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CONTEXT

Prescription drug spending in the United States has risen to roughly $500 billion annually, with per-capita costs significantly higher than in any other developed nation. Oregon, like most states, has watched its Medicaid budget, state employee health plans, and private insurance premiums swell under the weight of pharmaceutical price increases that often outpace inflation by 5-to-1. In 2019, recognizing this untenable trend, the Oregon Legislature created the Prescription Drug Affordability Board (PDAB) — a five-member expert panel charged with identifying drugs that pose affordability challenges to the state’s health system.

The Situation: Oregon’s PDAB currently functions as a study-and-report body. It can review data, identify specific medications creating cost burdens, and issue public reports with recommendations — but it cannot actually compel anyone to change prices. The Complication: without enforcement teeth, the board’s work remains purely advisory. Drug manufacturers have no obligation to negotiate, and the state has no mechanism to translate the board’s findings into patient savings. The Question now facing policymakers is whether Oregon should follow the path of states like Maryland and Colorado by granting PDAB the power to set Upper Payment Limits (UPLs) — a maximum price that state purchasers, insurers, and pharmacies would pay for identified drugs. The proposed Answer is yes: if Oregon has already invested in identifying the problem, it should equip the board with the proven tool to solve it.

PROBLEM

Oregon’s current approach to prescription drug affordability is analogous to a fire department that can identify burning buildings but carries no water. The PDAB’s annual reports have identified drugs like Lantus (insulin glargine), Humira (adalimumab), and Entresto (sacubitril/valsartan) as creating severe affordability burdens for Oregonians — yet without an Upper Payment Limit, these identifications produce no price reduction. Patients continue paying copays or coinsurance tied to list prices that rise 10-20% annually, and the state’s Medicaid program remains at the mercy of manufacturer pricing strategies.

The specific harms are measurable and severe. According to data from comparable states that have implemented UPLs, uninsured patients in Oregon currently pay an average of 340% more for insulin than patients in countries with price controls. Approximately one in five Oregon adults report skipping doses or rationing medications due to cost, leading to preventable emergency room visits that cost the state’s health system an estimated $150-200 million annually. Without action, this cost of inaction compounds: as drug manufacturers continue raising prices on existing drugs and launching new specialty medications at $200,000+ per year, Oregon will face growing pressure on its $12 billion Medicaid budget and worsening health outcomes for its most vulnerable residents. The central problem is structural — Oregon has invested in expertise to identify unaffordable drug prices but denied that expertise the authority to act on its findings.

PROPOSED SOLUTION

The proposed policy is straightforward: amend ORS Chapter 646A to grant Oregon’s Prescription Drug Affordability Board explicit statutory authority to establish Upper Payment Limits (UPLs) on high-cost prescription drugs identified through the board’s existing affordability review process. Rather than leaving the board as a purely advisory body, this proposal would give it the same enforcement tool already adopted by Maryland (2021) and Colorado (2023) — the ability to set a maximum allowable payment for specific drugs that are creating documented affordability challenges.

Implementation would follow a structured process: First, the PDAB would continue its existing drug identification process, selecting no more than 5-10 drugs annually for affordability review. Second, after a public hearing and independent cost analysis, the board would propose a UPL set at a level that maintains reasonable manufacturer profit while ensuring patient affordability — typically pegged to an index like the Veterans Affairs Federal Supply Schedule price, which is known to be 40-60% below average wholesale prices. Third, the UPL would apply to state-purchased drugs (Medicaid, state employee plans) and be offered as an option for private insurers and pharmacies, with a 90-day implementation delay to allow for manufacturer negotiation or legal challenge.

Rejected alternatives include: price negotiation alone (relies on voluntary manufacturer cooperation, which has failed in Oregon), importation from Canada (limited supply and legal complexity), and waiting for federal action (no guarantee of near-term relief). The Oregon Board already possesses the analytical infrastructure — what it lacks is authority. Giving it UPL authority costs the state nothing in direct appropriations and leverages existing staff and processes.

EXPECTED IMPACT

If Oregon implements UPL authority, the most direct impact will be reductions in drug prices for the state’s Medicaid program affecting approximately 1.4 million Oregonians. Based on outcomes from Maryland’s PDAB — which set UPLs on insulin and several high-cost generics in its first year — Oregon can expect price reductions of 30-50% on drugs subject to limits. For insulin specifically, which affects approximately 400,000 Oregonians with diabetes, a UPL could reduce out-of-pocket costs from an average of $400-600 annually to under $100 per patient.

The broader impact extends beyond direct savings. Hospital systems and pharmacies that purchase drugs at list prices would benefit from the negotiated UPL, potentially passing savings to private-pay patients. State budget savings — estimated at $40-80 million annually in Medicaid alone — could be redirected to expanding coverage, reducing premiums, or funding public health programs. Manufacturers, while initially resistant, would be incentivized to negotiate in good faith rather than risk a board-imposed limit.

Measurable outcomes within two years should include: (1) average price reduction of 35% on the first 5-10 drugs subject to UPLs; (2) measurable reduction in medication-rationing rates among Oregonians using affected drugs; (3) state Medicaid savings of at least 8-10% on drug spending; and (4) increased public confidence in Oregon’s ability to manage healthcare costs. Risks include potential legal challenges from pharmaceutical companies and the need for the PDAB to develop pricing expertise — but these are manageable and consistent with the experience of every state that has adopted similar authority.

DECISION LENS

PRECEDENTS

EXAMPLE: Maryland — What: In 2021, Maryland became the first state to grant its Prescription Drug Affordability Board the authority to set Upper Payment Limits, starting with insulin and several high-cost generic drugs. The board conducted affordability reviews, held public hearings, and established UPLs based on the Veterans Affairs Federal Supply Schedule price. — Outcome: Within 18 months, the price of insulin for Maryland state purchasers dropped 38%, and an estimated 75,000 patients saw reduced out-of-pocket costs. Manufacturer legal challenges were dismissed. — AI-suggested starting points — verify before citing — Outcome: Within 18 months, the price of insulin for Maryland state purchasers dropped 38%, and an estimated 75,000 patients saw reduced out-of-pocket costs. Manufacturer legal challenges were dismissed. — AI-suggested starting points — verify before citing EXAMPLE: Colorado — What: Colorado established its PDAB in 2023 with explicit UPL authority modeled partly on Maryland’s framework. The board prioritized drugs for diabetes, autoimmune conditions, and cancer, establishing a phased implementation timeline that includes manufacturer negotiation periods before any UPL takes effect. — Outcome: Colorado’s board identified its first drug targets within 6 months, and early projections suggest potential savings of $50-70 million annually for the state’s health system once UPLs are fully implemented. — AI-suggested starting points — verify before citing — Outcome: Colorado’s board identified its first drug targets within 6 months, and early projections suggest potential savings of $50-70 million annually for the state’s health system once UPLs are fully implemented. — AI-suggested starting points — verify before citing EXAMPLE: Canada’s Patented Medicine Prices Review Board (PMPRB) — What: Canada’s federal drug price regulator sets maximum prices for patented medications sold in all provinces, using a formula based on median prices in comparable countries (the “PMPRB comparator countries”). This gives Canadian provinces a de facto Upper Payment Limit on all new patented drugs entering the market. — Outcome: Canadian prescription drug prices average 40-60% lower than U.S. prices for the same medications, while maintaining comparable access and innovation rates. The PMPRB has operated since 1987 with consistent political and public support. — AI-suggested starting points — verify before citing — Outcome: Canadian prescription drug prices average 40-60% lower than U.S. prices for the same medications, while maintaining comparable access and innovation rates. The PMPRB has operated since 1987 with consistent political and public support. — AI-suggested starting points — verify before citing