IB-2001-A (January 2001)
Author: Linda Gorman

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House Bill 01-1108. Prescription Drug Fair Pricing Act. Creates a new state health insurance program that is not means tested. Makes the state a prescription drug wholesaler, politicizes prescription drug pricing, creates a new bureaucracy to act as a commercial middleman, gives the state full access to retail pharmacy business records, puts small bio-tech firms at risk by creating a new category of business crimes.

Synopsis: This bill creates a state health insurance program that is not means tested. It also creates a new set of business crimes. Any Colorado resident without prescription drug coverage would be eligible to participate. The bill does not specify whether the drugs covered under the major medical or stop loss provisions of many private health care plans would count as prescription drug coverage. It requires the state to maximize enrollment by eligible residents.

Any pharmaceutical manufacturer selling prescription drugs in Colorado through any state program would be required to agree to sell its prescription drugs to the state at prices negotiated by the Colorado Department of Health Care Policy and Financing. The difference between the list price and the negotiated price would be given to the state in the form of a cash rebate. The rebates would be put in the prescription program cash fund. The legislation lets the Department of Health Care Policy and Financing claim an annual management fee of one percent of the funds assets for expenses in 2001-02. After that, the monies in the fund would be removed from the control of the state treasurer and would be continuously appropriated to the executive director of the Colorado Department of Health Care Policy and Financing. Though this program represents a potentially huge new entitlement, there is no language stipulating that the programs costs cannot exceed the amount of rebates collected.

All retail pharmacies licensed by the state must sell prescription drugs to program participants at prices determined by the Colorado Department of Health Care Policy and Financing. The state will give the pharmacies a $3.00 professional fee for each prescription handled. The pharmacies will recoup the difference between the list price they pay and the mandated state price by filing claims. The bill requires the state to reimburse them on a weekly or biweekly basis. There is no provision for reimbursing pharmacies for the interest lost on their funds while waiting for rebate payments. The bill would make it legal for the Department to collect from the retail pharmacies any utilization data necessary to calculate rebates and require it to keep only trade secrets, work product, or proprietary information confidential.

If after all of the paperwork has been processed discrepancies between the rebate paid and the rebate claimed still exist, the state or the manufacturer must hire a mutually agreed upon independent auditor. If the auditor cannot resolve the discrepancy the side owing the money has to justify why the discrepancy exists within sixty days. If agreement still cannot be reached, a lawsuit may be filed before the district court of the City and County of Denver. No provision is made for reimbursing either side for the cost of funds tied up for the 60-day period.