Board approves procedure to limit drug costs in state health insurance

The Prescription Drug Affordability Board (PDAB) has finally approved a procedure that could lead to “caps on payments” for expensive prescription drugs for government health insurers – an obstacle the board has faced since its inception.

The committee earlier this summer selected six drugs for a “cost review” that could be subject to the new procedures approved Tuesday. It would use various methods to determine the cost of drugs that “present a challenge in affordability.” One of those methods could be the upper payment limit.

Vincent DeMarco, president of Maryland Health Care for All, which wants to expand the PDAB's powers, is “thrilled” with the decision.

“It really is a tremendous step forward in making expensive medicines more affordable, first for state and local governments and then hopefully soon for all Marylanders,” he said.

However, Marylanders will be a long way from seeing cuts.

The Payment Cap Action Plan does not yet provide an actual cost cap. It simply creates a tool to reduce prescription drug costs by setting a cap on how much the government is willing to pay for certain prescription drugs under state health insurance plans.

But the procedure must first be reviewed by the Legislative Policy Committee, which then has 45 days to approve or disapprove. If the committee does not respond within that time, the board must contact the governor and attorney general for approval.

During the meeting, Board Chairman Van T. Mitchell, who last month expressed frustration with the board's slow progress, praised the five-member staff's efforts to implement the new procedures.

“I'm not sure I've ever seen a process – and this is a credit to the staff, I'm certainly not – that was so deliberate and transparent and focused on doing the right thing,” Mitchell said. “Does that mean we're going to get it 100% right? I don't know yet, that's still to be determined. But for a small team… hats off to everyone who rolled up their sleeves.”

The Prescription Drug Affordability Board was created by the General Assembly in 2019. It was slow to get off the ground after then-Governor Larry Hogan (R) cut its funding in 2020 amid pandemic-related economic uncertainty.

Gov. Wes Moore (D) signed separate legislation last year reaffirming the panel's authority to set payment caps and extending deadlines from the previous law.

The board is currently engaged in a lengthy legislative process to begin work determining which drugs might be expensive for state employees and developing methods to reduce those costs.

“Under the original 2019 law, it should have happened two years ago,” DeMarco said. “It should have happened in 2022 … but unfortunately former Governor Larry Hogan vetoed a key funding measure for the panel in 2020, which set everything back.”

If the legislative committee agrees, that doesn't mean a cap will be set. It just means that committee staff will begin studying different ways to reduce prescription drug costs. Payment caps are an option if staff decides it would be an effective cost-cutting measure.

The process requires staff to consider a number of factors, including the price of the drug when it first came to market, the cost of comparable drugs, its cost in other countries, and how much the drug costs under other programs such as Medicare. A payment limit could also be set based on a combination of these factors.

Staff will weigh the payment cap options along with other cost-cutting measures and make a recommendation to the panel for approval. The panel will then coordinate with state and local governments to implement the payment caps, potentially saving money on state health care costs through lower prescription drug costs.