Upper Payment Limit Implementation Risks for Patients, Pharmacies, and Providers

ABSTRACT

Implementation of upper payment limits (UPLs) by state prescription drug affordability boards (PDABs) is unfolding within emerging price regulation efforts. This commentary explores the uncertainties UPLs introduce across the health care system and the potential risks to patient access. The patient-centered problem that UPLs are attempting to solve is not clear, and the downstream implementation of UPL effectuation risks worsening patient access. Our evidence-based commentary supports concerns that UPLs may threaten existing coverage, increase patient out-of-pocket costs, and expand the use of prior authorization, which is linked to poorer outcomes. For pharmacies and providers, we explore how UPLs may introduce financial uncertainty and operational burdens, leading to reduced stocking of UPL drugs or jeopardizing practice viability. Overall, we highlight that UPL implementation carries risks common to government price regulation, without clear or known benefits for patients. These policies impose implementation costs and introduce risks to benefit design, pharmacies, and providers, potentially compromising patient access and care delivery.

Am J Manag Care. 2026;32(11):In Press

Takeaway Points

Although upper payment limits (UPLs) are intended to improve drug affordability, their implementation poses significant, multifaceted risks to patients, pharmacies, and providers.

• UPLs risk worsening patient access by state; given existing incentives in coverage decisions, payers may remove UPL drugs from formularies, shift them to higher cost-sharing tiers, or impose stricter utilization management.
• For pharmacies and providers, UPLs introduce substantial financial uncertainty and operational burdens that may lead to decisions to limit or cease stocking selected drugs or jeopardize practice viability.
• In summary, UPL implementation carries risks common to government price regulation attempts without clear or known benefits for patients.

As of January 2026, 4 American states have prescription drug affordability boards (PDABs) with the authority to set upper payment limits (UPLs), or maximum reimbursement amounts, for statute-specified payers in those states. The Colorado and Maryland PDABs have voted to implement UPLs for specified purchasers or payers. Minnesota and Washington are progressing through varying stages toward UPL setting, and other states, including Virginia and Illinois, have recently debated proposed legislation to establish new PDABs with UPL authority.

UPLs cap the payment that statutorily defined payers, most often state employee benefit plans and state-regulated commercial plans, can reimburse to dispensing pharmacies or administering providers for specific drugs. UPLs, however, do not change acquisition costs for dispensing and administering entities, which are generally anchored in national pricing and contracts. Plan coverage is not currently required for UPL drugs, nor are clear guardrails specified around patient access (eg, utilization management) or out-of-pocket savings. Thus, although PDABs are costly for states to operate, they limit only the amount that specified payers reimburse for drugs, without clear mechanisms to protect patient access, lower out-of-pocket costs, or reduce acquisition costs for pharmacies and providers.

UPL implementation is unfolding within emerging price regulation efforts at the state and federal levels. Early evidence suggests that the effectuation of the Inflation Reduction Act (IRA) and its Drug Price Negotiation Program (DPNP) may offer only limited cost-sharing reductions while introducing risks to patient access.^1,2 Payers may place select drugs or their therapeutic alternatives on less favorable tiers, apply utilization management (UM), or elect not to cover therapeutic alternatives² due to misaligned incentives in the supply chain. Despite uncertainty about the patient impact of price-setting policies, new policies continue to be proposed, including CMS models GLOBE, GUARD, and GENEROUS, as well as state-level reference pricing.

Proponents contend that government price regulation, including UPL implementation, is intended to curb government drug spending and improve patient affordability. Others argue that state-level UPLs, similar to the federal-level IRA,² may destabilize the drug pricing ecosystem³ and offer limited taxpayer savings⁴ while worsening patient access^3,5 and introducing risks to pharmacies⁶ and providers.⁷ As states move toward UPL implementation at varying rates, the uncertainties introduced across the health care system and risks to patient access due to UPLs are substantial and warrant urgent attention (Figure).

Potential UPL-Related Risks for Patients

Advocates for PDABs often emphasize their mission to ensure that patients in their states have access to affordable prescription drugs, but the downstream effects of UPL effectuation risk the opposite impact on patients. Similar to concerns about the federal-level IRA, given existing incentives in coverage decisions, state-level UPLs may prompt payers and plans to steer patients taking UPL drugs or their therapeutic alternatives to different drugs by introducing new UM restrictions or by shifting drugs to higher cost-sharing tiers.³ Half of payers in one survey anticipated increased UM on UPL drugs (50%) and increased patient cost sharing for UPL drugs (50%) and/or drugs in the same class (53%).⁸ Payers interviewed in another study similarly suggested that UPL drugs or drugs in their class could see increased UM and tiering changes,⁹ consistent with early IRA-related observations on coverage losses among drugs in the same categories as drugs selected to the first round of the DPNP.²

Because coverage and formulary decisions vary across states, payers may adopt different strategies in each state to mitigate the potential financial impact of UPLs on profitability.⁸ One published analysis highlighted specific potential risks of UPLs to patient access by state.¹⁰ In the face of UPL-related financial pressures, payers in states with PDABs and UPL authority may scale back coverage policies—particularly when those policies are currently comparable to or more favorable than those in non-UPL states. For example, patients in Colorado and Maryland currently more often have access to a cohort of PDAB-selected drugs on lower cost-sharing tiers than patients in non-UPL states.¹⁰ If UPLs were effectuated in these states, payers may be more likely to place UPL drugs on a higher cost-sharing tier to steer patients toward a non-UPL drug. Patients would then face higher costs at the pharmacy counter after UPLs take effect. In this way, state-level evaluations of current coverage policies provide additional context to broad concerns that payers may remove UPL drugs from formularies,¹¹ shift them to higher cost-sharing tiers, or impose stricter UM controls.³

The theory behind UPLs assumes that drug prices drive patient access and affordability, but potential UPL-related shifts of financial costs and administrative burdens onto patients raise questions about PDABs’ intent and their patient impact. Findings suggest that patients in UPL states currently more often face prior authorization barriers for a cohort of PDAB-selected drugs than those in non-UPL states.¹⁰ UM is consistently associated with delays¹² and discontinuation,¹³ worsened clinical outcomes,¹⁴ and increased downstream health care costs.¹⁵ Similarly, nonmedical switching, including formulary-driven changes in therapy, is often negatively associated with economic and medication-taking behavior outcomes.¹⁵ Professional societies have highlighted the patient impact of these access barriers¹⁶ and urged reform,¹⁷ informing state-level legislative action on prior authorization.¹⁸ These and other pharmacy benefit manager (PBM) reforms may improve patient access without UPL-associated risks.

Potential UPL-Related Risks for Pharmacies and Providers

The implementation of UPLs also introduces uncertainty into reimbursement and acquisition cost dynamics for pharmacies and providers that dispense and administer drugs, including the potential for reimbursement below a drug’s acquisition cost¹⁹ and potential reductions in add-on drug administration payments, creating substantial UPL-related financial risk.

UPL-related financial risks and administrative burdens to community pharmacies⁴ would add to existing challenges, including declining PBM reimbursement rates,²⁰ 340B expansion,²¹ and federal price-setting efforts (eg, the IRA).²² State-level government price regulation may further exacerbate concerns about pharmacy access,⁶ including at the 1000-plus independent pharmacies²³ in the 4 UPL states alone. Notably, patients with lower income, who are 65 years or older, or who reside in rural areas disproportionately rely on independent pharmacies for optimal pharmacy access.²⁴ Changes in pharmacy access, such as pharmacy closures, have been associated with reductions in adherence,^24,25 underscoring the importance of ongoing pharmacy access.

The UPL-related cash flow risks at independent pharmacies mirror those faced by physician practices that purchase and administer specialty drugs (“buy-and-bill”). Because it may be unclear whether a given transaction falls under a UPL—particularly when some Employee Retirement Income Security Act or self-funded plans are exempt or opt out—providers may find it difficult to determine in advance what reimbursement rate will apply. This uncertainty creates risk and the prospect of acquiring a drug at a price above a potential UPL reimbursement, exposing providers to financial losses.⁹ As a result, some may choose to limit or cease stocking UPL drugs,⁷ particularly smaller community-based or rural providers with tighter margins.

UPLs may further impact providers if they decrease provider reimbursement tied to manufacturer-reported average sales price (ASP), if below-market UPL payments depress ASP over time. Physician practices, including those in oncology, immunology, and neurology,²⁶ depend on add-on payments to cover overhead costs of medication storage and administration,²⁷ clinical and office staff salaries,²⁸ and practice operations.²⁹ UPLs may also create logistical burdens with managing separate inventories and tracking administration for price-set drugs. These UPL-related challenges—mirroring those identified for federal-level price setting²⁸—threaten the viability of community-based practices. Closures of these practices may accelerate trends in physician consolidation, leading to increased costs for patients and the health system.^30,31 Reduced site-of-care availability from practice closures would likely also increase patient travel burden, risking worsened health outcomes³² and decreased clinical trial participation.²⁴

Conclusions

Although UPLs are intended to improve drug affordability, their implementation poses significant, multifaceted risks to patients, pharmacies, and providers. For patients, UPL effectuation threatens current coverage while placing pressure to increase patient out-of-pocket costs through adverse tiering and use of prior authorization barriers linked to poorer health and economic outcomes. For pharmacies and providers, UPLs introduce substantial financial uncertainty and operational burdens that may result in decisions to limit or cease stocking selected drugs or jeopardize practice viability.

In summary, UPL implementation carries risks common to government price regulation attempts (eg, the IRA, federal- and state-level international reference pricing) without clear or known benefits for patients. These interventions entail implementation costs and introduce risks to benefit design, pharmacies, and providers, potentially compromising patient access and care delivery.

Author Affiliations: National Pharmaceutical Council (JAP, RAC, JDC, JMO), Washington, DC.

Source of Funding: None.

Author Disclosures: The authors are employees of the National Pharmaceutical Council, a nonprofit health policy research organization. Dr O’Brien is a member of the editorial board of The American Journal of Managed Care.

Authorship Information: Concept and design (JAP, JDC); analysis and interpretation of data (JAP, RAC, JDC); drafting of the manuscript (JAP, RAC); critical revision of the manuscript for important intellectual content (JAP, RAC, JDC, JMO); administrative, technical, or logistic support (RAC, JDC, JMO); and supervision (JDC, JMO).

Address Correspondence to: Jonathan D. Campbell, PhD, MS, National Pharmaceutical Council, 1717 Pennsylvania Ave NW, Ste 800, Washington, DC 20006. Email: jcampbell@npcnow.org.

REFERENCES

1. Trish E, Blaylock B. Shifting cost-sharing burden to beneficiaries in Medicare Part D. USC Leonard D. Schaeffer Center for Health Policy & Economics. June 2025. Accessed March 27, 2026. https://schaeffer.usc.edu/wp-content/uploads/2025/06/2025-06-Cost-Sharing-Burden-Medicare-Part-D.pdf

2. Axelsen K, Heppson H. Keeping watch on Medicare: 2026 maximum fair prices for ten selected drugs. DLA Piper. January 29, 2026. Accessed March 27, 2026. https://www.dlapiper.com/en/insights/publications/2026/01/keeping-watch-on-medicare-2026-maximum-fair-prices-for-ten-selected-drugs

3. Update: effect of state prescription drug affordability boards (PDABs) and upper payment limits (UPLs) on the drug pricing ecosystem. Johnson & Johnson. September 2025. Accessed March 26, 2026. https://policyresearch.jnj.com/download/update-influence-of-pdabs-and-upls-on-the-state-drug-pricing-ecosystem-pdf

4. Prescription drug affordability boards: potential risks to pharmacy reimbursement. National Alliance of State Pharmacy Associations. Accessed March 27, 2026. https://naspa.us/resource/pdab/

5. Solving for access and affordability: PDABs are not the answer. Rare Access Action Project. 2025. Accessed March 27, 2026. https://www.rareaccessactionproject.org/wp-content/uploads/2025/08/RAAP-PDABs-Arent-Solving-for-Access-and-Affordability-July-202566.pdf

6. Brent B. Prescription drug affordability boards: a flawed approach to equity and access. Health Affairs. November 21, 2025. Accessed March 27, 2026. https://www.healthaffairs.org/sponsored-content/national-minority-quality-forum/prescription-drug-affordability-boards-a-flawed-approach-to-equity-and-access

7. COA position statement on prescription drug affordability boards. Community Oncology Alliance. March 7, 2025. Accessed March 27, 2026. https://mycoa.communityoncology.org/publications/position-statements/coa-position-statement-on-prescription-drug-affordability-boards

8. Payer perspectives confirm UPLs will likely raise costs and hinder patient access to medicines. Avalere Health. 2025. Accessed March 27, 2026. https://b11210f4-9a71-4e4c-a08f-cf43a83bc1df.usrfiles.com/ugd/b11210_1e92735a49744639ac37321c6320e8c8.pdf

9. Frazier L, Joldersma L, Sikora K. Research explores health plan perceptions of PDABs and UPLs. Avalere Health. April 2, 2024. Accessed March 27, 2026. https://advisory.avalerehealth.com/insights/research-explores-health-plan-perceptions-of-pdabs-and-upls

10. A cost of caps: risks to patient access amid PDAB upper payment limit implementation. National Pharmaceutical Council. April 21, 2026. Accessed April 21, 2026. https://www.npcnow.org/resources/risks-to-patient-access-PDAB-UPL

11. Potter A, Joldersma L, Meyer T, Donaldson E, Toso S. Update: health plans’ perceptions of PDABs and UPLs. Avalere Health. March 28, 2025. Accessed March 26, 2026. https://advisory.avalerehealth.com/insights/update-health-plans-perceptions-of-pdabs-and-upls

12. Ismail WW, Witry MJ, Urmie JM. The association between cost sharing, prior authorization, and specialty drug utilization: a systematic review. J Manag Care Spec Pharm. 2023;29(5):449-463. doi:10.18553/jmcp.2023.29.5.449

13. Kyle MA, Keating NL. Prior authorization and association with delayed or discontinued prescription fills. J Clin Oncol. 2024;42(8):951-960. doi:10.1200/JCO.23.01693

14. Park Y, Raza S, George A, Agrawal R, Ko J. The effect of formulary restrictions on patient and payer outcomes: a systematic literature review. J Manag Care Spec Pharm. 2017;23(8):893-901. doi:10.18553/jmcp.2017.23.8.893

15. Subash R, Vodicka E, Deeba S, Salter C, Dickerson C, Stawowczyk E. Impact of drug utilization management strategies on the incidence and cost of clinical events in patients with non-valvular atrial fibrillation receiving DOACs in the US. J Med Econ. 2025;28(1):1602-1615. doi:10.1080/13696998.2025.2558449

16. Media issue brief: utilization management policies. American Society of Clinical Oncology. Accessed March 28, 2026. https://www.asco.org/news-initiatives/policy-news-analysis/media-issue-brief-utilization-management-policies

17. American Medical Association; American Academy of Child and Adolescent Psychiatry; American Academy of Dermatology, et al. Prior authorization and utilization management reform principles. American Medical Association. 2017. Accessed March 28, 2026. https://www.ama-assn.org/system/files/principles-with-signatory-page-for-slsc.pdf

18. Sullivan L, Celik Z, Killelea A. Prior authorization reform heats up. Health Affairs Forefront. November 24, 2025. Accessed March 28, 2026. https://www.healthaffairs.org/content/forefront/prior-authorization-reform-heats-up

19. Upper payment limits (UPLs) explained. Charles River Associates. 2025. Accessed March 28, 2026. https://media.crai.com/wp-content/uploads/2025/12/15121242/CRA-LS-Upper-Payment-Limits-Explained-December2025.pdf

20. Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies. Federal Trade Commission. July 2024. Accessed March 28, 2026. https://www.ftc.gov/system/files/ftc_gov/pdf/pharmacy-benefit-managers-staff-report.pdf

21. Ferruggia K, Gremminger S. Expert: independent pharmacies face growing disadvantages under the 340B contract pharmacy model. Pharmacy Times. August 20, 2025. Accessed March 28, 2026. https://www.pharmacytimes.com/view/expert-independent-pharmacies-face-growing-disadvantages-under-the-340b-contract-pharmacy-model

22. Re: concerns about the Medicare Drug Pricing Negotiation Program. National Community Pharmacists Association. September 3, 2025. Accessed March 28, 2026. https://ncpa.org/sites/default/files/2025-09/9-3-2025-NCPA-CMS-MDPN-recs.pdf

23. The state of the pharmacy market. Pharmaceutical Care Management Association. Accessed March 27, 2026. https://www.pcmanet.org/the-state-of-the-pharmacy-market/

24. Anderson KE, Sahu M, DiStefano MJ, Asche CV, Mattingly TJ II. Pharmacy closures and anticonvulsant medication prescription fills. JAMA. 2024;332(21):1847-1849. doi:10.1001/jama.2024.19993

25. Qato DM, Alexander GC, Chakraborty A, Guadamuz JS, Jackson JW. Association between pharmacy closures and adherence to cardiovascular medications among older US adults. JAMA Netw Open. 2019;2(4):e192606. doi:10.1001/jamanetworkopen.2019.2606

26. Frazier L, Krupp G, Sullivan M, Dilmanian M, Isaiah E. Commercial spillover impact of Part B negotiations on physicians. Avalere Health. September 15, 2024. Accessed March 28, 2026. https://advisory.avalerehealth.com/insights/commercial-spillover-impact-of-part-b-negotiations-on-physicians

27. IRA Medicare Part B negotiation shifts financial risk to physicians. Community Oncology Alliance. November 29, 2022. Accessed March 28, 2026. https://mycoa.communityoncology.org/publications/studies-and-reports/ira-medicare-part-b-negotiation-shifts-financial-risk-to-physicians

28. COA comments on MDPNP for IPAY 2028. Community Oncology Alliance. June 26, 2025. Accessed March 28, 2026. https://mycoa.communityoncology.org/publications/comment-letters/coa-comments-on-mdpnp-for-ipay-2028

29. Bourbeau B, Harter D, Towle E. Results from the ASCO 2019 Survey of Oncology Practice Operations. JCO Oncol Pract. 2020;16(5):253-262. doi:10.1200/OP.20.00009

30. Beaulieu ND, Chernew ME, McWilliams JM, et al. Organization and performance of US health systems. JAMA. 2023;329(4):325-335. doi:10.1001/jama.2022.24032

31. Health care consolidation: published estimates of the extent and effects of physician consolidation. US Government Accountability Office. September 22, 2025. Accessed March 28, 2026. https://www.gao.gov/products/gao-25-107450

32. Wang Y, Quinones CM, Gonzalez E, et al. Impact of travel burden on timeliness of care and overall survival for breast cancer: a national cancer database analysis. Cancer Med. 2025;14(21):e71354. doi:10.1002/cam4.71354