CCAGW Urges the Colorado House Health and Insurance Committee to Oppose SB21-175 | Council For Citizens Against Government Waste

CCAGW Urges the Colorado House Health and Insurance Committee to Oppose SB21-175

State Action

May 19, 2021

House Health and Insurance Committee
Colorado General Assembly
200 E Colfax Avenue
Denver, CO 80203

Dear Representative,

You will soon consider a price control bill, SB21-175, for pharmaceuticals sold in Colorado.  On behalf of the 36,384 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in Colorado, I urge you to oppose this legislation.

SB21-175 would create the Prescription Drug Affordability Review Board, a new independent unit in the state that will conduct a review of prescription drugs and establish upper payment limits for drugs it determines to be unaffordable.  Starting in 2022, all health plans shall report to the All Payer Health Claims Database the top costliest prescription drugs, which include brand name, authorized generics, biologicals, and biosimilars.  The highest cost drugs will be based on various measurements like volume, rebates, and greatest increase in premiums. The costs for total drug spending by various entities like retail pharmacies, mail order pharmacies, employers, and hospitals must also be reported.

The board may conduct an affordability review based onthe initial wholesale acquisition cost (WAC) of $30,000 or more for a brand name drug or $100 or more for a generic drug and whether the drug’s cost has increased a certain amount for a specific time period.  Any manufacturer that intends to withdraw a prescription drug for which an upper-payment level has been established must notify the commissioner and the attorney general within 180 days before the withdrawal or it may be required to pay a fine of up to $500,000.

Establishing an upper payment limit is a price control and basing it on the WAC is a faulty premise.  Price controls cause market distortions and never solve the problem they were intended to fix.  The WAC is not what a patient would pay as it does not take into consideration the substantial discounts that private insurers, pharmacy benefit managers, pharmacies, and other stakeholders negotiate to lower prices for their customers.

The legislation ignores the value of pharmaceuticals in helping people get well and keeping them out of a hospital.  For example, today’s new drug treatments for hepatitis C provide a 98 percent cure rate.  That saves hundreds of thousands of dollars from not having to treat chronic liver disease or undertaking expensive liver transplant surgery and allows a person to live a productive life.

CCAGW is concerned that if this legislation should become law, Coloradoans may not have access to some of the most innovative drugs being produced if the board and a biopharmaceutical company could not reach agreement on a price.

CCAGW has long opposed using price controls to lower drug prices.  The United States leads the world in pharmaceutical research and development in large part because most pharmaceutical pricing is still negotiated in a free marketplace.

CCAGW understands the concern over drug costs, but a better way to lower them is for legislators to contact Colorado’s federal representatives and encourage them to hold the Food and Drug Administration’s feet to the fire for faster generic drug and biosimilar approvals, and to create an environment that encourages more “me too” drugs that will foster competition among branded pharmaceuticals that are in the same class and still under patent.  Congress should also work closely with the President to establish better trade deals so that countries that can and should contribute more to pharmaceutical research instead of implementing price controls in their socialistic healthcare systems and free-ride on U.S. funded-research, as discussed in a 2020 Council of Economic Advisers report, “Funding the Global Benefits to Biopharmaceutical Innovation.”

Again, I urge you to vote against SB21-175.


Tom Schatz
President, CCAGW

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