Why Drug Prices Are Too High—And How States Can Fix It

The Root Cause: Manufacturer List Prices

When Americans can’t afford their medications, it starts with drug manufacturers and the prices they set—as high as the market will bear. Hospitals, pharmacies, doctors, and patients are all downstream of drugmakers’ monopoly pricing decisions.

Here’s what that looks like in practice

The appetite suppressing drug Ozempic costs Americans nearly $1,000 per month. But the same manufacturer charges about $92 in Germany—showing the U.S. price has nothing to do with production costs.
Enbrel, an arthritis medication, has increased 1,582% since FDA approval—not because production costs rose, but because the manufacturer could.
Manufacturers routinely raise prices twice per year, often far exceeding inflation.

These aren’t market prices. They’re monopoly prices. Patents give drug companies exclusive rights to sell their products, and they exploit that government-granted monopoly to extract maximum profit.

The result: Americans pay 2-4 times what patients in other countries pay for the exact same medications made by the same manufacturers. But in some cases, Americans fare even worse. For example, a 90-day supply of the popular blood-thinner Eliquis costs about $1,800 in the United States. In Canada, it’s only $225.

The Solution: Prescription Drug Affordability Boards

Prescription Drug Affordability Boards (PDABs) are state-level bodies that restore accountability to pharmaceutical pricing. They give states the power to say “no” to monopoly pricing and protect patients, employers, and taxpayers from manufacturers’ out-of-control drug price practices.

HOW PRESCRIPTION DRUG AFFORDABILITY BOARDS WORK

1. Identify Unaffordable Medications

Boards review drugs causing affordability problems for patients and state budgets—medications with high launch prices, excessive price increases, or costs that create barriers to treatment.

2. Conduct Transparent Analysis

Manufacturers present evidence about their R&D costs, production expenses, and pricing decisions. Patients, doctors, and the public provide input about clinical value and impact on access to care.

3. Restore Market Accountability

In states with this authority, boards can cap what purchasers pay for a medication within the state—limiting reimbursement to a price that reflects actual value rather than monopoly exploitation. That cap is called an Upper Payment Limit, or UPL.

Why This Restores Market Accountability

PDABs counter the anti-competitive effects of patent monopolies. When a board reviews a drug:

Manufacturers must justify their prices based on evidence, not market power
States bring transparency and can set maximum payments that reflect reasonable value
Patients and employers get relief from unsustainable costs
The focus stays where it belongs—on manufacturer pricing decisions

This isn’t about limiting innovation or imposing arbitrary controls. It’s about ensuring that government-granted monopolies serve the public interest, not just corporate profits.

Real Results: PDABs Across America

11 states have established PDABs

Colorado, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Ohio, Oregon, and Washington

4 states can set Upper Payment Limits (caps on drug prices)

Colorado – First state to vote for an upper payment limit (Enbrel, 2024)

Maryland – UPL implementation plan approved and moving forward

Minnesota – Ties upper payment limits to Medicare negotiated prices

Washington – Authority established, implementation underway

Multiple states are considering PDAB legislation in 2026, recognizing that states don’t have to accept whatever price manufacturers demand. PDABs have strong bipartisan support among voters.

Colorado’s Leadership

In February 2024, Colorado became the first state to vote for an upper payment limit, targeting Enbrel after determining its 1,582% price increase made it unaffordable for Colorado patients.

The process

Transparent implementation timeline

Public hearings with manufacturer participation

Analysis of costs, therapeutic alternatives, and patient impact

Evidence-based board determination

This is accountability in action—holding manufacturers responsible for pricing decisions through a fair, public process.

Who Benefits

Patients

Lower out-of-pocket costs, especially for the uninsured and underinsured who pay closest to list price

Seniors

Protection from price increases that erode fixed retirement incomes

Employers

Relief from health insurance cost increases driven by drug spending

State Governments

Medicaid and employee health plan savings

Taxpayers

Reduced state spending on overpriced medications

The only losers: Drug manufacturers who can no longer charge whatever they want.

Why PDABs Are a Pragmatic Solution

Bipartisan Appeal

Both conservative and progressive states have enacted PDABs. Fiscal conservatives appreciate protecting taxpayer dollars. Progressives value patient protection. Everyone benefits from manufacturer accountability. PDABs have strong bipartisan support among voters.

State Control

States can tailor their boards to local priorities—whether focusing on Medicaid savings, protecting retirees, or addressing specific therapeutic areas.

Market-Based

PDABs don’t dictate what manufacturers can charge nationally. They set what purchasers in a state will pay, letting manufacturers decide whether to accept that price or lose market access.

Complementary to Federal Action

Medicare drug price negotiation under the Inflation Reduction Act addresses a limited number of drugs. PDABs can cover hundreds more, and states like Minnesota explicitly tie their limits to federal negotiated prices.

What PDABs Are Not

Not arbitrary price controls: Limits are set through evidence-based review of manufacturing costs, R&D expenses, therapeutic value, and affordability impact.

Not anti-innovation: Boards review drugs already on the market, often years after launch when companies have recouped development costs. Reasonable pricing doesn’t prevent innovation—it prevents exploitation.

Frequently Asked Questions

Q: Won’t manufacturers just refuse to sell in states with Upper Price Limits?

A: Unlikely. States represent major markets with millions of patients. Walking away means abandoning substantial revenue and giving competitors an opening. In practice, manufacturers negotiate or accept limits rather than exit markets.

Q: What about constitutional challenges?

A: Yes, manufacturers are suing. That’s what companies do when states threaten their profit margins. But so far, courts haven’t been convinced. Colorado’s board is operating while manufacturer lawsuits proceed, and legal experts believe well-designed PDAB laws can withstand these challenges. Manufacturers have billions at stake in preserving monopoly pricing—of course they’ll fight in court. But states have legitimate authority to decide what they’ll pay for drugs, just as they do for other purchases.

Q: How long until patients see savings?

A: Colorado voted for its first UPL (a price cap on what purchasers will pay) in February 2024 and is implementing it now in/at the end of 2025. Maryland approved its implementation plan in late 2024. As more states act and processes mature, timelines will shorten. Early states are creating the roadmap others will follow.

The Path Forward

States have the power to act now. They don’t need to wait for Congress or federal agencies. Every state legislature can establish a PDAB – the backbone of ALDP’s advocacy agenda – and every board can review drugs causing affordability crises in their state.

The more states act, the more pressure manufacturers face to justify their pricing decisions and accept reasonable limits. A patchwork of state actions can create national momentum for manufacturer accountability.

PDABs are proven, practical, and powerful tools for lowering drug prices by targeting the root cause: manufacturer list prices that exploit patent monopolies at patients’ expense.

Americans for Lower Drug Prices advocates for PDABs in states nationwide. We help policymakers understand how these boards work, connect them with patient voices, and counter pharmaceutical industry deflection.

Your state can establish a Prescription Drug Affordability Board. Tell your legislators it’s time to hold drug manufacturers accountable.

WHO WE’RE FIGHTING FOR

Working Families Who Are Struggling

Uninsured patients, paying full list prices
Or underinsured, facing high out-of-pocket costs
Making tough choices between medications, food and rent

People Too Sick to Work

Waiting years for a disability determination
Managing chronic conditions with limited income
Require specialty care that only few can provide
Facing drug costs that exceed monthly budgets

Those Who Are Living an Insecure Retirement

On a fixed income, while drug prices outpace inflation
Spending retirement savings on medications
Rationing prescriptions to make them last

Veterans

Navigating multiple confusing systems
Often ineligible for manufacturers’ patient assistance Programs
Any small disruption in their prescription access could have devastating consequences
Serving their country, then struggling to afford care