Examining Risks of Prescription Drug Price Controls

Understanding Upper Payment Limit (UPL) in Healthcare

In the field of healthcare, an Upper Payment Limit (UPL) signifies the highest reimbursement certain payers can offer to pharmacies and providers for specific drugs. Although UPLs cap the payer’s reimbursement, they do not reduce the drug acquisition cost for pharmacies and providers, compel coverage, or ensure lower out-of-pocket expenses for the patients.

States Moving Towards Establishing PDABs with UPL Setting Capacity

While the ability of Prescription Drug Affordability Boards (PDABs) to establish UPLs is still under court review, four states — Colorado, Maryland, Minnesota, and Washington — have already begun establishing PDABs with UPL-setting power. Simultaneously, in states like Virginia and Illinois, debates on legislation to create new PDABs with UPL authority are underway.

Status of UPLs in Different States

Presently, no UPLs have been implemented. The PDABs of Colorado and Maryland have voted in favor of putting UPLs into effect for a number of drugs, although these haven’t been implemented yet. A federal judge blocked a Colorado state panel from setting a cap on the price of an arthritis and autoimmune treatment. Meanwhile, Minnesota and Washington are at various stages towards setting UPLs. As the rates of UPL implementation by PDABs are inconsistent across states, it’s uncertain how they will affect patient access and states’ overall healthcare systems in the long run, as well as the legal challenges they may encounter.

Impact of UPLs on Patients

UPLs have the potential to worsen patient access on a state-by-state basis. Given the existing incentives in coverage decisions, payers might exclude UPL drugs from their formularies, shift them to higher cost-sharing tiers, or enforce stricter utilization management. Analysis from NPC has highlighted the state-specific threats of UPLs to patient access, which could lead to worsening formulary coverage, greater cost sharing, and heightened utilization management.

UPLs – A New Challenge for Pharmacies and Providers

UPLs bring an element of uncertainty into the reimbursement and acquisition costs for pharmacies and providers dispensing and administering drugs. Since a UPL only caps what a payer reimburses but doesn’t change the acquisition cost for a pharmacy or provider, reimbursement can end up lower than the acquisition cost. This could entail new financial and logistical challenges, possibly causing some providers, particularly smaller, community-based or rural ones, to limit or cease stocking UPL drugs due to their smaller profit margins.

Lessons from Federal Price-Setting Attempts

States can learn valuable lessons from federal price-setting efforts like the Inflation Reduction Act (IRA) and international reference pricing. Indications from the IRA’s Drug Price Negotiation Program suggest that it might provide only limited reductions in cost-sharing while introducing access risks for patients. A recent CBO analysis suggests that the IRA overshot its projected costs. All in all, implementing UPLs comes with the common risks of government price regulation attempts without assured or evident patient benefits.

References

1. Patterson JA, Cole RA, Campbell JD, O’Brien JM. Upper payment limit implementation risks for patients, pharmacies, and providers. AJMC^®. July 9, 2026. Accessed October 14, 2026. https://www.ajmc.com/view/upper-payment-limit-implementation-risks-for-patients-pharmacies-and-providers