The Future of Prescription Drug Affordability Boards and Upper Payment Limits Is Cloudy

Although most of the public is not aware of the existence and activity of Prescription Drug Affordability Boards (PDABs) across multiple states, they are indeed active, with the potential to adversely affect the healthcare access of many. For the uninitiated, PDABs have been statutorily set up in several states with the advertised goal of lowering the costs of prescription drugs for patients. However, operationally, that is not what they are structured to do. Most of them are focused on cost controls by utilizing Upper Payment Limits (UPLs), which are simply reimbursement caps on what insurers, state programs, and different parts of the supply chain can reimburse for medications that have been deemed “unaffordable”. Applying a payment limit for purchases and payments for drugs does not translate into financial relief for patients. Nevertheless, PDABs continue to evolve, developing increasing potential for harm. For more background on the history of PDABs, please read one of CANN's early blogs about them here.

A significant flaw in the statutory design of PDABs and UPLs is that they do not adequately address patient affordability. The metrics these boards are required to use to select what drugs are deemed unaffordable are not conducive to identifying what medications are truly causing patients affordability challenges. The focus is primarily on the list price for medications and financial expenditures of the system, such as state governments.

Moreover, the manner in which UPLs are set does not effectively analyze the outcomes of potential price targets. Drug pricing concerns are convoluted, and setting reimbursement caps can affect multiple parts of the complex system in different ways. For example, reimbursement caps can adversely affect public health infrastructure by lowering rebate revenue on which state health departments depend. In spite of this, Colorado and Maryland, two states that have set UPLs, did not engage in any interdepartmental engagement with state entities before setting their UPLs for the recent drugs they ruled on. Furthermore, in Colorado in particular, there was no concrete analysis defining desired budgetary goals nor how various cost points could achieve any specific beneficial outcomes for patients or the state. Colorado set a UPL for Enbrel based on the federal government’s Maximum Fair Price (MFP) it had negotiated directly with the manufacturer, Amgen. Colorado is currently involved in litigation involving Amgen, presently preventing any implementation of the UPL for the drug.

The MFP is negotiated by the federal government based on federal expenditures and demographic analysis. These characteristics are markedly different from the needs of the patient populations and complex healthcare infrastructures of various states. Additionally, the federal government spent millions of dollars to help develop ways to monitor MFP’s effects and operate the mechanisms required for manufacturers to make providers and pharmacies whole, since actual acquisition costs are higher than MFP. Under the federal program, Medicare will reimburse only up to the MFP price. Manufacturers, subsequently, must refund purchasers, such as pharmacies, the difference between the MFP and a drug’s actual acquisition cost through a retroactive rebate. This is done through the Medicare Transaction Facilitator to guard pharmacies from operating at a financial loss.

States that attempt to utilize the federal MFP as an upper payment limit do not have this safeguard in place. Entities such as pharmacies and physician practices obtain drugs at acquisition prices that are higher than those of MFPs and UPLs. Thus, they will be forced to operate at a loss. States would need to create additional infrastructure and appropriations to enable the same safeguards as the federal government. Most state governments presently operate under strained budgets, especially in regard to present and future Medicaid funding changes. Endangering the fiscal solvency of pharmacies and other entities does not improve affordability for anyone.

Notably, there is no longitudinal data demonstrating the outcomes and effectiveness of MFP. Thus, the harm of instituting UPLs using MFP as reference pricing is compounded. A January 2025 New York Times article also explains the unintended harms of the Inflation Reduction Act’s insulin price caps, which operate in the same manner as UPLs. As a result, many of the lowest-income patients lost access to needed medications because their clinics were unable to provide them in an affordable manner.

The recent ruling in the litigation between Amgen and Colorado, in which the state PDAB set a UPL on Enbrel, exacerbates the problematic nature of UPLs as an affordability tool. On July 1, Chief Judge Daniel Domenico of the Denver federal court granted a preliminary injunction blocking Colorado from implementing its price cap on Enbrel. Thus, until the underlying lawsuit is resolved, the state cannot institute its UPL on Enbrel. Judge Domenico cited previous precedent established in a case involving the District of Columbia, which proved that price controls are preempted by federal patent law. Thus, the UPL on Enbrel is unlawful and would inflict undue financial harm on Amgen, including harming negotiations with purchasers outside of Colorado.

The importance of the preliminary injunction is that injunctions are usually only issued when the aggrieved party is likely to win on the overall merits of their complete case. The preliminary injunction does not address other issues in the lawsuit. An important part of the overall case is the arbitrary and capricious nature of the Colorado PDAB’s affordability reviews, which selected Enbrel as a drug it deemed ‘unaffordable’. There was no objective definition of affordability, and the metrics used to assign the designation of ‘unaffordable’ were inappropriate and inaccurate. This raises questions about the ongoing operations of the Colorado PDAB and any other state PDAB considering UPLs.

Multiple stakeholders have published data concerning the potential harms of UPLs. For example, Avalere Health Advisory has conducted research on health plans’ perceptions of PDABs and UPLs. In March of 2025, Avalere released a report where the outcomes were partly based on interviews and surveys of health plan employees and executives. The participants indicated UPLs would have adverse effects on formulary design, cost sharing, rebates, pharmacy and provider reimbursement, and patient access to medications. The Oregon PDAB, this year, after careful deliberation, voted against suggesting upper payment limits to their legislature as a policy suggestion in their annual report, citing thier ineffectiveness and potential for harm to 340B and Medicaid.

Patients indeed need affordable solutions regarding prescription drug prices. However, upper payment limits are not the solution. There are many other solutions other states have instituted and are researching. Various aspects of PBM reform, copay cap legislation, and the prohibition of copay maximizers and accumulators are evidence-based solutions that would directly help patients in a much more timely manner. Moreover, the Federal Trade Commission just released the settlement in its administrative complaint against pharmacy benefit manager Express Scripts. It is a real-world example of ways patient and government payor costs can be lowered that a PDAB-UPL does not achieve. Some of the mandatory changes Express Scripts must enact include basing patient out-of-pocket costs on net price instead of list price, as well as delinking PBM fees from drug list prices.

Millions of dollars have been spent by state PDABs, with no savings generated for the states or patients. As PDABs continue to evolve and as states continue to deliberate the adoption of UPLs and MFP pricing, patients have the least power but will experience the full weight of the effects.