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5 numbers that explain why Colorado lawmakers want more insight into prescription drug costs

Democrats are trying again this year to pass a bill requiring pharmaceutical companies to be more transparent about price increases and rebates

A prescription bottle beside pills. (Photo by the U.S. Department of Agriculture, via CreativeCommons)
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Sometimes the personal crosses over with the political at the state Capitol, and that is what happened toward the end of last year’s session for Rep. Dominique Jackson.

Jackson, a Democrat from Aurora, had sponsored a bill she hoped would create more transparency around why prescription drugs cost so much — and why they keep getting more expensive. The bill failed, as did a similar one the year prior.

Around the same time, though, Jackson said she logged into an online pharmacy to renew a prescription that had been costing her $90 for a three-month supply. She found out that the price had climbed to $1,000 per prescription.

“Clearly I was devastated, and I burst into tears,” she said at a news conference last month announcing her third attempt at the Capitol to tackle prescription drug prices. “How is somebody supposed to be able to absorb those price increases for something they have to have?”

Jackson’s latest bill, House Bill 1160, is scheduled for a hearing Wednesday, its first test of whether this year might bring a different outcome on drug pricing. The bill requires health insurers, drugmakers, pharmacy benefit managers and some nonprofit groups to report more information about prescription costs, rebates and price increases. It also mandates health insurers pass any savings they receive from rebates on to consumers, starting in 2022.

“We just want to see where all the money is going,” Jackson said.

Here are five numbers that help better explain the issue.

$6 billion

This is how much was spent in Colorado on retail sales for drug prescriptions filled at pharmacies in 2018, according to the Kaiser Family Foundation.

A map showing the total spending on prescription drugs at pharmacies in 2018 by state, from the Kaiser Family Foundation’s State Health Facts: kff.org/statedata. (Kaiser Family Foundation)

Medicare and Medicaid members accounted for about half of those sales, with people covered by commercial insurance making up almost all of the rest. (Some people paid in cash, so it’s unclear what, if any, coverage they had.)

Colorado, the 21st-most-populated state, ranks 25th nationally in prescription drug spending, according to the Kaiser Family Foundation.

$994 million

This is how much Colorado’s Medicaid program spent on prescription drugs in 2018, before taking into account any rebates. It’s equivalent to roughly 3% of the total state budget.

The number has been steadily climbing since 2014, when the Medicaid program spent $573 million. That’s a 73% increase in five years.

A graphic showing spending on prescription drugs by Colorado’s Medicaid program. Specialty drugs, marked here with triangles, have contributed to the majority of overall spending growth. Taken from the Colorado Department of Health Care Policy and Financing’s December 2019 report “Reducing Prescription Drug Costs in Colorado.” (Health First Colorado)

A lot of that is driven by the skyrocketing costs of specialty drugs — medicines that aren’t widely used but can be hugely beneficial, and hugely expensive, for those who need them. In a report released last year as part of Colorado Democrats’ attempt to rein in drug costs, the state Department of Health Care Policy and Financing said specialty drugs accounted for slightly more than half of the increase in Medicaid drug spending in Colorado.

$557 million

This is how much Colorado’s Medicaid program received in rebates from drug manufacturers in 2018 — meaning rebates saved the state 56% on its drug spending. The final net spending amount was $436 million.

A chart showing Colorado prescription drug spending. Taken from the Colorado Department of Health Care Policy and Financing’s December 2019 report “Reducing Prescription Drug Costs in Colorado.” (Health First Colorado)

This illustrates why Colorado lawmakers want a better handle on the rebates sloshing through the system. It’s not clear how many rebates are paid in the private insurance market — or into whose pockets they go.

The rebates Colorado’s Medicaid program receives have increased significantly in the past few years. In 2014, the state received $224 million in rebates, or a 39% discount. But the rebate discount crossed 50% in 2016 and continued to climb in 2017 and 2018. (Numbers from 2019 aren’t yet available.)

A chart showing the increasing amount of rebates that Colorado’s Medicaid program receives when buying prescription drugs. Taken from the Colorado Department of Health Care Policy and Financing’s December 2019 report “Reducing Prescription Drug Costs in Colorado.” (Health First Colorado)

Rep. Dylan Roberts, a Democrat from Avon who is another sponsor of the price-transparency bill, said there’s evidence that drugmakers might be raising their prices just so they can give bigger rebates, which may or may not be passed onto the consumer.

“So we’re going to find out where those rebates are being held,” he said.

10.8%

This is the estimated percentage of Coloradans who did not fill a prescription in 2019 because of concerns about cost.

The figure comes from the every-other-year Colorado Health Access Survey, produced by the nonpartisan Colorado Health Institute and considered the gold standard for numbers on how people interact with the state’s health system. But, beyond the eye-popping implications — more than half a million Coloradans didn’t take medicine a doctor told them they needed last year because it cost too much — the trend lines here are less clear.

The number is basically unchanged from the 2017 survey, and it’s up one percentage point from the 2015 survey. But, before the federal Affordable Care Act went into effect, this figure used to be as high as 12%, so Colorado has actually made progress here over the last decade.

A chart showing Colorado’s declining uninsured rate, as measured by the every-other-year Colorado Health Access Survey from the Colorado Health Institute. More details can be found at: coloradohealthinstitute.org/research/CHAS. (Colorado Health Institute)

A deeper look explains why. More than a quarter of people who are uninsured said they skipped a prescription in 2019 because of cost, but Colorado’s uninsured rate has fallen significantly since the ACA went into effect. Among people with private insurance in 2019, 8.7% said they didn’t fill a prescription because of cost, meaning the state’s coverage gains have also likely made it slightly easier for people to afford medicines.

12.6%

This is how much the health insurer Anthem is expecting drug prices to increase by in Colorado in 2020 — with a caveat.

To understand this final number better, let’s zoom back a bit.

Even though people in Colorado with private health insurance report fewer affordability concerns around prescription drugs, prices for those drugs are still going up a lot. And the individual market — where people buy health insurance on their own, without help from an employer — is one of the best places to see this in practice. That’s because insurers are required to file lengthy reports with the state every year detailing how they set their rates in the individual market.

So this number is just for Anthem’s individual-market business. (Anthem is the only insurer offering individual-market plans in every county in Colorado.)

The website for Connect for Health Colorado, the state’s health insurance exchange, shown in October 2018. (Eric Lubbers, The Colorado Sun)

There are two components to Anthem’s prescription drug spending every year. There’s the price they pay for drugs. And there’s the quantity of drugs their members are using. For 2020, Anthem expects prices for drugs to increase 12.6%. Meanwhile, the costs attributable to the amount of drugs people use will only increase by 2.8%.

Drug prices also have the steepest increase of any segment of Anthem’s costs for 2020, according to its filing. The company expects prices to increase for hospitals and doctors by only 4.6% in 2020. And Anthem ultimately expects spending on prescription drugs to become its third-biggest expense in 2020, surpassing the amount the company pays for inpatient hospital stays.

It’s all the more reason why Colorado lawmakers want to better understand what’s going on here.

Rising Sun