Reducing Prescription Drug Costs in Colorado Cost Drivers and Strategies to Address Them

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Reducing Prescription Drug Costs in Colorado Cost Drivers and Strategies to Address Them 2nd Edition Reducing Prescription Drug Costs in Colorado Cost Drivers and Strategies to Address Them January 2021 Contents Forward to Reducing Prescription Drug Costs in Colorado, 2nd Edition ........... 4 2020 Updates to This Report .................................................................. 4 Executive Summary ............................................................................ 6 Introduction and Purpose ...................................................................... 6 Cost Drivers ...................................................................................... 7 Prioritized Solutions ............................................................................ 8 Learning from Medicaid Policy ............................................................... 12 The Department Invites Your Collaborative Partnership .................................. 12 Industry Trends and Background Information ............................................. 13 Prescription Drug Cost, Utilization, and Trends ........................................... 13 The U.S. Pays the Highest Prices for Pharmaceutical Drugs in the World .............. 16 Many Coloradans Aren’t Taking Their Drugs Appropriately Because They Can’t Afford Them, Often Leading to Worse Health Outcomes That Are More Costly ....... 16 Major Drivers of Prescription Drug Prices .................................................. 18 Patent Protections .............................................................................. 18 Anti-Competitive Practices and Price Fixing ................................................ 19 Specialty Drugs .................................................................................. 20 The Prescription Drug Pipeline: What is coming next? ................................... 23 Hospital Pricing Markup and Site of Care Pricing Differentials ........................... 25 Medicare’s Inability to Negotiate Prices ..................................................... 26 Prescription Drug Rebates ..................................................................... 27 Pharmacy Benefit Managers (PBMs): Pricing, Profits and Consolidation ................ 29 Rising Prescription Drug Manufacturer Profits .............................................. 30 Prescription Drug Promotional Marketing .................................................. 31 Marketing to Physicians ........................................................................ 34 Lobbying Contributions to Drive Industry Policy ........................................... 34 Learning from Other States ................................................................... 35 2018-2020 State Policy Update .............................................................. 35 Solutions for Colorado ......................................................................... 41 Improve Prescription Drug Price Transparency ............................................. 41 2020 Progress: Canadian Drug Importation Program Implementation .................. 42 2020 Opportunities: Expansion of Importation Programs to Include International Pricing and Additional Drug Classes .......................................................... 42 Looking to Medicaid as a Guide: Lessons from the Drug Importation Project ......... 46 Information and Tools for Prescribers ....................................................... 47 Prescription Drug Monitoring Program (PDMP) ............................................. 48 Ensure Employers Benefit from All Manufacturer Rebates and Compensation to Their Insurance Carriers/PBMs (Rebate Pass-Through) .............. 49 Explore Options on Manufacturer Couponing ............................................... 51 Tackling Physician Detailing: An Appointed Board That Frames Guidance for Prescribers ...................................................... 51 2 Prescription Drug Affordability Board ........................................................ 52 Public and Private Partnerships to Improve Access to Prescription Drugs .............. 53 Monitor Innovative, Evolving Ways to Price Prescription Drugs .......................... 53 Hospital Drug Acquisition Cost and Pricing and Site of Service Opportunities to Reduce Employer and Consumer Prices ..................................................... 54 Site of Service Opportunities to Reduce Employer and Consumer Costs ............... 55 Value-Based Contracts to Improve the ROI on High Cost Specialty Drugs .............. 55 Employer Best Practices for Drug Utilization Review, Contract Reimbursements and Fees .......................................................................................... 56 Preferred Drug Pricing for Employers ........................................................ 57 Federal Solutions to Lower Prescription Drug Costs .................................... 59 Reform Patent and Exclusivity Regulations ................................................. 60 Regulate Prices by Connecting U.S. Prices to International Prices ...................... 60 Emerging Federal & International Policy: The German Prescription Drug Pricing Model and Potential U.S. Cost Savings....................................................... 61 Redesign the FDA Approval Process to Include Cost Considerations .................... 61 Limit Direct-to-Consumer Advertising ....................................................... 62 Expedite Generic Drug Approvals............................................................. 62 Conclusion ........................................................................................ 63 Appendices ....................................................................................... 65 Appendix I. Definitions ......................................................................... 65 Appendix II. Federal Legislative Action ..................................................... 68 Appendix III. Total Prescription Revenues in Billions ...................................... 70 Appendix IV. Colorado Prescription Drug Spending and The Impact Of Drug Rebates (CIVHC Report) ................................................................................. 71 Appendix V. Drug Importation and International Pricing Report ......................... 92 Appendix VI. Prescription Drug Pipeline Report ............................................ 110 Appendix VII. Zolgensma®: Public Investments and Private Profits, Corrected ........ 115 3 Forward to Reducing Prescription Drug Costs in Colorado, 2nd Edition Since the Colorado Department of Health Care Policy & Financing (the Department) published the first edition of Reducing Prescription Drug Costs in Colorado in 2019, the prices of prescription drugs have continued to rise, largely unabated and unchallenged. The Department over the past year has continued to research and study the cost of prescription drugs and has updated this report with recent data, analyses and recommendations. The additions to this report have not changed the bottom line: prescription drugs costs are the leading contributor to rising health care costs. 2020 Updates to This Report This second edition of the report updates data and details how far Colorado has come in implementing the initiatives outlined in the first report. It also provides recommendations on how we can continue to battle rising prescription drug costs. More specifically, key updates in this report include: • Updated data and analysis: Throughout the report, the Department has updated statistics and state data where more recent data or reports were available. • Drug Importation in Colorado, International Pricing Report: Last year, this report focused on Colorado’s Canadian importation program. When fully implemented, this program could result in an average of 61% savings on imported drugs from Canada, based on an initial analysis of 167 brand-name drugs completed in March 2020. This year, the Department has completed a new analysis of cost savings associated with importing drugs from additional foreign countries, including the importation of biologic drugs. The new report compares drug pricing in Canada, France and Australia to Colorado’s pricing. If importing from Canada, Colorado consumers, employers, and other payers could expect to save an average of 63% on the 50 drugs analyzed. Importing from France and Australia could deliver even higher savings — an average of 84% and 78%, respectively. Changing federal statute to allow importation from countries other than Canada would also reduce the pressure on Canada as the sole conduit of reduced foreign prices for Americans and allow the US to import a greater variety of prescription drugs to meet the dynamic and evolving demands of U.S. consumers. The expansion of the program to include the importation of biologics would be an additional significant cost savings opportunity. A summary is included on pages 42-45, and the full report is in Appendix V. • Prescriber Tool: In the 2019 report, the Department detailed how it would create a tool for all prescribers in the state that would improve prescription drug cost control, reduce opioid addiction risk and improve patient health. Since then, the Department has begun implementing Phase I of the tool. The first module of this phase provides patient-specific opioid risk metrics and medication monitoring to prescribers via electronic medical record systems and will be operational in January 2021. The second module will provide real- time, patient-specific pharmacy benefit and drug cost information to prescribers.This
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