Prescription Drug Affordability Boards: Risks to Pharmacy Reimbursement

Introduction

Prescription Drug Affordability Boards (PDABs)

In recent years, several states have passed legislation leading to the creation of Prescription Drug Affordability Boards (PDABs). These boards are intended to address the escalating costs of prescription medications by reviewing drug prices and setting upper payment limits (UPLs) to make medications more affordable for patients. While the intention behind PDABs is to curb excessive drug pricing and enhance access to necessary medications, there are significant implications for pharmacies, particularly concerning reimbursement rates.

 Understanding Upper Payment Limits (UPLs)

UPLs are maximum prices that can be charged for specific drugs, as determined by PDABs based on their cost-effectiveness and affordability. These limits are designed to prevent price gouging and ensure that essential medications remain accessible to the public. However, the implementation of UPLs can have unintended consequences for pharmacies, which operate within tight financial margins.

Current Landscape:

Risks to Pharmacy Reimbursement

  1. Reduced Reimbursement Rates:
    • Pharmacies may be reimbursed at rates below their acquisition costs for certain medications if UPLs are set too low. This discrepancy can lead to significant financial losses, particularly for independent community pharmacies that lack the purchasing power of larger chains.
  2. Impact on Cash Flow:
    • Cash flow issues may arise when pharmacies are forced to sell medications at or below cost, leading to challenges in covering operating expenses such as payroll, rent, and inventory management. This can threaten the viability of smaller pharmacies, reducing patient access to essential services.
  3. Administrative Burden:
    • The implementation of UPLs can introduce additional administrative complexities, as pharmacies must navigate and comply with new pricing regulations. This can increase operational costs and divert resources away from patient care.
  4. Impact on Patient Care:
    • Reduced reimbursement rates may force pharmacies to limit their stock of certain medications, particularly high-cost specialty drugs. This can result in delayed treatment for patients and reduced access to necessary medications, undermining the quality of care.
  5. Incentives for Generic Substitution:
    • While UPLs may incentivize the use of lower-cost generics, they can also limit the availability of branded medications that may be clinically necessary for some patients. Pharmacies need to balance cost containment with the clinical needs of their patients, which can be challenging under restrictive pricing policies.

Resources

PSM Podcast: For further information on Prescription Drug Affordability Boards and what they mean for pharmacy, check out this podcast discussion between NASPA CEO Krystalyn Weaver and PSM Executive Director Shabbir Imber Safdar. In this 18-minute discussion, the experts walk you through exactly what a PDAB does, the impact their Upper Payment Limits could have on community pharmacies, and concerns about the safety of the supply chain. Available in video and audio.

Testimony from NASPA members:

Perspectives from experts and advocates: