To fix soaring prescription costs, Colorado lawmakers have a new plan: A board to cap drug prices
Kris Garcia, a Denver father of three and community activist, lives in fear of simple accidents.
Garcia lives with four bleeding disorders, including hemophilia. Any injury could quickly result in a health emergency.
But it’s not just the physical risks that worry him. Garcia uses a drug called Humate-P to control his conditions. One vial costs $10,000, he said. He needs four vials every time he gets an infusion, meaning huge medical bills and financial disaster also loom constantly over him. He said he works multiple jobs to make sure he can afford his health coverage and medications.
Now, though, Democrats at the state Capitol think they have hit on a solution that will help Garcia and other Coloradans: They want to create a state board that will determine whether drugs are affordable. And — here’s the big part — the board will have the authority to set maximum prices that can be charged in Colorado for those drugs deemed unaffordable. No other state in the nation currently has a board that does that, though the idea is spreading across the country.
“No Coloradan should have to live in fear of financial ruin to their family just because of our drug costs,” Garcia said last week during a virtual news conference hosted by the Colorado Consumer Health Initiative, an advocacy group supporting the legislation.
The proposal — Senate Bill 175, which will create something formally known as a prescription drug affordability review board — is scheduled for its first committee hearing Wednesday afternoon. It is expected to draw intense opposition from the pharmaceutical industry, which has already begun an ad campaign against it.
Big health care fights brewing at the Capitol
The bill is just one of several in what could be a transformative session for health care policy in Colorado, as Democrats, emboldened by their majorities at the statehouse and Democratic control in Washington, D.C., look to use the full muscle of state regulatory authority to wrestle down the costs of health care or to improve the value of what people pay for.
There are proposals to require insurance companies to cover an annual mental health wellness exam without a deductible, to expand a program to import prescription drugs from other countries, and to tighten regulation on health coverage sharing programs that aren’t insurance.
The drug affordability board bill would give the state attorney general authority to enforce a fine of $1,000 on an entity that violates the payment caps the board places on drugs. It gives the state commissioner of insurance the ability to fine drug makers up to $500,000 if they fail to provide adequate notice that they are pulling a drug from the market in Colorado after the board places a price cap on it.
And the fight over all of these bills is likely to pale in comparison to that surrounding a measure expected to be introduced later this week: A bill telling insurance companies to start offering more affordable coverage plans — or else. If companies fail to do so, the state would set up its own insurance company, one that would pay government-dictated prices for health care that every doctor and hospital in the state would have to accept.
“We know, Americans know, that we’re just sick and tired of being ripped off on this,” said Gov. Jared Polis, speaking during the news conference last week.
Setting drug prices
Spending on prescription drugs in Colorado has exploded in recent years, and especially so for people with private health insurance. Coloradans spent $6.7 billion on prescriptions filled at retail pharmacies in 2019, according to the nonpartisan Kaiser Family Foundation.
But much is still unclear about why this spending is rising so much and where all the money, and rebates paid by the manufacturers, are going. So the board created in Senate Bill 175 would first be tasked with an investigative role: It would use a complex set of calculations laid out in the bill to determine whether a drug should be considered unaffordable.
The board would consist of five members, all appointed by the governor and subject to confirmation by the state Senate. People who work for pharmaceutical companies, insurance carriers or pharmacy benefit management firms — or any of their trade associations — are specifically prohibited from serving.
For the drugs it deems unaffordable, the board could then set an “upper payment limit.” Exactly how the board would do this is unclear; board members would have to set the rules for it.
The price cap would apply to “all purchases of and payer reimbursements for a prescription drug that is dispensed or administered to individuals in the state.” In other words, insurance companies would be prohibited from paying more for the drug that the board allows — or from requiring their members to pay more for the drug through deductibles.
While other states have created or are considering creating prescription drug affordability review boards, none of those other states yet has a board that is setting price caps. Whether the limits could face legal challenge is unknown. There is no federal entity that broadly regulates drug prices.
Industry raises concerns
The pharmaceutical industry argues that these price caps would lead to consumers having fewer options for the drugs they can receive.
“Creating a board of unelected bureaucrats with the authority to arbitrarily decide what medicines are worth and what medicines patients can get would be a disaster for patients,” the trade group PhRMA, which represents makers of brand-name drugs, said in a statement. “…In practice, this policy could make it more difficult for individuals to access the medicines they need now and in the future and could lead to discrimination against seniors, those with disabilities and the chronically ill.”
Supporters of the bill say it has the potential to save people as much as 75% on the most unaffordable drugs. The bill requires insurance companies to pass the savings from the price limits on to consumers, though industry representatives like PhRMA question whether the state will actually be able to make that happen.
State Sen. Sonya Jaquez Lewis, a Boulder County Democrat who is one of the bill’s sponsors, likened the price limits to what was created in Colorado’s first-in-the-nation cap on insulin prices — though that cap has had its own downfalls.
“It’s the same thing,” she said. “It’s basically saying we have to make prescription drugs affordable, and this is one way to do it.”
She and other supporters said the bill could reduce overall health care spending in another way — by allowing people to afford their medicines so they take them when needed. One in 10 Coloradans skipped doses of needed prescription medications in 2019 because of concerns about cost, according to a survey by the nonpartisan Colorado Health Institute.
“I have seen prescription drug costs continue to skyrocket,” said Jaquez Lewis, a pharmacist who previously worked in Colorado’s Medicaid agency. “This really forces Coloradans to make impossible choices.”