HB23-1201 eliminates drug pricing mark-ups between what a health carrier pays a pharmacy for a drug and what it charges to employers and consumers for dispensing that same drug
FOR IMMEDIATE RELEASE
May 10, 2023
Department of Health Care Policy & Financing
Denver, CO - Today Gov. Jared Polis signed HB23-1201, which will eliminate the practice of “spread pricing,” or up-charging of prescription drugs by middlemen on insured individual and group policies. It also creates an opt-in provision so that self-insured employers can benefit from this affordability law as well. Spread pricing occurs when a pharmacy benefit manager (PBM), or its affiliated health insurance company, pays the pharmacy a lower price for a given drug, then charges a policy holder or an employer a higher price for the same drug and keeps the “spread” as a profit. As a result, employers often unknowingly pay more for prescription drug benefits provided to their employees while employees are paying higher coinsurance and insurance premium contributions than they should. By eliminating spread pricing, this bill will save currently impacted employers an average of 10-25% on their prescription drug costs, which is further incentive for self-insured employers to “opt-in.”
HB23-1201 also creates transparency for employers on prescription drug pricing factors that impact what they ultimately pay for their employee prescription drug benefit under their contract with the PBM or insurance carrier. This important provision in the bill will impede PBM’s or carriers’ murky pricing mechanisms that disadvantage employers and individuals while creating unusually high, hidden profits for PBMs and insurance carriers. Brokers and consultants can leverage this transparency information when negotiating on behalf of their valued employer clients. It also allows employers to make proactive, voluntary decisions on how they wish to leverage the prescription drug benefit savings, such as increasing wages, maintaining or reducing out of pocket costs for their covered employees. The bill also adds a spread pricing prohibition for Health First Colorado (Colorado’s Medicaid program), ensuring the state and taxpayers are not being harmed by the practice of spread pricing.
“Spread pricing unnecessarily drives up the costs of prescription drugs for employers, consumers and the state,” said Kim Bimestefer, executive director for the Department of Health Care Policy & Financing. “Employers are struggling to keep pace with rising wages and health care costs. This bill helps Colorado employers save money on health care, which they can repurpose however they see fit.”
The spread pricing prohibition and required PBM and carrier affiliate transparency reporting begins January 2025.
About the Colorado Department of Health Care Policy & Financing: The Department administers Health First Colorado (Colorado's Medicaid program), Child Health Plan Plus, and other programs for Coloradans who qualify. These health care programs now cover about one in four Coloradans. For more information about the Department, please visit hcpf.colorado.gov.