While the big fight on healthcare in the 2021 session has been focused on the Colorado Option bill, a fight that hasn’t gotten as much attention but is almost as big is being waged over prescription drug costs.
While everyone acknowledges that prescription drugs are becoming more unaffordable, there was plenty of argument on both sides about whether Senate Bill 175 is the best way to address it.
SB 175 was reviewed Wednesday night in a five-hour hearing with the House Health & Insurance Committee. That’s after the bill got an eight-hour hearing in the Senate Health & Human Services Committee back in March, along with dozens of amendments from sponsors and opponents and a two-hour floor debate in the Senate almost two months later, on May 6.
The bill is almost unrecognizable from its original introduced version, due to the amendments that took out items such as fines for pharmacies or insurance companies that buy drugs at prices that exceed state-mandated caps.
What the bill does: beginning Jan. 1, 2022, the bill makes it illegal to buy a prescription drug at a cost that exceeds the price cap established by the new five-member Prescription Drug Affordability Review Board. The state board, to be appointed by the governor no later than Oct. 1 and confirmed by the state Senate, would set an upper payment limit for a dozen prescription drugs per year for three years, for a total of 36 drugs. Board members must all have advanced degrees and expertise in healthcare economics or clinical medicine.
Insurance carriers and pharmacy benefit managers must report to a state database, known as the “All-Payer Health Claims Database,” the top 15 most expensive drugs paid for by insurance carriers, as determined by total annual plan spending; the top 15 drugs that account for highest increase in total annual spending, the top 15 drugs that caused the greatest increase in insurance premiums, and the top 15 drugs that the carrier paid for most frequently and/or which earned the biggest rebates from manufacturers.
Carriers and PBMs also must report total spending for brand-name drugs and generics, and drugs administered by hospitals in both in- and out-patient settings.
That information will be used to review the drugs for which the board will set price caps.
Bill sponsors Reps. Yadira Caraveo, D-Thornton, and Chris Kennedy, D-Lakewood, noted the bill has a five-year sunset, so that group of 36 drugs with price caps may be the only ones that are reviewed by the board in its first five years.
The bill allows the Attorney General to enforce the price caps, although what that looks like is not spelled out in the bill.
Penalties do not apply to those who buy prescriptions for personal or family use, according to the bill’s May 17 fiscal analysis.
And while "orphan" drugs, which are used to treat rare medical conditions and may be exorbitantly expensive, are exempt under the bill, other expensive (and life-saving) medications are not. And that’s what drew dozens to the hearing Wednesday night, to warn that their lives could be put at risk if they can’t get the medications they need for cancer or cystic fibrosis, for example.
On the other side, patients with long-term conditions, such as multiple sclerosis, testified that their medications are so expensive that in some cases they break up doses or aren’t taking them at all.
“We are not here to demonize the pharmaceutical industry, but we are here to try to correct a market failure,” Kennedy said at the beginning of the hearing. As to claims made by pharmaceutical companies that research and development are big cost-drivers for drugs, Kennedy said he believes those costs are based more on what the market will bear. He recounted the story of a family friend with cystic fibrosis, who has now lived to the age of 39, well past what was expected.
“I am thankful for these drugs that are changing their lives, but some of these drugs are bankrupting families at the same time,” he said.
He also claimed nine out of 10 of the largest drug companies spend more on marketing than on researching new medicines as well as millions of dollars on lobbying. Kennedy said he believes wholesalers, the so-called middle man between pharmacies and manufacturers, will pay less for drugs, responding to the price caps, and will be reimbursed by the manufacturers for the difference.
“We really don't believe that in-state purchasers are stuck in the middle in this bill,” Kennedy said.
However, not one witness confirmed that claim, and no one representing wholesalers testified at the hearing.
Is it legal? asked Minority Leader Hugh McKean, R-Loveland, who replaced Rep. Tonya Van Beber of Eaton on the committee. Kennedy said their legal analysis says it is, but that will be up to the courts to decide, indicating he believes a lawsuit will result from the bill becoming law.
Kim Bimestefer, executive director of the state Department of Healthcare Policy and Financing, testified that high-cost drugs are the leading cause of the overall healthcare cost crisis. Less than 2% of drugs prescribed in Colorado consume 50% of the overall prescription drug budgets for Medicaid and employers, she claimed.
McKean pointed out that two years ago, Bimestefer claimed hospital profits were the leading cost driver for healthcare.
“Which is it?” he asked.
Bimestefer replied that both are correct, but that drug prices have now outpaced hospitals as the biggest cost driver.
And while Kennedy said he wasn’t out to demonize the pharmaceutical industry, Isabel Cruz of the Colorado Consumer Health Initiative had no trouble doing so.
“Drug manufacturing companies spend billions of dollars a year on marketing and advertising and pay enormous fines from unethical business practices. Even in the midst of a pandemic, they have continued to choose profit over people and increase prices well beyond the rate of inflation,” she told the committee.
The committee also heard from patients who struggle to pay for prescriptions.
Mike Russell of Highlands Ranch, representing the national Multiple Sclerosis Society, has primary progressive MS. He has to support his family on a $20-per-hour job and prescription costs at $5,000 per year. He estimated that 40% alter their medication doses or stop taking them completely because of cost. He gets an infusion twice a year, and last year it was $32,000 per infusion. The cost increased to $35,000 in 2021, and his out-of-pocket cost was $5,000.
“I urge you to help pass the bill and stop the choices of feeding your family or taking your prescribed medications,” he said.
One witness from Ridgway testified that her son has a rare autoinflammatory disorder with prescription drug cost at $5,000 per month. Her husband’s insurance covered it, until the costs went up so much that their claims were denied. They had to switch to a drug that was covered under the insurance, but that meant the medication that made the greatest impact on his condition was not covered.
One of the chief complaints about SB 175 is that it goes after those who buy drugs — pharmacies, including hospitals, which don’t set the prices they pay for drugs — rather than going after the manufacturers, which set the prices and in some situations refuse to negotiate over those prices.
Josh Ewing of the Colorado Hospital Association pointed out that the bill indicates that by penalizing state regulated entities and individuals,” you can somehow force behavior change in multinational pharmaceutical corporations. The reality is that Colorado hospitals and health systems will likely find themselves in a situation where the purchase price of a number of drugs will remain the same, but our reimbursement will be significantly reduced.”
“In the short term,” Ewing said, “we would in all likelihood break the law, because it's the right thing to do for our patients.”
He also theorized that the sponsors didn’t go after the manufacturers because it may be illegal and even unconstitutional (under the Commerce Clause).
Doctors, particularly hospital oncologists, testified that they may be able to cover that gap, but that’s not sustainable. And that could lead to situations where a doctor prescribes a treatment that fits under the price cap but gives a patient months to live rather than year, or that doctors will have to go back to older, more toxic medications.
Dr. Barbara McInerney is a past president of the American Medical Society and an oncologist. She told the committee that “putting a lid at one end of the pipeline will limit access.”
Cancer doctors purchase drugs at the lowest price possible, and indicated the bill doesn’t go after where the costs increase the most, which she explained is at the wholesaler level, not the manufacturer.
“They raise the price so they can increase the discount,” she said. “That’s where you could control the cost of drugs to the patient without blocking access.”
Zach Zaslow of Children’s Hospital said they want the bill to succeed. But they’re already struggling with reimbursement rates from Medicaid.
“We are not aware of any other payer in the nation, public or private, who chooses to deliberately underpay for drugs,” he told the committee. “If we want our patients to have these life-saving drugs we have to pay the difference.. . Our choice is whether to pay higher price or stop treating those kids,” although they will, of course, keep treating the kids.
Another witness also took issue with an appeals process laid out in the bill that allows for the board to take up 60 days for a decision. “That could be the difference between life and death."
Angie Howes of the Colorado Retail Council also pointed out for many members, such as multi-state companies, that their prescription drug purchases are made on a national level, not a state level.
That also brought up the point that the Senate sponsors, Sens. Julie Gonzales of Denver and Sonya Jaquez Lewis of Longmont, never asked for input on the bill from the hospitals or pharmacists before it was introduced. Opponents claimed that led to a bill that doesn’t understand how a very complex system works. No other state in the country attempts to lower drug prices by capping what insurance companies or pharmacies pay, according to several witnesses.
Jaquez Lewis is a pharmacist.
Republican committee members, led by Rep. Matt Soper, R-Delta, tried without success to amend SB 175. That included excluding new drugs on the market, to exclude hospitals from being subject to the price caps, and to change the medical inflation rate.
SB 175 passed on a party-line 8-4 vote and was sent to the House Appropriations Committee.