As Medicare drug-price negotiations inch forward, some states are flexing new powers to cut costs for a broader swath of drugs 

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As Medicare’s years-long drug-price negotiation process is being hotly debated and litigated, some states are plowing ahead with wide-ranging efforts to bring down costs for a potentially much broader set of prescription drugs. 

Medicare this week announced that the first 10 drugs have been selected for negotiation of prices to take effect in 2026, advancing a process that is already the subject of at least eight lawsuits filed by drugmakers and industry groups. But weeks earlier, Colorado beat Medicare to the punch, unveiling a list of five drugs selected for review by its new prescription-drug affordability board in a process that could lead to upper payment limits being set for those drugs next year. Two of the drugs selected in Colorado — Amgen Inc.’s
rheumatoid-arthritis drug Enbrel and Johnson & Johnson’s
psoriasis treatment Stelara — also showed up on Medicare’s negotiation list. 

At least seven states have established prescription-drug affordability boards, which are generally charged with identifying drugs with the highest cost and usage within the state and looking for ways to cut those costs. Efforts to set up such boards are gaining traction in several other states, as well. In a speech to state legislators on Wednesday, for example, Michigan Gov. Gretchen Whitmer, a Democrat, included the establishment of a prescription-drug affordability board among her top priorities for the fall. 

In several states, including Colorado and Maryland, the boards have the authority to set upper payment limits for drugs. Yet unlike the Medicare negotiation process, they’re not facing an onslaught of litigation, policy experts say. 

Some state boards also have much more leeway than Medicare in selecting drugs for cost reviews. The Maryland board, for example, can look at reining in costs for drugs that have only been on the market for a short time, said Gerard Anderson, a member of the Maryland Prescription Drug Affordability Board and a professor of health policy and management at Johns Hopkins University. The Medicare negotiation process excludes drugs that are less than seven years past their U.S. Food and Drug Administration approval date, or less than 11 years past that date for biologics. 

What’s more, Anderson said, the Maryland board aims to move much faster than Medicare to bring down costs. Unlike Medicare, he said, “we don’t have a two-year waiting period for negotiations. We can do it much quicker.” Upper payment limits on some drugs could be set early next year, he said. 

Medicare’s announcement of the first drugs selected for negotiation could also light a fire under states that haven’t yet taken such significant steps on drug pricing, policy experts say. The National Academy for State Health Policy, a nonpartisan group of state policy makers, late last year released new model legislation that would let states use Medicare-negotiated prices as reference rates to set upper payment limits for state and private purchasers. While the legislation has not yet been enacted in any states, Jennifer Reck, director of NASHP’s Center on Drug Pricing, said: “I’m anticipating more interest coming into the next legislative session, now that the drug list has been announced” by Medicare.  

Wall Street analysts are keeping an eye on the impact the state boards could have on drugmakers’ bottom line. The cystic-fibrosis treatment Trikafta, which was among the drugs recently selected for affordability review in Colorado, accounted for about 90% of drugmaker Vertex Pharmaceuticals Inc.’s
total product revenues in the quarter ending in June. “We need to watch whether these [boards] will be able to actually enact material action to address pricing,” Jefferies analysts wrote in a research note on Vertex this week, noting that the overall impact on Trikafta sales is uncertain. Vertex declined to comment on Trikafta’s selection for the Colorado affordability review. 

Colorado’s prescription-drug affordability board, established under a 2021 state law, decided to focus on drugs that don’t have generic or biosimilar competition for its inaugural round of affordability reviews, which it is launching now, said Lila Cummings, prescription-drug affordability director at the Colorado Division of Insurance. In the coming months, the board will weigh the affordability of the five selected drugs, based on list price, patient copays and other cost sharing, details on nonadherence and utilization management, input from patients and caregivers and other factors. If a drug is deemed unaffordable, Cummings said, there will be a separate vote on whether to establish an upper payment limit for that drug. The payment limit would apply to the state Medicaid program as well as state-regulated commercial and employer plans.

Many employer-sponsored health plans are regulated at the federal level rather than by states.

The first upper payment limits could be established in Colorado in the spring of next year. Those limits would likely take effect at the start of the 2025 plan year, said Kate Harris, deputy commissioner at the Colorado Division of Insurance. 

In years to come, the criteria for selecting drugs for affordability reviews could change, Cummings said, perhaps emphasizing different factors like out-of-pocket costs or impact on the state budget. The board members “don’t want to artificially tie themselves to a single definition” of affordability, she said. 

The pharmaceutical industry doesn’t like the idea of the state initiatives unfolding at the same time as the Medicare negotiations. “Competing federal and state price-setting policies risk further disrupting our healthcare system and patients’ ability to get the medicines they need, because they all open the door for government bureaucrats to insert themselves between patients and their doctors,” Reid Porter, spokesperson for industry group Pharmaceutical Research and Manufacturers of America, said in a statement to MarketWatch. Such policies, Porter said, don’t solve the root problems that let insurers and pharmacy benefit managers shift more costs to patients. 

Some doctors and other healthcare professionals, meanwhile, are teaming up to advocate for more states to launch prescription-drug affordability boards. “We sit in our exam rooms, talking to patients and banging our heads against the wall trying to figure out how they can afford these drugs,” said Dr. Rob Davidson, an emergency-room physician in western Michigan and the executive director of the Committee to Protect Health Care, an organization of healthcare professionals advocating for quality, affordable care. The group’s members are supporting efforts to establish a prescription-drug affordability board in Michigan and other states, Davidson said. 

While the Biden administration works to defend Medicare price negotiations in court, some state boards say they’ve had cordial relations with drugmakers. The industry had helpful comments on approaches to setting upper payment limits, Anderson said. “We haven’t been sued yet, and they’re actually participating as an active and helpful player,” he said.  

Ultimately, Anderson said, state approaches to taming drug costs could influence the Medicare negotiation process. “States are always laboratories for what should be done,” he said. “Congress is going to revisit the whole negotiation process at some point, and the expectation is they’ll look to the states for guidance.” 

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