Prescription Drug Affordability Boards: Potential 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:

Updated August 2025

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

Why are Price Caps a Bad Solution for Medicine Affordability?

This handout argues that drug price caps like Upper Payment Limits and Medicare’s negotiated prices may unintentionally harm patients by under-reimbursing pharmacies, creating cash-flow shortfalls, and accelerating pharmacy closures, ultimately reducing access to medications. Download the Flyer

Employers, Do You Know How Much You’re Paying PBMs?

Pharmacy Benefit Managers use spread pricing and preferential reimbursement to PBM-owned mail-order pharmacies to generate profits, driving up employer costs and patient out-of-pocket expenses while financially destabilizing community pharmacies. Download the Flyer

 

Five Years of Prescription Drug Affordability Boards

Prescription Drug Affordability Boards (PDABs) have been created in several states with the goal to lower prescription drug costs for patients. One of the oldest, Maryland’s, is five years old, but they have yet to fulfill their promise to lower medicine costs. Even worse, the implementation of Upper Payment Limits appears likely to impact patient access to lifesaving medicines and financially harm vulnerable community pharmacies. This is becoming a political liability rather than an admirable solution.  Download the Flyer

PDAB Costs to Taxpayers

Since Prescription Drug Affordability Boards were first started in 2020 in Maryland, they’ve been copied in Colorado, Minnesota, Oregon, Washington, and New Jersey. Their goal has been to lower the price of medicine, but they haven’t yet saved any money and they’ve cost taxpayers a lot in spending and resources. Download the Flyer (Updated for 2026!)

PSM Podcast

For further information on Prescription Drug Affordability Boards and what they mean for pharmacy, check out this podcast series with NASPA CEO Krystalyn Weaver and PSM Executive Director Shabbir Imber Safdar.

Testimony from NASPA Members

Perspectives from Experts and Advocates

Summary of PDAB activities (provided by the Partnership for Safe Medicines)

2024
2025
2026

Other Resources