation Program should encourage states to push policies to improve prescription drug affordability for patients and health-care systems.
“You’d be kidding yourself if you walked into this thinking you weren’t going to get slapped with a lawsuit at some point,” said Kirk Williamson, executive director of the New Hampshire PDAB.
“This is a very litigious space to be in, not only just in exercising state authority, but also given that it’s quite a focal point in the health-care cost debate at the moment,” Williamson said.
Unfazed by Pharma
Analysts predict a flurry of lawsuits against states mirroring what the Biden administration has faced so far with drugmaker lawsuits challenging the Inflation Reduction Act. But PDABs, some of which are beginning cost reviews and others that are still setting up their boards, don’t have any plans to pause their work.
“Unless we get a stop order” from a court, “we will continue to move ahead,” said Gerard Anderson, a member of Maryland’s PDAB and a health policy professor at the Johns Hopkins University Bloomberg School of Public Health.
The Johns Hopkins Bloomberg School of Public Health is supported by Michael Bloomberg. Bloomberg Law is operated by entities controlled by Michael Bloomberg.
The Maryland PDAB voted in May to begin cost reviews for six drugs, including
The drug industry views UPLs as “arbitrary price setting by bureaucrats,” risking “impacts on the supply chain that could put patients with chronic conditions in position to lose access to their current treatments or experience interruptions in care,” said Leslie Wood, regional vice president of state policy at the drug industry trade group Pharmaceutical Research and Manufacturers of America.
Amgen is arguing in its lawsuit against the Colorado board that the state law violates the supremacy clause of the US Constitution, federal patent laws, and the Fourteenth Amendment’s due process clause. Amgen is expected to file a motion for summary judgment in the US District Court for the District of Colorado by June 24.
Another concern from the pharmaceutical industry is members of the Colorado board “haven’t really shown their work in terms of incorporating stakeholder input,” Brett Johnson, Amgen’s director of state government affairs, said June 5 at the Biotechnology Innovation Organization International Convention in San Diego.
Tony Lourey, chair of the Minnesota PDAB, said engaging with the pharmaceutical industry and other stakeholders early in the process could help prevent some litigation.
“We want them to be able to share their perspective with us,” said Lourey, a former state senator and commissioner of the Minnesota Department of Human Services.
Katie Pope, a spokesperson for the Washington PDAB, said in an email the Colorado lawsuit and the threat of additional litigation “have not impacted the board’s approach.” Washington board members are building a list of initial drugs of interest for potential affordability reviews. Under Washington state law, the earliest a UPL could go into effect is 2027.
“Our goal is to draw in as many voices as possible during our open public meetings, to ensure that any comments from industry or patient advocacy groups are heard and accounted for prior to any decision being made,” Pope said.
New Hampshire’s PDAB doesn’t have the authority to set UPLs, but Williamson said the board consults the state’s attorney general’s office and other legal partners and academics “to understand how can we best design our policies to ensure that they, while maybe not ironclad, may provide the best amount of protection.”
Looking Back
Part of the confidence in the legal durability of state PDABs is because state policymakers and consultants developed legislation with the possibility of litigation in mind, Anderson said.
“When we helped write the legislation, we were aware of that as a likelihood, and so we have tried in every case to minimize the chance of being sued, although we still expect that to happen,” Anderson said. Maryland in 2019 became the first state to enact a bill to form a PDAB, based on model legislation developed by the National Academy for State Health Policy.
Hemi Tewarson, NASHP’s executive director, said a UPL should be able to withstand lawsuits because it’s “a maximum reimbursem*nt rate,” and not a cap on the prices manufacturers set.
This is an essential distinction, said Jennifer Reck, project director of NASHP’s Center for State Prescription Drug Pricing, pointing to previous court decisions on state drug pricing laws. In 2018, the US Court of Appeals for the Fourth Circuit struck down a Maryland law aimed at preventing drug companies from excessively raising prices on certain products. The court ruled the law unconstitutionally regulated trade beyond the state’s borders.
“There were some guidance in terms of strategies to avoid, and so this is definitely not attempting to set price, but instead to use state authority to regulate rates that payors pay within a state,” Reck said.
Medicare Litigation
The lack of success pharmaceutical companies have had so far in challenging the Medicare Drug Price Negotiation Program doesn’t give much strength to litigation challenging state PDABs, state board members said.
“The drug companies have made exactly the same challenge to the Inflation Reduction Act,” Anderson said, adding “the government has the right and should determine how much it pays for services.”
Federal district courts have so far tossed IRA lawsuits from PhRMA, AstraZeneca, Johnson & Johnson, and
Minnesota, which has the youngest PDAB with UPL authority, has a law requiring its PDAB to use Medicare’s negotiated maximum fair price for the state’s UPL on a drug that’s also been selected for federal government price negotiations. Lourey said the Medicare negotiated prices seem “pretty well poised to be able to go into effect.”
“Pharmaceuticals are a tremendous benefit to consumers but only if they can get access to them, and so we’re trying to address some of those cost barriers,” Lourey said.
—With assistance from Nyah Phengsitthy.
