2022 State of the State Addresses Reflect Realities of Health, Economic Recovery
/in Health Coverage and Access Blogs Chronic and Complex Populations, Cost, Payment, and Delivery Reform, Featured Policy Home, Health Coverage and Access, Health System Costs, Maternal, Child, and Adolescent Health, Population Health, Prescription Drug Pricing /by Allie Atkeson, Anita Cardwell, Clare Cartheuser, Rebecca Cooper, Gia Gould and Elinor HigginsGovernors use their annual state-of-the-state addresses to showcase successes and accomplishments over the past year and to define their policy priorities for the year ahead. This year 36 states will hold gubernatorial elections, so many governors use their state-of-the-state addresses to build their case for reelection and visions for the future. By late February, 41 governors had delivered speeches outlining plans to address a wide variety of health and economic related issues in the coming year, as the immediate health-related emergency of the COVID-19 pandemic has faded. Most governors reflected on the incredible response from frontline responders and public health agencies’ ability to meet the needs of the crisis but focused their future plans on how to emerge from the pandemic and respond to the economic and mental health crises that remain.
View a map highlighting governors’ goals on a variety of health-related policies here.
Priorities diverged from their 2021 health care and social determinants priorities. While many governors continued to address social drivers of health, citing affordable housing and access to healthy food and the environment as key levers to improve health, more highlighted livable wages, support for the workforce and business, and education. Notably, in comparison to last year, many more governors highlighted the need to address health care workforce shortages that have been exacerbated by the COVID-19 crisis. Governors also mentioned their priorities for investing American Rescue Plan Act (ARPA) funding.
These issues do not exist in isolation; many of these topics, including mental health, education, workforce, and equity, are woven throughout the speeches and require a whole-of-government approach to address. Below are highlights from key themes that the governors addressed.
Behavioral Health
Twenty-eight governors discussed behavioral health in their speeches this year, up from 22 last year. With an increased focus on crisis services, substance use disorder services and school-based mental health care as a result of COVID-19, governors addressed the need for investments in behavioral health services and workforce.
Fourteen governors mentioned making significant investments in behavioral health in their state-of-the- state addresses. In Idaho, Gov. Little proposed accelerating the implementation of the Behavioral Health Council’s recommendations, including a $50 million dollar investment in behavioral health care. In the executive budget, Gov. Lujan Grisham of New Mexico is proposing “tens of millions of dollars into new behavioral health services, expanding access to treatment for substance abuse, suicide interventions and more. New Mexicans call me about this issue more than almost any other, and we will answer that call.”
Ten governors mentioned substance use disorder, including the opioid epidemic and recent rises in overdoses over the past year. New Jersey Gov. Murphy discussed the state’s data driven approach to the opioid-use epidemic and expansion of harm reduction centers and naloxone.
In Delaware and Tennessee, governors discussed their executive branch efforts to combat the opioid epidemic. In Delaware, the Behavioral Health Consortium is led by Lt. Gov. Hall-Long, and the state was one of a few to see a decrease in the rate of overdose deaths. In Tennessee, Attorney General Slatery is working to deploy funding from the $26 billion dollar suit against pharmaceutical companies. Governors in Alaska and Missouri discussed providing behavioral health services to individuals in the criminal justice system.
Nine governors referenced youth behavioral health and school-based services now that children are back in the classroom. In Alabama, Michigan, Vermont, Washington, and Wisconsin, governors proposed additional school mental health supports. Gov. McMaster in South Carolina stated, “we must also recognize that a mental health crisis exists in South Carolina, especially among our young people who have weathered two years of disruptions, virtual instruction, isolation, and constant changes to normal routines.” He also directed the Health and Human Services Director to study the state’s behavioral health system as 60 percent of South Carolina children are enrolled in Medicaid. In Washington, Gov. Inslee’s budget will increase the number of school counselors, nurses, psychologists, and social workers in schools.
Six governors discussed strengthening the crisis system of care in their states through outreach services, mobile unitsand new centers. Gov. Ivey of Alabama proposed funding for two new mental health crisis centers and in New Hampshire, Gov. Sununu discussed mobile crisis support and a new 24/7 crisis call center. Alaska Gov. Dunleavy announced reopening the unit that serves adolescents in crisis, and additional funding for staffed beds.
Six governors also discussed supporting the behavioral health workforce through crosscutting investments. Massachusetts Gov. Baker discussed working with the legislature to address “enormous staff and clinician shortages in exactly the areas of care that we need most.” In Michigan, Gov. Whitmer stated, “40 percent of Michiganders do not get treatment for their mental illness. We will address this shortfall by expanding Michigan’s Loan Repayment Program for mental health professionals. And we will make a historic investment to retain and recruit hundreds more mental health workers.”
Broadband
This year, 17 governors discussed broadband in their state-of-the-state speeches, down from 30 in 2021. Governors in four states, Alabama, Delaware, Hawai’i and Maine proposed leveraging ARPA funding to support broadband efforts in their states. Other themes included broadband connectivity to support remote work and education and the creation of statewide authorities for broadband. Missouri Gov. Parson requested a “$34 million dollar investment in rural communities to increase access to telehealth and telemedicine services.”
Five governors identified broadband as critical for supporting remote work and education. According to Kansas Gov. Kelly, hotspots were deployed to students in low-income households to continue their education remotely. Gov. Dunleavy in Alaska stated that broadband “…unlocks the opportunity for us to live anywhere and work from anywhere in this Great State.”
Additionally, governors in Kansas and Maine are establishing statewide broadband authorities, In Kansas, the Office of Broadband Development has expanded internet access to over 50,000 new households and businesses. The Maine Connectivity Authority is “a new entity charged with achieving universal internet access.”
COVID-19
In 2021, 34 governors addressed COVID-19 in their state-of-the-state speeches, emphasizing vaccine distribution and economic recovery. In 2022, 17 governors mentioned COVID-19 with a focus on COVID-19 mandates, return to school, testing and vaccines.
The continued rollout of vaccines and testing as a strategy to mitigate the spread of COVID-19 were discussed by 12 governors. Gov. Sununu in New Hampshire emphasized the importance of data guiding the state’s approach. In South Dakota, Gov. Noem mentioned the state’s free at-home test program and announced an additional 1 million new tests to be delivered throughout the state.
Four governors spoke against COVID-19 mandates, including vaccines and masking. Gov. Dunleavy of Alaskastated his administration, “will continue to defend Alaskans’ rights to make their own medical decisions about vaccines and therapeutics for themselves and their families in consultation with their doctors and pharmacists.” Similarly, Gov. Parson of Missouri said, “when it comes to COVID-19 mandates, I firmly believe that the people should have say through their local elected representatives and not be dictated by needless executive action or any one person.”
Return to in-person instruction and masks in schools were discussed by three governors. Recently elected Gov. Youngkin of Virginia signed an executive order that allows parents to opt out of mask mandates in schools. In Kentucky, Gov. Beshear discussed the strategy to prioritize vaccines for educators and the state’s ability to return to in-person instruction in every school district early on.
Education
Thirty-seven governors discussed education this year and the impacts of COVID-19 were present throughout the speeches. Major themes included teacher recruitment and retention, addressing learning loss, and affordability of higher education. There was a marked decrease compared to last year in the number of governors that talked about expanding access to early education. Twenty-three governors proposed generalized investment in schools and students, and five governors emphasized the importance of keeping children in the classroom. Gov. Ige of Hawai’iemphasized the importance of in-person learning, but also announced the launch of the Hawai’i Virtual Learning Network—a virtual classroom network that can supplement in-person classes.
Eighteen governors talked about recruiting and retaining qualified teachers, with a major focus on increasing teacher salaries and recognizing the difficulties that educators have faced over the past two years. Gov. DeSantis of Florida proposed increases in teacher salaries in addition to $1000 bonuses for the second year in a row. Some governors also mentioned other types of support for teachers. For example, Gov. Hochul of New York proposed more “effective training and support, faster and easier certification, and stronger career pipelines and ladders”.
Sixteen governors proposed targeted investments in improving the quality of education in their states by enhancing literacy levels and meeting benchmarks, supporting greater investment in STEM education, or by making up learning loss sustained during the COVID-19 pandemic. Gov. Burgum of North Dakota talked about setting computer science and cyber science graduation standards for K-12 students, undergraduate students, and graduate students. Indiana Gov. Holcomb talked about the continued investment in accelerated learning programs to support students who fell behind during the pandemic.
Many governors also focused on opportunities following K-12 education, whether entering the workforce, enrolling at a community college, or attending a four-year university. Ten governors talked about apprenticeship programs and adult education opportunities, fourteen proposed investments in higher education, with nine of those focusing specifically on community college investments, and sixteen governors proposed higher education affordability measures like tuition freezes, scholarships, or loan forgiveness programs.
Ten governors also emphasized parental choices and roles in education, through vouchers, school choice programs, charter schools, or more parental involvement in curriculum. Idaho Gov. Little proposed an investment in Empowering Parents grants, which would cover “computers, tutoring, internet connectivity and other needs so students have the best chance for success.”
Equity
COVID-19 clearly shone a light on racial and ethnic health and economic-related disparities that existed prior to the pandemic, and in 2022, 9 governors highlighted the connection to equity in their plans, down from 21 governors in 2021. Three governors discussed the connection and disproportionate impact of the environment on low-income communities and communities of color. Oregon Gov. Brown used an equity lens to set the tone of her speech. She noted that she is “…most proud of is how Oregon approaches … challenges––through an equity lens. With a focus on our communities hardest hit by climate change: rural communities, people with low incomes, and people of color.”
Delaware Gov. Carney announced that the state, with federal support, will invest more than $400 million in Delaware’s clean water infrastructure, focusing on underserved communities. New York’s Gov. Hochul also proposed work to fix longstanding problems that disproportionately impact communities of color, including reconnecting neighborhoods that were cut off by highways, and directing the Metropolitan Transit Authority (MTA) to conduct an environmental review, to ensure no further harm is done.
Three governors also considered the intersection of poverty and communities of color and developed strategies to mitigate economic impacts.
Health Care Costs
Seven governors addressed increasing health care costs— emphasizing the need to alleviate the burden of rising healthcare costs on both individuals and state budgets. Notable state efforts to lower costs across the health care system include:
– New Jersey Gov. Murphy committed to lowering healthcare and prescription drug costs through a cost growth benchmark and additional transparency requirements throughout the prescription drug supply chain to identify cost drivers.
– Nevada Gov. Sisolak announced that the state will join the Northwest Prescription Drug Consortium with Washington and Oregon to leverage collective purchasing power to lower the cost of prescription drugs.
– Gov. Cox of Utah asked legislators to support the newly established Utah Sustainable Health Collaborative tasked with developing strategies to lower health care costs while improving outcomes.
Virginia Gov. Youngkin expressed support for legislation to extend access to association health plans, providing small business owners with a lower cost coverage option for their employees. Three governors celebrated successful state reforms which have lowered health insurance costs in the individual and small group market.
– Colorado Gov. Polis shared that the state reinsurance program reduced healthcare premiums by 24 percent on the individual market, with even more significant cost savings in the western region of the state.
– Following last year’s launch of a state-based marketplace, New Jersey Gov. Murphy shared that enrollment in the individual marketplace increased by more than 25 percent.
– Nevada Gov. Sisolak touted last year’s adoption of a public option to increase affordability and expand coverage options.
Five governors addressed the issue of rising prescription drug costs, with the majority focusing on the prohibitively high cost of insulin. Governors in Michigan and Colorado aim to improve insulin affordability through monthly price caps and Gov. Whitmer of Michigan announced that the state’s Attorney General would launch an investigation into one of the largest producers of insulin for excessive pricing.
Health Care Workforce
This year, against the backdrop of ongoing COVID-19 hospitalizations and concerns about burnout, 20 governors talked about their plans to address workforce shortages and bolster the health care workforce. In 2021, only eight governors mentioned plans to support or bolster the healthcare workforce. Recruitment was the overarching theme this year, with fifteen governors talking about how to successfully train more nurses, doctors, or emergency responders, how to use scholarships or loan forgiveness programs to incentivize entry into the health care field, and how to bring more health care providers into the state from elsewhere. Governors of New York, South Dakota, and Vermont talked about recognizing out of state licenses to attract qualified providers to their states. In Alaska, Georgia, Hawai’i, Maine, New Mexico, and Oklahoma, governors talked about expanding education programs to train more nurses and other health care providers. These proposals included plans for adding faculty to existing programs, opening new educational programs, and admitting more students to increase the number of graduates. Gov. Reynolds of Iowa announced a new apprenticeship program for high school students that would allow them to become certified nursing assistants before graduating high school. And governors in Iowa, Illinois, Rhode Island,and New York mentioned plans to offer additional scholarships, tuition reimbursement, or loan forgiveness for students training to enter the health care workforce—particularly if they stay in-state after graduating.
In addition to recruitment, nine governors also focused on strategies to retain the existing workforce—particularly those individuals who are experiencing the exhaustion of the COVID-19 pandemic. In Alabama, Colorado, Maine, New York, and Wisconsin, governors talked about increased compensation for those in the healthcare field, through pay raises, higher Medicaid reimbursement rates, or bonuses. Gov. Polis of Colorado and Gov. Pritzker of Illinoismentioned plans to wave licensing fees for healthcare providers in their states.
Housing and Homelessness
Sixteen governors addressed housing and homelessness in their state of the state speeches. Highlighting the impact of the COVID-19 pandemic, governors concentrated on the need to increase the supply of affordable housing, strategies to reduce homelessness, and rent and mortgage assistance. In her speech, Gov. Brown in Oregon made the connection between housing and homelessness stating, “there is no avoiding the fact that these two issues are undeniably linked –– a lack of affordable housing and some of the highest rates of people experiencing homelessness. In Oregon, today, missing one paycheck can be the difference between going to bed in a home with heat and running water, or sleeping unsheltered.”
Eleven governors spoke for the need to increase the housing stock with an emphasis on affordable housing. Gov. Mills of Maine referenced the Maine Jobs and Recovery Plan which will invest $50 million to “increase the number of energy-efficient, affordable homes for working Maine people.” In Colorado, Gov. Polis announced 14,000 units of affordable housing have been developed in the past year, saving families more than $72 million annually.
Governors in Delaware, New Mexico and Oregon discussed providing rent and mortgage assistance to residents, and governors in Colorado, Delaware and New Hampshire addressed using ARPA funding to support their housing programs. New Mexico Gov. Lujan Grisham said, “in the next 12 months your state government is going to deliver an additional $230 million in rent and utility assistance to the New Mexicans who need it most.”
In addition to increasing the housing supply, five governors discussed reducing homelessness in their states, proposing models such as permanent supportive housing. In Colorado, Gov. Polis proposed several interventions to address homelessness including “affordable and transitional housing, substance use treatment and recovery care, related residential programs, and permanent housing with wrap-around support services, and recipients of funds need to be held accountable for actually reducing homelessness.” Gov. Hochul of New York identified root causes of homelessness in her speech—poverty, addiction and housing insecurity—and announced a five-year housing plan to preserve 100,000 affordable homes with supportive services in 10,000 units.
Jobs/Livable Wages
The topic of employment, workforce investments, livable wages and the need to support overall economic growth was mentioned by a total of 38 governors, which is an increase from last year when 28 governors focused on this topic.
The most common theme was planned investments to promote workforce development through new training initiatives. Governors in Maine, Oklahoma, South Carolina, Tennessee and Vermont specifically mentioned apprenticeship opportunities and career development for adolescents and young adults, and Vermont’s Gov. Scott placed an emphasis on trades training, in particular to help grow the number of nurses and other healthcare workers in the state. Oregon’s Gov. Brown discussed plans to build upon Future Ready Oregon, a workforce training initiative focused on jobs in health care, technology, manufacturing, and construction. She also mentioned plans to incorporate support services to help individuals advance from an entry-level job such as a certified nursing assistant to a health care administrator. Governors in Delaware, Michigan, Mississippi, and South Carolina shared plans to invest recently allocated federal funds to support workforce skills training initiatives, and Hawai’i’s Gov. Ige highlighted the launch of an online hub designed to connect unemployed individuals with career and training opportunities.
Governors also focused on the issue of supporting overall economic development. Delaware’s governor highlighted the state’s focus on championing small businesses to bolster job growth, including both “mom-and-pop” small businesses as well as cutting-edge technology companies, and Gov. Murphy of New Jersey commented similarly about supporting both technology start-ups and traditional small businesses. Other governors spoke about the role of planned tax cuts with the intention of supporting job creation, with governors in Colorado, Idaho, and Indiana mentioning this issue.
Some governors also focused on the issue of wages and highlighted plans to increase pay rates for state employees, such as law enforcement and teachers. The governors of Alabama, Kentucky and Missouri announced pay raises for all state workers, and Gov. McMaster commented that while overall compensation for South Carolina state employees should be reevaluated, salary increases should be determined by merit-based performance incentives rather than an across-the-board pay raise. Proposals to increase salaries for teachers specifically were raised by the governors in Alabama, Florida, Georgia, Mississippi, Oklahoma, South Carolina, and Tennessee. Additionally, the governors of both Delaware and Pennsylvania advocated for an increase in the overall minimum wage in their states. Gov. Wolf noted that when factoring in inflation, minimum wage workers in Pennsylvania actually experienced a $2 pay reduction.
Medicaid, Coverage and Access
Despite the significant growth in state Medicaid programs during the pandemic, only five governors mentioned Medicaid in their speeches.
Several governors proposed Medicaid coverage and benefit expansions. In response to rising maternal mortality rates, governors in Georgia and Rhode Island advocated for extending postpartum Medicaid coverage from 60 days to 12 months to provide coverage continuity during the critical postpartum period. Rhode Island Gov. McKeeintroduced a proposal to cover all kids regardless of immigration status through the state’s Medicaid program. Tennessee Gov. Lee announced a $25 million dollar investment to broaden access to dental services for over 600,000 Medicaid recipients as well as an additional $55 million to support the Medicaid Pathways to Independence program.
Only Kansas Gov. Kelly advocated for adoption of Medicaid expansion, providing the economic argument that, “Medicaid expansion won’t just protect small towns and their residents, it will keep health care professionals from moving to neighboring states… (without Medicaid expansion) we are sabotaging our rural communities and their efforts to recruit new jobs and residents”.
The broader topic of health coverage and access was mentioned by governors in six states — a significant decline from last year when 17 governors addressed these issues. Governors were largely focused on the need to improve rural health care access:
– New Mexico Gov. Lujan Grisham proposed the creation of a Rural Health Care Delivery Fund to provide support for health systems in counties with fewer than 100,000 residents. The fund would provide financial support for newly constructed hospitals in rural areas to compensate for operating losses incurred during the first five years of operation.
– South Dakota Gov. Noem aims to improve health care options for rural communities by extending telehealth flexibilities to emergency responders.
– Wyoming Gov. Gordon committed to improving care accessibility through improvements to the state’s Emergency Medical System.
– Gov. Evers of Wisconsin will invest $20 million to provide rural communities with flexible funding to increase staffing support and provide additional training to first responders.
Gov. Pritzker of Illinois commented on the state’s recent $3.8 billion dollar investment in hospitals serving high proportions of Medicaid patients to improve care in underserved communities.
Other health-related issues
Below is a snapshot of some of the other health-related topics that governors mentioned:
- Aging: Four governors mentioned issues related to the elderly population in their speeches. Mills of Maine announced plans to establish a Silver Cabinet (similar to the state’s Children’s Cabinet) to promote interagency action on long-term care issues. New Mexico’s governor proposed an initiative called New Mexi-Care to expand an existing state program that supports and reimburses caregivers for the care they provide to elderly family members, regardless of Medicaid eligibility. Also, although New York’s Gov. Hochul did not mention the topic of aging in her speech, in an accompanying document she outlined intentions to develop a state master plan for aging.
- Child Care and Family Supports: Nine governors commented on proposals to support the needs of families, such as Delaware’s Gov. Carney advocating for paid leave in the private sector as well as other governors promoting increased access to high-quality and affordable child care. Maine’s Gov. Mills noted plans to include $12 million in the state’s supplemental budget to increase child care workers’ wages, and also highlighted the use of American Rescue Plan Act funds to strengthen the state’s child care system, which includes stipends for child care workers as well as investments in child care facilities and early childhood education programs. Iowa’s Gov. Reynolds announced an expansion of the state’s Childcare Challenge, which is designed to increase access to child care options for families, and commented on progress in implementing recommendations from the state’s Child Care Task Force. North Dakota’s Gov. Burgum highlighted a new initiative that will be launched in the spring to help employers offer child care benefits to their employees and a soon-to-be finalized comprehensive state strategy for increasing access to high-quality, affordable child care. Utah’s Gov. Cox proposed creating a new government position to address the needs of parents and children, which will focus on parental leave, increased access to child care, and mentoring opportunities for parents. Also, Tennessee’s Gov. Lee highlighted recent funding for the state’s Healthy Starts Initiative, which focuses on maternal health and holistic care for both mothers and children.
- Child Welfare: Eight governors spoke about the child welfare system, including the governors of Arizona, Florida, Georgia, and Tennessee who mentioned potential new investments to support caregivers. Ducey in Arizona mentioned plans to provide resources to extended family members caring for children who would otherwise be in the foster care system, and Georgia’s governor proposed a 10 percent provider rate increase for all foster parents, relative caregivers, and child caring and placing agencies. In Washington, Gov. Inslee said that his budget would include $80 million to support foster care youth with complex needs and help them transition out of foster care. Gov. Kelly noted that Kansas was one of the first states to implement the Family First Prevention Services Act and the recent creation of the Division of the Child Advocate to help ensure that youth in the child welfare system are healthier and safer.
- Environmental Actions: Seventeen governors discussed their plans to protect the environment, including plans to address climate resiliency and ensuring clean air and water for residents. Ten governors discussed plans to improve water quality. Kansas shared the state’s new water plan, a five-year blueprint to ensure the state has a reliable, quality water supply to support the needs of Kansas communities, including their farming economy. Ten governors discussed their plans to address climate change and promote climate resiliency. Delaware’ Gov. Carney announced the state’s new Climate Action Plan. Six governors discussed actions to reduce carbon emissions or become carbon neutral, and four governors noted deadlines by which this must occur. Ige reflected that Hawai’i was the first state to commit to a net-negative goal by 2045 and re-committed to doubling down on this effort.
- Food Access: Eight governors commented on the issue of food security, distribution, and production. Alaska’s Gov. Dunleavy spoke about plans to create a Food Security Task Force to help promote the state’s agriculture and mariculture industries and minimize disruptions in the food supply chain by supporting state-grown products. In response to rising food costs, governors in both Illinois and Kansas advocated that their state’s grocery taxes should be suspended, and Utah’s governor proposed a $160 million grocery tax credit for families. Maine’s Gov. Mills announced that her proposed budget will include plans to fund universal free meals in schools and promote school and community gardens.
- Public Health: Three governors addressed the topic of public health, with the governor of Indiana mentioning a number of public health issues, including that the state’s Public Health Commission will be publishing recommendations on ways to modernize and strengthen the state’s overall public health system. Also, given that the state ranks 46th in obesity, 46th in smoking, and 40th in childhood immunizations, he emphasized the importance of investing in preventive measures to minimize future costly health complications. Additionally, he noted plans to continue focusing on reducing infant mortality and strengthening childhood lead screening efforts. Nebraska’s Gov. Ricketts highlighted plans to use $200 million from the American Rescue Plan Act for public health emergency response efforts. South Carolina’s governor also noted plans to use federal funds for investments in upgrading water and sewer systems and commented on how these enhancements can improve the overall public health of communities.
- Transportation: Seven governors spoke about transportation infrastructure investments from a health-focused perspective. Five governors mentioned initiatives to support clean transportation, with Delaware’s Gov. Carney and Michigan’s Gov. Whitmer highlighting plans to dedicate resources to support electric vehicles and Washington’s Gov. Inslee proposing to invest nearly $1 billion to fund a range of transportation programs that reduce pollution. Additionally, Indiana’s Gov. Holcomb spoke about investing in commuter rail projects as well as committing $150 million to expand the state’s walking, hiking, and biking trails.
- Violence Prevention: Thirteen governors commented on the issue of violence prevention. The governors of Delaware, Maryland, New Jersey, and New York emphasized the importance of gun violence prevention, and the governors of both Colorado and Illinois focused on community-based violence prevention initiatives. Alaska’s Gov. Dunleavy requested state legislators to fund the People First Initiative, which includes addressing the issues of domestic violence and sexual assault, human trafficking, and missing and murdered Indigenous individuals.
Conclusion
As the United States enters the third year of the pandemic, governors’ 2022 state-of-the-state speeches reflect the realities of health and economic recovery. Compared to 2021, states have access to additional resources through ARPA, and their priorities remain centered on addressing the lasting impacts of the COVID-19 pandemic with an emphasis on behavioral health, education and jobs and wages. As state legislatures convene and enact budgets, the National Academy for State Health Policy will continue to track many of these topics in the coming months.
Drug Price Transparency Laws Position States to Impact Drug Prices
/in Prescription Drug Pricing California, Maine, Nevada, Oregon, Vermont Blogs, Featured News Home Prescription Drug Pricing /by Johanna Butler and Jennifer ReckDrug price transparency laws enable state policymakers to understand opaque drug pricing and payment systems to formulate appropriate policy solutions to high prices, while also creating the data infrastructure to effectively realize those policy solutions. Since Vermont passed the first state drug price transparency law in 2016, more than a dozen states have enacted and implemented similar laws.
State-level transparency legislation shines light on drug pricing by requiring manufacturers and other supply chain entities such as prescription drug benefit managers (PBMs), health plans, and wholesalers to provide information on drug pricing. Transparency programs also establish accountability around manufacturers’ price increases or high launch prices. Since programs began collecting pricing data, states have seen fewer drug price increases trigger reporting requirements; however, launch prices and overall spending on prescription drugs have continued to increase.
Transparency laws can also create a foundation for additional strategies to lower drug costs. Policies like prescription drug affordability boards (PDABs), rely on having access to and expertise with drug pricing data. This blog provides an update on state drug price transparency laws and their impact.
Current State Transparency Landscape
Vermont passed the first state drug price transparency law in 2016. Since then, 13 other states have passed transparency laws focused on drug manufacturers and other actors within the supply chain – CA, CT, ME, MN, NV, NH, ND, OR, TX, UT, VA, WA, and WV. Most state programs require reporting from manufacturers when they increase the wholesale acquisition cost (WAC) of a drug above a certain threshold or if they introduce a drug with a high launch price. Several states also require reporting from insurers and pharmacy benefit managers. A few states extend reporting to other supply chain actors – pharmacy service administrative organizations (WA) and wholesale distributors (ME, NV, VA).
Transparency programs vary state-by-state regarding which drugs are reported on, the level of data collected (in aggregate or on an individual drug level), and how data is published and analyzed by the state.
- Maine’s transparency program offers one of the more robust approaches to drug price transparency. Maine collects and analyzes data with the goal to identify each supply chain entity’s average net income, including data on manufacturers, PBMs, insurers, pharmacies, and wholesale distributors. This allows the public and policymakers to “follow the money” through the supply chain.
- California’s transparency program posts launch price information and five-year schedules of price increases reported by manufacturers to its website, creating one of the only freely available sources of WAC data.
- Oregon’s transparency program holds an annual public hearing that acts as a forum for sharing data analysis, discussion with stakeholders, and policy recommendations.
- Nevada took a unique approach with its transparency program, first focusing reporting on diabetes drugs when its program was enacted in 2018 and then including asthma medications in 2019. In 2021, the state expanded its program to include all prescription drugs.
Impact of Transparency Programs
As states investigate and work to lower high drug costs, drug price transparency has become an important foundation and launch pad for efforts to lower costs. Data collected by state transparency programs can provide insights into the types of price increases and types of drugs driving high spending in a state. Pricing data can provide policymakers state-specific information to direct policy.
Moderated Price Increases Over Time
Since state transparency laws were first enacted, the number of price increases that trigger reporting based on state thresholds has decreased over time. Vermont’s Medicaid program explained in its 2020 report that compared to 2016, there was a 79 percent decline in the number of drugs reaching the state’s per year price increase threshold. The program report concludes that fewer manufacturers are excessively increasing the price of drugs. Similarly, Oregon’s transparency program reported that compared to its first year of implementation in 2019, the program received 70 percent fewer reports for price increases in 2020. However, during that same time, Oregon saw a 15 percent increase in the number of drugs with high launch prices.
Vermont and Oregon’s findings align with what drug pricing researchers have found – from 2016 to 2020 the amount of WAC price increases have decreased but launch prices have continued to rise. Although the rate of price increases may be moderating, launch prices may still cause increased state spending on prescription drugs.
Accountability for High Launch Prices
Transparency programs can establish accountability around manufacturers’ high drug price increases and high launch prices. For example, manufacturers of Semglee, the first generic insulin product deemed interchangeable by the U.S. Food and Drug Administration, recently announced it will price the new insulin product at almost $270 per vial, only $20 cheaper than Lantus, the brand-name biologic competitor. Based on this launch price, Semglee would trigger Virginia’s reporting requirements under the state’s 2021 transparency law which requires manufacturers to report information on the launch of biosimilar products that are not at least 15 percent below the cost of the reference biologic. While the law is not yet implemented, Virginia’s program would be one of the most immediate tools to create some accountability for Semglee’s high list price.
Data Infrastructure for Policy Solutions
In addition to establishing accountability, transparency programs can provide the necessary data infrastructure for the successful implementation of efforts to lower drug prices. Since 2020, several states have enacted prescription drug affordability boards (PDAB), entities with the authority to review high cost drugs and in some states set an upper payment limit to ensure no one pays more than that amount in the state. A first step for a PDAB to review high drug costs and potentially set payment limits is to gather the necessary drug pricing data – whether that’s leveraging existing data sources or establishing manufacturer or insurer reporting like transparency programs. States without transparency laws already in place must include transparency requirements. For example, Colorado’s PDAB law, enacted in 2021, requires insurers to report top-spend drugs to help inform which drugs the PDAB will review.
States that already have transparency programs in place however, are well-positioned to take steps to rein in high drug costs through a PDAB. Oregon’s new PDAB law leverages the state’s existing drug price transparency programto identify high-cost drugs that should be reviewed by the board. Each quarter the transparency program will provide the PDAB with a list of drugs with high price increases or high launch prices as well as a list of insulin products sold in the state in the previous year. Based on this information, the PDAB will identify nine drugs and one insulin product to review. Oregon’s PDAB will be supported and housed in the same agency that manages the drug price transparency program, the Department of Business and Consumer Services, allowing the PDAB to capitalize on the drug pricing data expertise developed by the transparency program since it was enacted in 2018.
In these ways, transparency can be seen not only as a steppingstone to future action, but often a necessary building block to sustain other efforts. The data gathered and expertise developed by transparency programs could be applied to any number of drug pricing policies beyond PDABs – direct negotiations for supplemental Medicaid rebates, implementing reference rates, or prohibiting price gouging.
Federal Efforts on Transparency
While a variety of federal transparency efforts are in process, state transparency programs go beyond proposed or recently enacted language. The Build Back Better Act that passed the House in November 2021 but continues to be debated in the Senate, would require pharmacy benefit managers to report certain information related to spending, cost, utilization, and formulary placement to health plan sponsors. Additionally, the Centers for Medicare and Medicaid Services (CMS) recently published an interim final rule requiring health plans to report certain information on the most costly drugs, most frequently utilized drugs, and drugs with the greatest year over year spending increases, among other data elements, to the Departments of Health and Human Services, Labor, and the Treasury. This interim final rule is similar to the insurer reporting requirements of many existing state transparency programs. For states that do not have transparency laws, this federal data, if shared with state leaders, could be helpful to identify top-spend drugs in each state and fuel other strategies to lower costs such as a PDAB. However, it’s unclear to what extent the data could be accessed or used by states, though states are eager to coordinate with the federal government to enhance data-sharing on drug prices. Importantly, none of these initiatives focus on requiring reporting from manufactures – who actually set drug prices – leaving state officials to continue this important work.
To learn more about state transparency legislation, review the National Academy for State Health Policy’s state strategy implementation tracker or the Transparency Law Comparison Chart.
Toolkit: New Legislative and Medicaid Models to Lower Drug Prices
/in Prescription Drug Pricing Featured News Home, Toolkits Legal Resources, Model Legislation, Prescription Drug Pricing /by Drew Gattine, Jennifer Reck and Sarah LanfordState Strategies To Lower Drug Prices: New Legislative And Medicaid Models
/in Prescription Drug Pricing Featured News Home, Reports Prescription Drug Pricing /by Sarah Lanford, Jennifer Reck and Drew GattineOpportunities for Aligning Prescription Drug Affordability Boards and Cost-Growth Benchmarks
/in Prescription Drug Pricing Blogs Prescription Drug Pricing /by Johanna ButlerHigh prices for health care services and prescription drugs are driving health care spending and increasing insurance premiums. To tackle rising health care costs, states have advanced two separate but related initiatives over the past few years:
- cost-growth benchmarks to track and contain overall health care spending; and
- prescription drug affordability boards (PDABs) to conduct reviews of high-cost prescription drugs and set limits on what can be paid for these drugs in the future.
Some states have been considering the similarities and differences in these approaches as well as opportunities for alignment across these initiatives.
Background
Massachusetts first introduced a cost-growth benchmark in 2012 as a way to measure overall health care spending and set a target for annual spending growth. Following Massachusetts, several other states have enacted cost-growth benchmarks – Connecticut, Delaware, New Jersey, Oregon, Rhode Island, and Washington. Current spending growth benchmark levels range from 3.1 – 3.4 percent and most states have a “glide path” towards lower cost growth over time.
In 2017, the National Academy for State Health Policy (NASHP) released model legislation for a prescription drug affordability board (PDAB), comparable to a public utility commission for drugs. Based on the model, a PDAB has the authority to determine if a drug is unaffordable and set an upper payment limit for certain high-cost drugs to ensure no one pays more than that amount in the state. Maryland enacted the first PDAB in 2020 and since then, other states, including Colorado, Maine, New Hampshire, and Oregon, have enacted legislation with similar goals, although slightly different designs.
Key Differences between PDABs and Cost-Growth Benchmarks
While both a PDAB and cost-growth benchmark rely on data to measure and contain health care spending, they use different mechanisms to contain costs. PDABs set upper payment limits on certain prescription drugs the Board determines are unaffordable, which limits how much purchasers can pay for those drugs. In contrast, states use a cost-growth benchmark to set projected growth, but to determine if the benchmark is met the state does a retrospective look back at costs over the past year. This process enables policymakers to compare the previous year’s actual spending against the benchmark, to better understand which actors within the health system may be driving excessive spending, and to make policy recommendations for addressing those drivers.
Cost-growth benchmarks look at total spending in aggregate. The benchmark is generally enforced by noting stakeholders that are responsible for high costs during public meetings and in public reports. In states such as Massachusetts, there is also a threat of a targeted performance improvement plan for entities determined to be cost drivers. In 2021, Oregon enacted a more robust enforcement process for the state’s cost-growth benchmark, adding financial penalties for payers and providers that exceed the benchmark.
PDABs, in contrast to cost-growth benchmarks, focus exclusively on prescription drugs and establish a limit for payment of a specific drug, although the PDAB’s authority and which payers are affected by an upper payment limit varies state-to-state. For example, Maryland’s PDAB will initially set upper payment limits for enrollees in public plans while Colorado’s PDAB affects all consumers in the state, except self-funded plans that elect not to participate.
Similarities Across Policies
Equity Focus: Recognizing that unaffordable care creates and exacerbates health equity challenges, state officials have discussed how to include equity considerations in the work of both PDABs and cost-growth benchmark initiatives. In its 2021 cost trends report, Massachusetts included a new section on measures of health equity as well as policy recommendations for advancing equity, including setting new equity-based targets and improving data collection. As part of Oregon’s recently enacted PDAB law, the criteria to determine which drugs the PDAB will review includes whether a drug has led to health inequities in communities of color.
Engagement of Stakeholders: PDABs and cost-growth benchmarks create a forum for convening and holding accountable the stakeholders involved in the high costs of health care. Most state PDABs are either mandated or have the authority to establish advisory councils made up of stakeholders impacted by rising drug costs. Cost-growth benchmarks use a variety of levers to hold stakeholders accountable to the benchmarks, including annual public hearings to enhance transparency. These initiatives purposefully create a venue for stakeholder feedback and conversation with consumers and state officials to better understand rising costs.
Use of Data: Both cost-growth benchmarks and PDABs use existing and newly collected data to drive cost containment efforts. For example, Colorado’s PDAB legislation includes new reporting requirements for insurers, pharmacy benefit managers, and manufacturers. Insurers will report to the board on top-spend drugs to help inform which drugs the PDAB will review. Similarly, Oregon’s PDAB will leverage the state’s existing drug price transparency program to identify high-cost drugs that should be reviewed.
Cost-growth benchmark programs use public and private payer data to understand total health care spending in the state. For example, states use total medical expenses (TME) for Medicaid, CHIP and Medicare as well as per member, per year TME reported by commercial insurers to measure total cost of care. In part because of these data needs, but also out of a consideration for establishing independent processes, PDABs and cost-growth benchmarks require a degree of new state infrastructure to implement.
State Infrastructure Needed for Cost Containment Strategies
Both PDABs and cost-growth benchmarks are an effort to leverage health policymaking to contain costs by using data to limit future expenditures, but what kind of state infrastructure do they require? Interested states may ask if the same state agency or board could conduct both the drug affordability review work of a PDAB and cost-growth benchmark analyses. While the work related to these efforts is connected and in fact may be improved by coordinating across policies, there is likely different expertise needed for the implementation of a PDAB versus a cost-growth benchmark.
PDABs and other drug affordability review work requires a degree of expertise in complex pharmacy pricing. Across states, PDABs are generally independent or semi-independent boards that are supported by state agency staff. For example, Maryland’s PDAB includes providers as well as academics and former state officials with expertise on a range of topics – cost-effectiveness research, pharmaceutical costs, pharmacoeconomic analysis, and the existing drug distribution and payment system. The staff supporting the board also has a range of pharmacy knowledge, legal expertise, and experience collecting and/or analyzing drug pricing data.
Like PDABs, in most states, a cost-growth benchmark is overseen by a board or commission with support from state agencies for data collection and analyses. For example, in Massachusetts, the state created a new agency, the Health Policy Commission (HPC), to carry out the work related to the cost-growth benchmark. Massachusetts’ efforts are guided by the HPC’s 11-member board and supported by the Center for Health Information and Analysis, the state’s all-payer claims database (APCD). Other states have placed their cost-growth benchmark in existing agencies such as Rhode Island’s Office of the Health Insurance Commissioner or Connecticut’s Office of Health Strategy. Each of these agencies, new or existing, must have access to and expertise in handling health care spending data. This expertise would likely differ from that of a PDAB as expertise for a cost-growth benchmark would require a broader understanding and melding of spending information across health care sectors as well as a strong understanding of the provider and insurer market in a state.
Some states have started to establish central offices focused more generally on health care affordability. These more central offices or agencies could support both hospital and drug focused cost containment strategies, but the boards or stakeholders tapped to discuss these issues may need to be different. The Massachusetts Health Policy Commission is an early example of this – not only does the agency support the cost-growth benchmark, but it also does some drug affordability review work for MassHealth that is relevant to PDABs. In the 2021 legislative session, Maine created an Office for Affordable Health Care which will support the state’s PDAB. The Maine office is also tasked with monitoring health care cost growth.
As states craft solutions to the health care cost conundrum, the efforts focused on prescription drugs, hospital care, and other health care sectors may overlap. As states consider possibilities to align these approaches together, officials should consider:
- Could the same agency or office support these different initiatives even if there are separate external stakeholders?
- How will these initiatives be funded? Could these activities be funded by a universal fee on health care actors (providers, drug manufacturers, health plans, etc.), including both drug supply chain entities and providers and payers? Or should funding for a PDAB and cost-growth benchmark be collected and used separately?
- How can these initiatives be linked in more substantive ways beyond implementation logistics?
- For example, for states that include pharmacy spending as part of a cost-growth benchmark or annual cost growth reporting, is there a way to link this information to the work of a PDAB?
- Could a PDAB review a greater or fewer number of drugs, or different types of drugs, in response to a state exceeding its cost-growth benchmark if growth in pharmacy spend played a role?
- How can each of these initiatives be best aligned and added to a number of other ongoing state strategies to achieve more affordable health care?
To learn more about ongoing state efforts, see NASHP’s Center for State Rx Drug Pricing and the Center for Health System Costs, which track implementation of these state strategies.
NASHP’s Annual Conference Highlights States Taking Bold Action on Drug Prices
/in Prescription Drug Pricing Featured News Home Newly-Enacted Laws, Prescription Drug Pricing, State Rx Legislative Action /by Sarah Lanford and Jennifer ReckWhile Congress continues to consider significant reforms for drug pricing, states have taken bold steps to control drug prices across payers. This legislative session, Colorado followed Maryland’s lead and established a prescription drug affordability board (PDAB) to address high drug prices. PDAB legislation, such as Maryland’s and Colorado’s, that includes authority for a board to set upper payment limits (UPLs) within a state for high cost drugs, represents some of the strongest state efforts to date to rein in drug costs. The National Academy for State Health Policy’s (NASHP) 2021 annual conference featured a session highlighting Colorado and Maryland’s PDAB laws, as well as New York’s experience with enhanced negotiating authority with manufacturers for high cost drugs within its Medicaid program. New York’s success in achieving notable savings offers insights on implementation that can help guide states standing up PDABs.
Maryland’s Prescription Drug Affordability Board
Enacted in 2019, Maryland’s PDAB law was created to study the prescription drug market in Maryland and to protect consumers and the state from the high costs of prescription drugs. The Board has spent the past year analyzing Maryland’s pharmaceutical distribution and payment system and will report findings, along with policy options to lower costs, to the General Assembly by the end of this year. In September, Maryland issued its first round of invoices for the assessment on drug manufacturers and other entities along the supply chain to support the work of the state’s PDAB. Under the legislation, the PDAB can consider setting upper payment limits, implementing a reverse auction marketplace, and establishing a bulk purchasing process. If the Board determines it is in the interest of the state to establish a process for setting UPLs, the Board must create a plan of action for implementing the process that includes the criteria the Board shall use to set UPLs and submit the plan to the Legislative Policy Committee for its approval. If the plan is approved, the Board may begin setting UPLs for state purchasers in 2022, and for all purchasers starting in 2023.
Colorado’s Prescription Drug Affordability Board
In June 2021, lawmakers in Colorado enacted a law to create a PDAB with aggressive timelines that will enable the Board to begin setting upper payment limits for all payers as early as next year. The law has a transparency component that requires insurance carriers and pharmacy benefit managers to report certain cost and utilization information to the Division of Insurance. The Board will use that data to perform affordability reviews of drugs that exceed the wholesale acquisition cost triggers outlined in the law.
Beginning April 1, 2022, the Colorado PDAB may establish UPLs for up to 12 drugs each year. Colorado’s PDAB, unlike Maryland’s, does not require additional legislative authority to set UPLs, and UPLs will apply to all purchases of and payer reimbursements for a drug dispensed or administered in the state. Similar to Maryland, the Colorado PDAB will make policy recommendations to the General Assembly on strategies to improve the affordability of prescription drugs for consumers.
New York Medicaid’s Drug Cost Cap and Enhanced Negotiating Authority in Massachusetts
In 2017, New York enacted a law that gave the Medicaid program the authority to negotiate with drug companies for supplemental rebates if drug spending is projected to exceed an annual spending limit, which is based on a 10-year rolling average of the Consumer Price Index. If the state is unable to reach an agreement with a manufacturer, a drug may be referred to the Drug Utilization Review Board (DURB), which then conducts a value assessment of the product. When conducting a value assessment, the DURB can consider a drug’s affordability and net cost to Medicaid, value-based pricing, significant price increases, and/or the proportionality of price to therapeutic benefit.
Five years later, New York has had success with this approach. Since the law went into effect in 2018, the state has negotiated over 50 new supplemental rebate contracts with manufacturers, which have generated over $500 million in new supplemental rebates. The DURB has also completed three value assessments for the drugs Orkambi, Remicade, and Spinraza. The DURB used value-based pricing benchmarks from the Institute for Clinical and Economic Review (ICER) to guide the Department of Health on target supplemental rebate amounts for Orkambi and Spinraza and a domestic reference pricing approach for Remicade because two comparable biosimilars were on the market. As a result, New York’s drug cap is achieving additional rebates and reducing the growth of spending without limiting access to high-cost drugs.
Massachusetts has a program similar to New York’s which enables enhanced negotiating authority within its Medicaid program. If an agreement cannot be reached and the drug exceeds certain price thresholds, the drug can be referred to the Massachusetts Health Policy Commission (HPC) for review. To date, this approach has been successful in securing additional rebates without the need for HPC review.
For more information about state actions to lower drug costs, explore NASHP’s Comparison of State Prescription Drug Affordability Review Initiatives and legislative tracker.
States Can Again Weigh in on TennCare Demonstration with Closed Formulary
/in Prescription Drug Pricing Blogs, Featured News Home Prescription Drug Pricing /by Jennifer ReckStates and other stakeholders have another chance to weigh in on Tennessee’s 10-year Medicaid funding demonstration which was approved by the Centers for Medicare & Medicaid Services (CMS) in early January during the final days of the Trump administration. In April, two legal advocacy organizations sued the federal government to block the demonstration, though the plaintiffs have since agreed to pause the lawsuit on the condition that a new federal comment period be opened. CMS is accepting public comments through September 9.
The Medicaid demonstration enables Tennessee to receive a capped amount of federal funding and flexibility to change the program at its discretion, so long as changes maintain or are additive to its level of coverage in 2020. Savings that the state achieves through the demonstration can be invested in other health programs.
One aspect of note within the Tennessee waiver is CMS’s approval for a closed drug formulary – a state strategy that has taken on increased relevance following the Food and Drug Administration’s accelerated approval of Aduhelm in June. Under accelerated approval, Biogen has until 2029 to complete confirmatory trials to prove Aduhelm is performing as hoped. In the meantime, Aduhelm’s approval has the potential to lead to millions in increased Medicaid spending for a drug with unproven clinical benefits.
States have few policy levers to address the impact of the accelerated approval program on their Medicaid spending, however, a closed formularies would enable a state to exclude certain drugs, like those approved under the accelerated approval program, from coverage. Another approach is reflected in the recent Medicaid and CHIP Payment and Access Commission (MACPAC) recommendation to Congress to increase Medicaid rebates for accelerated approval drugs until confirmatory trials are complete. While Tennessee’s closed formulary was approved as part of its 1115 demonstration, an earlier request by Massachusetts for approval of a closed formulary was denied in 2018. Dan Tsai, who led the closed formulary effort in Massachusetts, is now the Director of the Center for Medicaid and CHIP within CMS.
Though states can weigh in on any aspect of Tennessee’s waiver, the re-opened federal comment period represents an important opportunity for comments related to closed drug formularies, specifically following the controversial FDA approval of Aduhelm through the accelerated approval program. Comments on the closed formulary, or any other aspect of the TennCare 1115 waiver, can be shared here.
Three More States Enact Reverse Auction Laws to Reduce Prescription Drug Spending
/in Prescription Drug Pricing Colorado, Louisiana, Minnesota Blogs, Featured News Home Prescription Drug Pricing /by Amanda AttiyaColorado, Louisiana, and Minnesota enacted laws this session enabling reverse auctions to procure a pharmacy benefit manager (PBM) for their state employee health plans (SEHPs).
This approach to PBM procurement, first used by New Jersey, aims to achieve savings by encouraging PBMs to be more competitive on pricing in their bidding for contracts without reducing drug benefits for the state’s public employees.
In the reverse auction procurement model, states design their own drug formulary for their SEHP, and a PBM’s participation in the auction is contingent on agreeing to the terms of the proposed state drug benefit plan. This eliminates the need for states to compare bids based on specific services provided and instead allows states to focus solely on price.
To conduct a reverse auction, states must first procure a third-party technology vendor through a request for proposal (RFP). PBM procurement is then initiated through a second RFP and managed through the vendor’s technology platform. The reverse auction platform allows each PBM to see how its bid compares against the highest bid in an anonymous fashion, giving bidders the opportunity to improve their offers over several rounds of bidding. This process forces vendors to compete more aggressively on price alone while still offering the same services and benefits to SEHP beneficiaries.
Colorado, Louisiana, and Minnesota enacted legislation in June 2021 to authorize reverse auction procurement of PBM services for their SEHPs and are in the early stages of implementation. Minnesota released an RFP for a technology platform with bids due in early August. Colorado is in the process of developing their technology vendor RFP, while Louisiana’s law went into effect on August 1.
New Jersey became the first state in the nation to authorize and implement reverse auction procurement of PBM services in 2016 – the state reports a savings of $2 billion over five years without cutting drug benefits for State Health Benefits Program and School Employees’ Health Benefits Program enrollees. Maryland followed in 2019, tasking the state’s Prescription Drug Affordability Board (PDAB) with evaluating whether to pursue this model of procurement. In the meantime, Maryland moved forward with an RFP for a technology platform to support the reverse auction with bids due early July. New Hampshire’s Employee Benefits Plan secured a contract with a technology platform in January. Initial responses to their RFP for PBM services were due in June, and bidders are being evaluated on price and a point system based on the technical questionnaire. Their proposed PBM contract terms contain few major changes from their existing PBM contract, though the state is switching to a pass-through model.
Other states continue to express interest in this approach to achieving prescription drug savings. Looking ahead, NASHP will continue to monitor reverse auction proposals and compile resources useful to states considering and implementing reverse auctions such as enacted laws, RFPs, and contracts. On July 28, 2020, NASHP hosted a webinar featuring New Jersey’s experience implementing a reverse auction model. State officials interested in viewing the webinar recording or learning more about reverse auctions should contact Amanda Attiya.
State Strategies for Costly Drugs with Unconfirmed Clinical Benefits
/in Prescription Drug Pricing Blogs, Featured News Home Prescription Drug Pricing /by Jennifer Reck and Amanda AttiyaThe recent approval of the Alzheimer’s drug Aduhelm under the U.S. Food & Drug Administration’s (FDA) Accelerated Approval Program is controversial for a range of reasons, including its projected impact on state Medicaid budgets which will be required to cover the drug, priced at $56,000 a year, despite inconclusive evidence of its clinical effectiveness. While Aduhelm is the latest prescription drug to make headlines, state Medicaid programs have been seeking policy solutions to address high cost accelerated approval drugs for some time.
The Accelerated Approval Program
Created in 1992 in response to the HIV/AIDS crisis, the FDA’s Accelerated Approval pathway is intended for drugs that address unmet medical needs, often showing a previously unseen benefit or targeting a disease with few or no available treatments. These drugs are approved based on surrogate endpoints which may not reflect the true clinical outcomes of interest. In the case of Aduhelm, approval was based on the drug’s ability to prevent the build up of certain plaques in the brain, though it has not demonstrated an ability to limit the memory impairment associated with Alzheimer’s. Manufacturers of accelerated approval drugs must conduct post-market confirmatory trials to verify the anticipated clinical benefit, however they have limited incentives to do so in a timely fashion. Biogen has until 2029 to complete confirmatory trials indicating whether Aduhelm is performing as hoped.
Medicaid programs opting to cover outpatient drugs (all do) are required to cover all FDA-approved drugs, including those approved through the Accelerated Approval Program such as Aduhelm. The lower evidentiary standards underlying the approval of these drugs means states are required to pay for drugs with unclear clinical benefits. Though accelerated approval drugs represent a minimal percentage of Medicaid prescriptions, they account for a much larger percentage of overall Medicaid drug spending net of rebates. States have long expressed concerns about paying high prices to cover these drugs when clinical outcomes have not been verified.
Though both require federal approval, states have pursued two main policy responses with the ability to alleviate spending on accelerated approval drugs prior to manufacturer completion of post-marketing confirmatory trials resulting in traditional approval:
- Closed formularies, which would allow a state to exclude accelerated approval drugs;
- Higher rebates for drugs approved under the Accelerated Approval Program.
Closed Formularies
Two states have sought approval from the Centers for Medicare and Medicaid Services (CMS) for Section 1115 Medicaid demonstrations to implement closed formularies which would enable a state to exclude certain drugs from Medicaid coverage, such as those approved under the Accelerated Approval Program. In 2018, CMS denied Massachusetts’ request, stating it would not authorize a closed formulary while still allowing the state to keep the mandatory rebates from the Medicaid Drug Rebate Program. In January 2021 however, CMS approved Tennessee’s Medicaid block grant demonstration which included a closed formulary. It is uncertain if the Biden Administration will seek to limit the approval of Tennessee’s block grant demonstration. Some state officials, however, wonder if former Massachusetts Medicaid Director Dan Tsai, who led the state’s closed formulary initiative, and who is the new Director of the Center for Medicaid and CHIP within CMS, will be supportive of a closed formulary option if additional states request this flexibility.
Increased Manufacturer Rebates
CMS requires state Medicaid programs to cover essentially all FDA-approved drugs in exchange for preferred pricing benefits under the Medicaid Drug Rebate Program, including accelerated approval drugs.
In June 2021, MACPAC made two recommendations to Congress regarding accelerated approval drugs that would alleviate state spending for these drugs. MACPAC recommended:
- Increasing the minimum rebate on accelerated approval drugs until the manufacturer completes the post-marketing confirmatory trial and the drug is granted traditional FDA approval.
- Increasing the additional inflationary rebate on accelerated approval drugs if the manufacturer has not yet completed the post-marketing confirmatory trial and has not been granted traditional FDA approval after a specified number of years.
These recommendations would maintain coverage requirements, while providing financial incentives for manufacturers to complete confirmatory trials in a timely manner and mitigating price increases prior to confirmatory trial completion.
State officials interested in further information on accelerated drug approvals, including slides and a recording of a state-only webinar, may contact Jennifer Reck. Medicaid Pharmacy Directors that may be interested in participating in a brief, anonymous interview with researchers on accelerated approvals may also contact Jennifer Reck to learn more.
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