A federal judge has temporarily blocked Colorado’s first-in-the-nation price cap on a specific prescription drug, saying that it likely runs afoul of legal precedent and federal patent law.
The ruling is a blow to Gov. Jared Polis and his administration’s efforts to lower drug costs through tougher regulation, and it raises questions about the ongoing operations of the state’s Prescription Drug Affordability Board, the body that imposed the cap.
The preliminary injunction issued Wednesday involves a price cap placed on the prescription drug Enbrel, which treats rheumatoid arthritis and other autoimmune conditions. The affordability board, which is known as the PDAB, placed a cap on that drug after determining it was unaffordable. Enbrel’s wholesale cost is about $96,000 per patient per year, though, after discounts and rebates, most patients and insurance companies combined pay about $58,000 per patient per year.
The PDAB set the price cap, which was scheduled to go into effect in 2027, at around $31,000 per year. The pharma company Amgen, which manufactures Enbrel, sued, arguing that the cap undermines federal patent law and would cause the company economic harm.
The injunction blocks the cap from taking effect while the lawsuit is debated. It was issued by Chief Judge Daniel D. Domenico of the U.S. District Court in Denver.
“Since under binding Federal Circuit precedent, caps on the price of patented drugs like Enbrel are preempted by federal law, Amgen’s motion must be granted,” wrote Domenico, who was appointed to the bench by President Donald Trump and who is currently up for a promotion to the 10th Circuit Court of Appeals.
The precedent Domenico cited involved a similar effort by the District of Columbia to impose price controls on patented prescription drugs. In that case, the appellate court ruled that the price controls were preempted by federal patent law, which essentially engages in a trade-off with drug companies. To encourage research, development and innovation, the law grants drug companies a monopoly on their drugs for a period of time to allow the companies to charge whatever they want and recoup their R&D costs.
Domenico said that precedent directly applies to Amgen’s lawsuit.
“Colorado’s attempt to rebalance Congress’s patent system is preempted by federal law,” he wrote.
The state argued against the injunction by pointing to the pharmaceutical industry’s famously complicated pricing system — which is so confusing that even Domenico expressed bafflement during a hearing last month. Essentially, the state’s attorneys argued that Amgen couldn’t show it would be harmed by the price cap, since it’s possible the hit would be absorbed by others along the supply chain, such as distributors or pharmacies.
But Domenico rejected that argument, at least in deciding the preliminary injunction.
Addressing the argument by the state’s attorneys, Domenico wrote: “They are right that the system is convoluted, confusing, and often counterintuitive. But it is not necessary to unravel the entire system to understand that, as a result of Colorado’s cap, Amgen will receive less money from its wholesalers and will fare more poorly in negotiations with other purchasers in Colorado and elsewhere.”
The PDAB is a major component of Polis’ efforts to lower healthcare costs, and the board moved methodically over more than four years to establish a process for reviewing drugs before ultimately setting the price cap on Enbrel. While other states have also created PDABs, Colorado’s was the first to impose a cap, which is known formally as an upper payment limit.
The price cap on Enbrel was the only one Colorado’s PDAB had issued so far, but it is in the process of studying caps on two other drugs, Stelara and Cosentyx, both of which treat autoimmune inflammatory conditions. Wednesday’s ruling throws that work into question. While Stelara is now off-patent, Cosentyx still enjoys U.S. patent protections.
A spokesperson for the Colorado Division of Insurance, which oversees the PDAB, declined to comment citing the pending litigation.
A consumer advocacy group that has backed the PDAB criticized the ruling.
“This is a step backwards for Colorado and consumers,” Adam Fox, the deputy director of the Colorado Consumer Health Initiative, said in a statement. “Drugs don’t work if people cannot afford them and this is yet another example of pharmaceutical companies throwing their weight around to keep their prices high and squeeze all the money they can from consumers.”
Amgen released a statement saying it was pleased with the decision.
“We appreciate the court’s careful consideration and remain confident in our position as the case moves forward,” the statement read.
The preliminary injunction issued Wednesday will remain in place at least until Amgen’s underlying lawsuit is resolved, which could take months if not longer.