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House Committee Passes HB 1237, Takes Major Step in Modernizing How CO Purchases Prescription Drugs

Bipartisan Leaders Unequivocally Express Their Support for PBM Reverse Auction Bill; Colorado Stands to Save Millions of Dollars with New Approach


(Denver, CO) - Yesterday, Colorado’s elected leaders and policy experts from across the country testified before the House Health & Insurance Committee in support of an innovative process that creates a competitive marketplace for Pharmacy Benefit Managers (PBM) to bid on contracts with the state. The adoption and implementation of this new approach could bring $6.7 million - $10.2 million in savings to the state annually.


PBMs manage the prescription drug benefits for public and private health plans, negotiating rebates with drug manufacturers, and establishing reimbursement rates paid to pharmacies for filling prescriptions.


“Despite their promise to reduce consumer costs, PBMs enjoy high profit margins, while patients, local pharmacies, employee health plans, and states face sharply increasing costs for prescription medicines,” said bill sponsor Representative Susan Lontine (D-Denver). “HB 1237 creates a dynamic competitive process in which PBMs must to underbid one another to win the State’s business. Leading edge technology enables our State government to compare complex PBM pricing offers on a level playing field to capture the greatest value for Colorado taxpayers. Above all, HB 1237 will enable Coloradans, finally, to know exactly what the State is paying for prescription drugs and why.”


The new process, a PBM reverse auction, uses technology to transparently compare PBM bids for the state’s business to help bring savings promised by PBMs back to Coloradans.


“The PBM reverse auction transforms the currently non-competitive process for setting prescription drug prices into a dynamically competitive marketplace,” said bill sponsor Representative Janice Rich (R-Grand Junction). “This free market approach uses an innovative analytics technology to encourage PBMs to provide the best possible offer for the state.”


House Bill 1237 would create savings for taxpayers, as well as the more than 28,000 people who work for the state of Colorado.


“This bill could not come at a better time,” said Hilary Glasgow, Executive Director of Colorado WINS, the union representing state employees. “HB 1237 has the potential to generate millions in savings for the state, so we can support Colorado’s economy, not the bottom line for PBMs. The best part - it will save us millions without any reduction in employee benefits.”

Similar legislation has passed in three other states and has been fully implemented by the State of New Jersey, which realized savings of more than $2.5 billion over five years.


“The prescription drug savings realized by New Jersey in our first two years of experience actually exceeded our initial projections,” testified Dudley Burge, a Commissioner of the New Jersey State Health Benefits Commission, noting reduced PBM invoice spending for public employees by $822 million in 2018, and an additional $578 million in savings in 2019. “The positive effects seen in New Jersey are not a coincidence. This legislation is tried and true, and Coloradans deserve the best from their government.”


The House Health & Insurance Committee passed the bill with a vote of 11-2. The bill will now head to the full House of Representatives for debate and a vote.


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