For the past five or so years, red and blue states alike have been passing bipartisan prescription drug bills on a broad variety of topics, including cost sharing and deductibles, transparency, pharmacy benefit managers, and affordability.
On a national scale, it can be hard to trace the impact of each individual bill. However, as Congress continues to shine a light on prescription drugs, state policy actions are beginning to have national ripple effects.
States' interest in prescription drug laws are not new.
- National Conference of State Legislatures bill tracker reports that since 2015, over 1200 bills related to prescription drugs have been enacted in 50 states, D.C., and Puerto Rico.
- National Academy for State Health Policy tracker, which focuses specifically on drug pricing, counted an average of 50 enacted laws from about 33 states per year across 2017-2021.
2022 is on track to meet, if not surpass, the number of bills introduced and ultimately enacted. Here's what industry stakeholders need to know to ensure they're ready for the next wave of state laws.
States' scope may be narrow, but their impact can be felt nationally.
State governments do not have the authority of federal lawmakers. Their power in the prescription drug space is often limited to state employee health plans, Medicaid plans, and plans on the individual market. When they pass regulations on entities like PBMs, these laws are often challenged in court, and the legal precedents can vary from jurisdiction to jurisdiction.
Still, the U.S. government is designed so that state laws push the federal government forward, and prescription drug laws are no exception. Examples of the different ways that state and federal governments push and pull each other towards legislative change are highlighted below.
- Overarching consensus across states creates momentum for federal policy: In 2019, Colorado placed the first $100 cap on insurance copays for a 30-day supply of insulin. Since then, approximately 18 other states have set caps on insulin prices. The general popularity and public support for these measures may be one reason why the federal version has been pulled out of the larger Build Back Better package and introduced as a separate bill. As of April 2022, a bill capping insulin costs at $35/month has passed the House of Representatives but has yet to progress in the Senate.
- Federal regulatory language can create opportunities for state innovation: CMS issued a final rule for 2021 that allows health plans to use copay adjustment programs and defers regulation of such programs to the states. This is important to note, considering that CMS also has a final rule that manufacturers will be required to include the value of their copay assistance offers in best price calculations starting in January 2023. The language in the statute is vague and manufactures are collectively confused on how to best adhere to this rule. State legislatures—who do have some regulatory power in this space—may be able to step up to the plate and provide clarity on a state-by-state basis.
States have laid the groundwork. Now they're drafting a new blueprint.
State legislatures have been thinking strategically about how to build an environment of accountability and transparency. Many states have been focused on pharmacy benefit managers (PBMs), specifically. Thus far in 2022, 37 states have considered 144 bills related to PBMs.
A number of states have taken a stepwise approach to regulate PBMs over the past few years. First, state leaders enact a licensing or registration law to get a sense of which PBMs are operating within the state. Next, they focus on transparency regulations, such as reporting mandates and pass-through requirements. With these licensing and transparency laws in place, some states will then progress to other topics such as affordability, reimbursement, and cost-sharing.
Common progression of state laws regarding PBMs
With this in mind, we can start to see the bigger picture of where states may be headed next, thinking more broadly across the whole prescription drug industry.
Policy proposals to watch
- State prescription drug affordability boards: In 2019, states began to enact prescription drug affordability boards. Recent years have seen an increase in state interest and public discourse on these boards. In 2022, Washington enacted, and five states are considering, legislation to create a prescription drug affordability board. The board functions as an independent, third-party regulatory body that reviews and identifies high drug prices and provides guidance for lowering them.
- Copay adjustment programs: As of spring 2022, Maine became the 15th state, plus Puerto Rico, to enact laws that regulate the use of copay adjustment programs used by insurers and PBMs. Typically, they require any payment or discount made by or on behalf of the patient be applied to the annual out-of-pocket cost-sharing requirement.
Action items for industry stakeholders
- Watch for state legal challenges: While states try out different versions of similar legislation, it's hard to predict how the regulations will play out on the ground. Some states may find that PBMs easily find "work arounds" resulting in laws with minimal impact or that the laws they enacted have unintended consequences. States may also turn to strategies other than legislation to monitor and regulate the prescription drug marketplace. Recent headlines from Louisiana and California showcase states' willingness to challenge powerful actors, whether in court or through fines.
- Track legislation in your state/region: With the 2022 midterms approaching, prescription drug legislation will likely remain a topic of national debate and consideration. State policy moves can provide insight into the future of prescription drug legislation and regulation. Tracking tools from National Conference of State Legislatures and National Academy for State Health Policy are regularly updated and provide bill summaries and links.