Colorado - Oppose HB18-1260 | Council For Citizens Against Government Waste

Colorado - Oppose HB18-1260

State Action

March 1, 2018

House of Representatives
Health, Insurance, and Environment Committee
Colorado General Assembly
Denver, Colorado 80203

Dear Representative,

On March 1, 2018, you are scheduled to have a hearing on HB18-1260.  The legislation would require health insurance companies and pharmaceutical manufacturers to report to the Colorado Commissioner of Insurance voluminous drug pricing information, which would place burdensome and expensive requirements on these entities while doing nothing to lower the costs of drugs.  On behalf of the 36,279 members and supporters of the Council for Citizens Against Government Waste in Colorado, I ask that you reject this ill-advised legislation in committee and not allow it to reach the floor.

The bill would require a drug manufacturer to notify insurers and pharmacy benefit managers ninety days in advance of a price increase of more than 10 percent for a drug with a wholesale acquisition cost (WAC) of more than $40 for a 30-day supply or a course of therapy.  The WAC is essentially a list price and does not represent what patients ultimately pay after rebates, discounts, or other price concessions.  This notification could create the potential for shortages through hoarding, as some distributors would stockpile drugs to take advantage of the situation, which will drive up costs.

At the end of each quarter, pharmaceutical manufacturers would be required to submit to the commissioner reams of data, some of which is proprietary, with the following information: the financial and nonfinancial factors that caused the price increase, and why; a list of past WAC prices; prior owners of the drug, if any; the year the Food and Drug Administration approved the drug; patent expiration for the drug; a description of marketing and purchasing plans used to launch a specialty drug; and, how many patients might be prescribed the new drug under the indication approved; and, other superfluous information.  All of this information will be posted on the insurance commissioner’s website.

Generic drug companies operate on very small profit margins and represent approximately 85 percent of all prescriptions in the U.S.  Their products behave more like commodities as prices fluctuate rapidly in a highly competitive marketplace.  It would be extremely arduous and costly, if not impossible, for them to produce the data required under HB18-1260.

None of this data will lower drug costs for patients.  It is nothing more than a fishing expedition, and if anything, will cause drug costs to rise due to the team of lawyers and accountants that will be needed to assemble the data.  CCAGW also believes the estimated total cost to the state of $174,834 to implement this law is grossly underestimated considering the data crunching and analysis that will be required to produce a report for the state legislature in a timely manner.

A July 2015 Federal Trade Commission (FTC) article, “Price Transparency or TMI,” pointed out that too much transparency can harm competition in any market, including healthcare markets.  The information is of little use to consumers but can be very beneficial to competitors.  The FTC was particularly concerned when “information disclosures allow competitors to figure out what their rivals are charging, which dampens each competitor’s incentive to offer a low price, or increases the likelihood that they can coordinate on higher prices.”

The price of prescription drugs generates much media attention and controversy, and it is understandable that legislators, government officials, and consumers are expressing their concern.  But, the best approach to lowering drug prices is an environment that fosters competition and innovation.  It takes 10 to 12 years to get a new drug through the Food and Drug Administration (FDA) approval process, which costs an average of $2.6 billion.  Fortunately, Congress has taken steps to speed up clinical trials and the approval process, though more remains to be done.

One way to lower prices would be for Colorado legislators to ask their U.S. congressional delegation to continue to hold the FDA’s feet to the fire to make sure the backlog of generic drugs awaiting approval can be cleared.  This would be a far more effective way to help bring down the price of prescription drugs than passing this unnecessary and counterproductive bill.

On behalf of Colorado taxpayers, please reject and do not report HB18-1260 out of your committee.

Sincerely, 

Thomas Schatz

Issues/Topics: 

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