A bill intended to increase transparency around prescription drug costs has Colorado health insurers and some pharmaceutical companies saying whoa.
House Bill 1296, sponsored in the Colorado state House by Democratic Reps. Sonya Jaquez Lewis of Longmont and Dominique Jackson of Aurora, has four main provisions:
- it requires health insurers, prescription drug manufacturers, pharmacy benefit management (PBM) firms, and nonprofit organizations to report specified information about the costs of prescription drugs to the commissioner of insurance;
- it requires the state insurance commissioner to analyze the information and submit a report regarding the effects of prescription drug costs on health insurance premiums;
- it bans PBM firms from retroactively reducing payments to pharmacies;
- and it requires health insurance plans and PBMs to send rebates directly to consumers.
It's that last provision that has health insurers and PBMs seeing red.
The bill is awaiting action from the House Appropriations Committee, before it can advance to the full House for possibly two votes. Passing there, it then would go to the Senate to start over, as the May 3 adjournment swiftly approaches.
Testimony during the bill's hearing in the House Health and Insurance Committee on April 3 began with Jackson describing the cost she pays to treat an auto-immune disorder, well above the average $30,000 annual tab to patients cited by the National Institutes of Health.
Price increases on drugs, according to a report by National Public Radio, isn't for new therapies or new medications, Jackson said. it's for drugs already on the market. One of her mail-order pharmacies recently notified her that a drug that had previously cost her $25 for a 90-day supply will now go up to $1,550.17 for that same 90-day supply.
"I am no different than anyone else, any of our constituents," Jackson told the committee.
Under House Bill 1296, the prescription drug food chain, as Jackson calls it, would have to report price increases to the state Commissioner of Insurance. That includes drug manufacturers and health insurers who would have to report what they pay for prescriptions, and PBM companies would have to report information on rebates and other fees they receive.
A PBM is a kind of middleman, Jackson said. They negotiate rebates, run mail order programs, and process claims between patients and pharmacies. Their size allows them to negotiate large contracts to get the best rates, Jackson told the committee. In some cases, the PBM owns the insurance company and vice versa. And PBMs are not regulated, Jackson noted.
Rebates come under "direct to consumer" benefits to reduce costs, Jaquez Lewis, a pharmacist, said. Millions of Coloradans covered by commercial health plans could receive an immediate savings on their prescription drug costs. "We believe we have gotten it right with this bill: transparency and immediate cost savings," she said.
The heart of the bill is the "pass-through" rebate that will offset the cost of medications, Jaquez Lewis said. Rebates would go to patients at the point of sale, or at the pharmacy itself. When a PBM bills a pharmacy, within 60 to 90 days they can "claw back" a part of that cost, and that's driving up the cost of drugs, she explained. She also noted that under the bill rebates would go to consumers before the deductible is satisfied, given that expensive drugs often take up much of the deductible.
But opponents -- the health plans, for example -- say it's just a form of cost-shifting, and that PBMs and others use those rebates to lower costs for everyone, not just for those drugs for which rebates are available.
Republican Rep. Susan Beckman of Littleton, who has worked on prescription drug transparency in the past, asked how consumers would know when a rebate is involved for a drug, and she also raised concerns about increasing bureaucracy.
Jason Hopfer, representing the Colorado Association of Health Plans, testified against the bill. He pointed out that not everyone in the prescription drug food chain is included in the bill, such as hospital pharmacies and group purchasing organizations
But it's the rebates that have the health insurers the most concerned. Rebates are used to buy down the cost of health insurance premiums for everyone, he told the committee. This bill will take the rebate and pass it through to consumers who purchase certain drugs, which he said is not a cost savings but a cost shift.
The bill also may be administratively impossible to do, and it doesn't address that manufacturers set prices. Premiums, which have been bought down by rebates, could go up if the measure passes, Hopfer told the committee. "That's a big policy decision for you," he said, which is whether to benefit one group of consumers buying the drugs that come with rebates at the expense of everyone else who is on the health plan.
CVS Health, represented by Rachel Lee, also testified against the bill. She said prices are sometimes trade secrets. And she defended PBMs, which she said are not middlemen. Their clients are large and small employers, unions, school districts and governments. They negotiate with manufacturers for the lowest possible prices and for the lowest premiums, she said. Rebates are given on a small percentage of drugs, maybe 10 percent, Lee said. Those are drugs with limited competition and branded-only (not generic) products.
"We can pit those brand manufacturers against each other" and result in a better price, she said. But revealing those prices, as is required in the bill, will mean brand manufacturers will know how much the other is charging and that could result in higher prices, not lower, she indicated.
Those who support the bill include those who work with people with long-term and illnesses with expensive drug therapies, such as the National Multiple Sclerosis Society. Jessalyn Hampton, a senior manager of advocacy for the National MS Society, told the committee that early treatment is the best way to modify the course of the disease. Medications can only change lives if people can afford them, and those drugs have increased in cost at a rate of five to seven times higher than other drugs every year. One drug that started at $11,000 per year is now more than $90,000 per year, and they don't know why, she said.
A survey revealed that 39 percent of patients find the drugs difficult to afford, she said.
"We cannot talk about cost containment without data, and the lack of transparency throughout the health care system," particularly for drug pricing, is a barrier to stakeholders making informed choices, she said. Brendan Thompson, who has had MS for 20 years, told the committee that he was on two medications at the end of 2018, and the prices for one of those drugs increased from a $40 copay to $2,200 per copay. "And I don't know why," he said. His story was similar to what other MS patients told the committee.
The bill was heavily amended in that committee, and a week later, in the House Finance Committee. The latter amendment made the bill worse, according to opponents. It has yet to pick up a single Republican vote.