What are Prescription Drug Affordability Boards (PDABs)?
Prescription Drug Affordability Boards (PDABs) are state-level, independent entities created to address the rising costs of prescription drugs and ensure medications remain accessible and affordable for residents. PDABs analyze the pricing of high-cost drugs, assess their financial impact on patients and healthcare systems, and may recommend or implement measures to limit price increases. These boards aim to balance affordability with innovation, helping to reduce financial barriers to essential medications. PDABs differ in their approaches to reducing costs and how far along they are in implementing their state’s strategies.
Eleven states have PDAB legislation (Colorado, Maine, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Ohio, Oregon, and Washington).[1] Thirteen more states have pending legislation (Arizona, Connecticut, Iowa, Kentucky, Michigan, Nebraska, Pennsylvania, South Carolina, Vermont, Virginia, West Virginia, and Wisconsin.)[2]
There is no uniform approach with PDABs. PDAB methods for determining affordability and the scope of how far the PDABs could reach vary. Some PDABs are attempting to set Upper Payment Limits (UPLs) on select drugs,[3] others are primarily responsible for negotiating rebates,[4] Others have more of an advisory role in creating recommendations for reducing prescription drug spending. [5]
PDABs with the authority to set UPLs for drugs create the biggest concern for manufacturers. A UPL is a ceiling price set by the PDAB for the amount a manufacturer could charge for a specific drug in their jurisdiction. PDABs set UPLs on medicines that have high costs to patients and plans for their state.
Maryland PDAB can implement any one or a combination of the following methodologies to determine whether a UPL is necessary.[6] These methods include a Cost-Effectiveness Study, Therapeutic Class Reference Upper Payment Limit, Launch Price-Based Upper Payment Limit, Same-Molecule Reference Upper Payment Limit, Domestic Reference Upper Payment Limit, International Reference Upper Payment Limit, Budget Impact-Based Upper Payment Limits, and a Blend of Multiple Methodologies. [7] Please refer to the site for additional information on how these methods are determined.
Legal Challenge
How far along each PDAB also varies. However, Colorado and Maryland are the furthest along in their action plan (as well as the PDABs with the authority to set UPLs), which has led to Colorado being subject to the first PDAB litigation. Amgen argues that the Colorado PDAB violations the Supremacy Clause because it conflicts with the federal patent laws, the act violates the Due Process clause of the 14th Amendment because the act lacks proper procedures that would prevent the board from setting inappropriate pricing, the act violates the Supremacy clause because the UPL is so broad that it could include other payors outside the board’s scope. The act violates the commerce clause because it regulates transactions outside Colorado. [8]
Amgen
First, Amgen claims the act violates federal patent laws, including the Drug Price Competition and Patent Term Restoration Act of 1984 (also known as the “Hatch-Waxman Act”), because it gives manufacturers market exclusivity and the ability to set drug prices during that period as an economic incentive to reward innovation. The Colorado limits on the price during that time violated the intention of the act.[9]
Second, Colorado argues the act violates the Due Process clause of the 14th Amendment because it lacks standards on how the board determines if a drug is unaffordable and how it will set an Upper Payment Limit. Amgen argues that more procedures are necessary to avoid the board’s arbitrary and capricious decision-making. [10]
Third, Amgen argues that the act violates the supremacy clause because the statute broadly applies the implementation of the UPL, including Medicare and commercial payors outside the state’s authority.[11] The Colorado statute enables the PDAB to set an upper payment limit that “applies to all purchases of and payer reimbursements for a prescription drug that is dispensed or administered to individuals in the state”[12] and does not exempt federal payors or make their participation optional. Amgen argues that because the Medicare beneficiaries are patients who received dispensed drugs within the state and/or are administered medications in the state, the UPLs set by the board would also set prices for the patients in the state with federal insurance.[13]
Fourth, the act violates the commerce clause for similar reasons. The act is so broad that it regulates commercial transactions that occur outside the state of Colorado.[14] The Dormant Commerce Clause states laws that control commerce outside the states exceed the state’s authority and are invalid.[15] Amgen argues the issue with UPL is that the language of the statue[16] includes out-of-state transactions outside of the state if the drug is that the ultimately dispensed or administered in the state. [17]
Colorado
First, Colorado responded to Amgen’s claims by arguing that the court lacks subject matter jurisdiction because Amgen does not have standing (the injury is not concrete and particularized but rather hypothetical, Amgen has not established that the board’s action caused the injury, the issue is not ripe without the UPL set). [18] Second, Colorado argues that even if Amgen has standing, the Colorado PDAB is constitutional. Colorado argues that the PDAB is not preempted by federal patent law because it is a proper exercise of the state’s police powers. It does infringe on Amgen’s patent but rather regulates the stream of commerce after the product is sold.
Third, Colorado argues that the Affordability program does not infringe on Amgen’s due process rights because the act includes procedures to protect due process. Colorado also argues that the UPL does not apply to federal programs and other payers, so the claim is moot. Last, UPLs do not violate the dormant commerce clause because the program is applied equally, does not impact the price in other states, and does not impose a substantial burden on interstate commerce. [19]
Conclusion
Until the price is set, Amgen has legitimate standing concerns. A dismissal based on standing would avoid evaluating Amgen’s claims on the merits. For any standing-related questions or questions in general, please communicate with the Amgen Inc. v. Mizner chatbot.
Explore the resources for each state by clicking on the links below to learn more about how PDABs operate locally and the steps they are taking to make prescription drugs more affordable for everyone. Each state’s page includes a dedicated chatbot for state-specific information.
Footnotes
[1] LexisNexis, Potentially Big Year for Prescription Drug Affordability Boards, Capitol Journal (Dec. 27, 2024), https://www.lexisnexis.com/community/insights/legal/capitol-journal/b/state-net/posts/potentially-big-year-for-prescription-drug-affordability-boards.
[2] Id.
[3] PDABs in Colorado, Maryland, Minnesota, and Washington can set Upper Payment limits.
[4] Massachusetts and New York PDABs are accountable for negotiating Medicaid supplemental rebates.
[5] Maine, New Hampshire, New Jersey, and Oregon PDABs make recommendations to limit spending and costs.
[6] Md. Prescription Drug Affordability Bd., Upper Payment Limit Action Plan (Draft), Aug. 30, 2024, 6:00 PM, available at https://pdab.maryland.gov/Documents/reports/UPL%20Action%20Plan.2024.08.30.1745%20%281%29%20revised%20draft.pdf.
[7] Id.
[8] Amgen Inc. v. Colorado Prescription Drug Affordability Review Bd., No. 1:24-cv-00810-NYW-SBP (D. Colo. Mar. 22, 2024), available at https://litigationtracker.law.georgetown.edu/wp-content/uploads/2024/03/Amgen_2024.03.22_COMPLAINT.pdf.
[9] Id at 5.
[10] Id at 6.
[11] Id at 6.
[12] Colo. Rev. Stat. § 10-16-1407(5)
[13] Id.
[14] Id.
[15] Under this “dormant Commerce Clause” doctrine, a state law “that directly controls commerce occurring wholly outside the boundaries of a State exceeds the inherent limits of the enacting State’s authority and is invalid” per se. Amgen Inc. v. Colorado Prescription Drug Affordability Review Bd., No. 1:24-cv-00810-NYW-SBP (D. Colo. Mar. 22, 2024), available at https://litigationtracker.law.georgetown.edu/wp-content/uploads/2024/03/Amgen_2024.03.22_COMPLAINT.pdf. Citing Healy v. Beer Inst., Inc., 491 U.S. 324, 336 (1989); see Ass’n for Accessible Meds. v. Frosh, 887 F.3d 664, 668 (4th Cir. 2018)
[16] Under the act, an upper payment limit set by the board applies to “applies to all purchases of and payer reimbursements for a prescription drug that is dispensed or administered to individuals in the state in person, by mail, or by other means.” Id at 34 quoting Colo. Rev. Stat. § 10-16-1407(5).
[17] Id.
[18] “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Amgen Inc. v. Mizner, No. 1:24-cv-00810-NYW-SBP, Defendants’ Combined Cross-Motion for Summary Judgment and Memorandum in Support and Response in Opposition to Plaintiffs’ Motion for Summary Judgment, at 28-29 (D. Colo. Aug. 9, 2024), available at https://litigationtracker.law.georgetown.edu/wp-content/uploads/2024/03/Amgen_2024.08.09_DEFENDANTS-COMBINED-CROSS-MOTION-FOR-SUMMARY-JUDGMENT-AND-RESPONSE-IN-OPPOSITION-TO-PLAINTIFFS-MOTION.pdf quoting Spokeo v. Robins, 578 U.S. 330, 338 (2016).