One of the hidden costs in Colorado's $30 billion state government budget: how much the state pays for prescription drugs.
According to Sen. Joann Ginal, D-Fort Collins, the cost to the state's general fund is about $1 billion. Or, one out every $30 in the state budget goes to pay for a prescription for a state employee, a prison inmate, someone in the state's Medicaid program, or someone in a state-run mental health or youth offender facility.
And those costs are too high, say Ginal and other lawmakers who rolled out two bills Tuesday on prescription drug transparency, which they say is necessary to lower prescription drug costs.
Ginal's bill, Senate Bill 107, tasks the Health Care Policy and Financing agency with finding out the disconnect between what a drug costs to develop and what the drug companies charge.
Under the bill, HCPF would submit a written request to drug manufacturers, seeking the costs of research and development, clinical trials, regulatory costs, marketing, administrative costs, licensing data or manufacturing. Ginal said she's been told that information is readily available in Securities & Exchange Commission filings, although that's not an easy way to find information.
For example: Zolgensma, a gene therapy drug that is the most expensive in the world. It's used to treat spinal muscular atrophy, a disorder that affects infants and is a leading cause of death from a genetic condition. It hits about 1 in every 6,000 to 10,000 births, according to SMANews.
The drug was developed by a researcher at a state university in Ohio, who started a company to develop the drug. Research and development cost $250,000. Then Novartis bought the company for $8.7 billion in 2018. The cost of one dose of Zolgensma? $2.1 million.
The bill seeks the cost information only for the 20 highest-cost prescription drugs per course of therapy and the 20 highest-cost prescription drugs by volume. And the bill carries teeth: any company that refuses the information could be hit with a $10,000 per day fine, enforced by the Attorney General.
To avoid claims of trade secrets, the bill says the state would be required to keep information confidential and that information would not be subject to the state's open records law.
According to a December 2019 report by HCPF on reducing prescription drug costs, specialty drugs dominate the pipeline of drugs in the development process. Out of 46 new drugs on the market in 2017, 75% were specialty drugs.
The report said "the market price of an emerging specialty drug has little relationship with the cost to develop and manufacture" it. The report also claimed three factors are driving the rising costs of prescription drugs: an extended patent protection monopoly period, a manufacturer's focus on specialty drugs and the lack of transparency into the pricing of those specialty drugs.
Ginal told Colorado Politics that the cost of prescription drugs paid for by the state have increased by some $435 million between 2014 and 2019, and the state paid more than $1 billion for prescription drugs in calendar year 2019. She's been trying to push prescription drug pricing reform for the past five sessions.
The state pays for prescription drugs in four state agencies: Health Care Policy and Financing, which runs the state's Medicaid program; the Department of Corrections, which pays for prisoner prescriptions; Health & Human Services, which operates the state mental hospital in Pueblo and regional centers for the developmentally disabled, among others; and the Department of Personnel and Administration, which administers health insurance plans for state employees.
The transparency issue is also at the heart of a second bill, House Bill 1160, which was also introduced Tuesday. Democratic lawmakers announced the bill will go after prescription drug pricing transparency for consumers.
The bill is sponsored by Reps. Dominique Jackson, D-Aurora and Dylan Roberts, D-Eagle; and Sens. Kerry Donovan, D-Vail and Ginal.
Jackson has had her own struggles with prescription drug costs. "I know how scary it is, to suddenly find out a prescription you rely on every day shoots up [in price]."
Last year, she found out when trying to reorder prescriptions that two drugs went from $90 for a three-month supply to more than $1,000. "I was devastated and burst into tears," Jackson said. "How is anyone supposed to absorb that kind of price increase for something they have to have into their family budget?"
The bill, Jackson said, will finally bring to light the "murky dealings and obscure relationships that drive up the costs of prescription drugs and our health insurance."
The bill intends to provide transparency to consumers on prescription drug prices and information to lawmakers who want to address drug costs. Drug companies will be required to provide the Division of insurance with an explanation on drug price increases that exceed 10% or more in a 12-month period. Insurers will be required to report on drug spending for the top 50 most expensive and most-prescribed drugs.
The bill's most controversial piece may be in how it deals with prescription drug rebates, paid either to health insurers or to pharmacy benefit managers who work with health insurers to develop formularies, the list of drugs that an insurer will cover.
The Kaiser Family Foundation says a rebate is intended to get pharmacy managers to include a particular drug from a manufacturer in the formulary. Rebates don't lower drug costs for the consumer, although it may lower the cost for the health insurer, according to a fact sheet from House Democrats.
Jackson and others have maintained that those rebates should be passed along to consumers, and tried to legislate that in 2019, but it died in the House. Jackson told reporters Tuesday the bill's 2020 version differed from the 2019 bill, but she couldn't say how.
One in 10 Coloradans didn't fill a prescription in 2019 because of the cost, according to the Colorado Health Institute. In Pueblo, it's almost one in five.