The hell of drug pricing boards

By James K. Glassman

The writer, a former senior fellow in economics at the American Enterprise Institute and Under Secretary of State, is an adviser to health care companies and nonprofits.

No one knows who came up with the phrase, “The road to hell is paved with good intentions.” Virgil? Samuel Johnson? Muhammad? It especially applies to public policies that appear beneficial at first glance, but turn out to be anything but.

Here’s one to add to the list: government boards to set drug prices.

Maryland established the first such board in 2019, and it recently selected eight popular medicines — treating such conditions as diabetes, kidney disease and HIV/AIDS — for a “cost review” to see if the state should impose Upper Price Limits, or UPLs.

Nine other states have set up these Pharmaceutical Drug Affordability Boards (PDABs), and there is a growing realization that they do a lot more harm than good. Maybe that’s not hell, but for the victims of PDABs — that is, millions of patients — losing access to the right medicines will mean needless suffering with no gain in affordability.

Consider Colorado, which last year became the first state to identify a batch of medicines targeted for price controls. We can assume these are among the most unaffordable, if not the most unaffordable, drugs.

The state’s board looked conscientiously at the facts, gleaned from price and efficacy data and interviews with patients, and in December produced a 589-page report on Trikafta, a therapy for cystic fibrosis (CF). The board unanimously concluded that the drug was “not unaffordable for Colorado consumers.” (The underlining and italics came from the PDAB report itself.)

Trikafta costs $234,439 a year. How can it be affordable? Because affordability means how much patients pay out of their own pockets, and 93% of Coloradans have health insurance to protect against catastrophic expenses. Many patients can get co-pay coupons. “Patients with commercial insurance paid 3.59% of the total cost of Trikafta in 2022,” the report said. Most, in fact, “paid less than $50 a month.”

Trikafta also helped patients avoid other health care costs. It produced a “drastically reduced need for hospitalizations,” said the report. The drug offered “significant cost-savings for not having to pay for other CF-related medications” and reversed “CF complications such as diabetes and liver disease,” which entail medical costs of their own.

Two months later, the Colorado PDAB voted unanimously that the second drug it studied, Genvoya, for HIV/AIDS, was also “not unaffordable.” The report said Genvoya’s cost was $2,683 a month, but the average patient with commercial insurance paid just $119. Again, about half of patients using Genvoya paid $50 a month or less.

Interviews of patients by the board found that 59% said Genvoya “reduces the amount of time and money going to the doctor,” and no one said Genvoya “caused me to accrue medical debt.”

On Feb. 16, the Colorado PDAB found that the third medication it studied in depth, Enbrel, for autoimmune diseases like arthritis and psoriasis, was indeed unaffordable — despite the fact that the average patient paid $332 monthly out of pocket, or about one-twelfth the drug’s cost.

When price controls are eventually applied, few patients will end up paying less for Enbrel. In a March study for the Partnership to Fight Chronic Disease, the research firm Avalere found that more than 80% of health plan directors believe that cost savings won’t be passed on to patients. Why? Because UPLs mean insurers and pharmacy benefit managers (PBMs) will take a hit to their rebates, so they will take steps such as moving a drug like Enbrel into a non-preferred formulary tier that requires higher coinsurance — or remove it entirely.

The study also predicts that UPLs will “create additional barriers to medication access,” like prior approval before an insurer approves a doctor’s prescription or “step therapy,” which requires patients to use a less-preferred drug and have it fail.

In a report issued April 4, HealthHIV, an advocacy group for “LGBTQ and other underserved communities,” concluded that “UPLs could negatively influence patient and provider treatment choices” and “exacerbate patient access concerns,” especially for drugs that treat HIV/AIDS.

It has dawned on regulators that they have a hellish problem on their hands. “The U.S. Centers for Medicare and Medicaid Services is aware of the irony that government pricing intervention could lead to less patient access for the affected products,” said an April 16 analysis by the industry publication Pink Sheet. This restricted access was a reason Gov. Glenn Youngkin vetoed Virginia’s PDAB bill on April 9 — along with the fact that the policy is “unproven to lower drug prices.”

Despite all this evidence, some Maryland legislators are actually trying to expand the reach of their price controls. If legislators really want to perform a public service, they will abandon the PDAB route and encourage drug researchers and manufacturers to do their job, which is discovering medicines that will make lives longer and better.