Fact Check: Would Colorado Violate Federal Law by Limiting Prescription Drug Prices?

In a discussion at the state Capitol last Wednesday, a national pharmaceutical lobbying group claimed that upper price limits set by a prescription drug affordability board (or a PDAB) in Colorado could violate federal law and leave Colorado open to lawsuits.

However, this argument draws on assumptions that drug manufacturers would withdraw their price-capped-product from Colorado and that federal courts would connect precedent from patent law cases to the upper price limits.

Neither of those assumptions have been proven true in the other states with a PDAB or by health policy experts. Six states have passed legislation creating a PDAB while eight other states are presently considering PDAB bills.

Colorado’s PDAB, proposed in SB-175, would consist of five non-partisan health care experts and would set upper pricing limits on only the most exorbitantly priced prescription drugs.

The pharmaceutical industry spends big to fight PDAB legislation nationwide. The national group Pharmaceutical Researchers and Manufacturers of America (PhRMA) is currently lobbying against Colorado’s PDAB legislation, including at the hearing last Wednesday at the state legislature.

Trey Rogers, a Colorado lawyer-lobbyist representing PhRMA at the meeting, made the argument that upper price limits could restrict access to medicine. If that happens, Colorado could be violating the Eighth Amendment in the U.S. Constitution by depriving inmates of life-saving or life-enhancing medications.

“If upper price limits result in restricted access to medicines, the state may become the target of litigation for violating prisoner’s constitutional rights,” Rogers said. “Now, if SB-175 becomes law, if access to medicines is limited, and if successful Eighth Amendment litigation follows, the state will be left in a very difficult situation: violate state law by paying more than the UPL or violate a federal court order to provide necessary medication to inmates. … The solution to this problem is to eliminate the mandatory upper price limit provisions of SB-175.

In the argument Rogers referenced a 2016 Westword report that found the biggest cause of death in Colorado’s prisons was Hepatitis C, despite the development of drugs that virtually eliminate the virus. The report resulted in an ACLU lawsuit and a Department of Corrections settlement costing $41 million.

Adam Fox, Director of the Colorado Consumer Health Initiative, a progressive health care advocacy group, responded to Rogers’ argument.

“This seems to be a new attempt to scare legislators from reigning in unaffordable drug costs to help Coloradans,” Fox said. “If anything, SB-175 should make it easier for the Department of Corrections to afford the medications someone needs. There are provisions in the bill and in the Title VI statute to protect access to the medications people need.”

Fox is referring to the Title VI statute of the 1964 Civil Rights Act which protects from discriminatory health care practices.

Fox also explained that measures in the bill prevent manufacturers from pulling their drugs from the Colorado market, even if they are subject to upper price limits.

SB-175 sponsor and pharmacist Sonya Jacquez Lewis (D-Boulder) introduced the bill during Wednesday’s meeting reinforcing the idea that her bill does not force manufacturers to pull their drugs out of Colorado.

“Let me put this to rest,” Jacquez Lewis said. “This board absolutely does not do price setting. The prescription drug affordability board is not controlling drug prices. PDAB is not controlling a company’s ability to sell their product in our state. Some Pharma manufacturers may tell you that, but it’s simply not true.”

None of the other states with a PDAB have had drug manufacturers pull their products from the market, and Colorado’s PDAB would reign in only the most expensive prescription drugs, proponents emphasize.

Rogers also argued that upper price limits could conflict with federal patent law and cited a 2007 lawsuit over a prescription drug excessive pricing act in Washington D.C. That lawsuit was charged by PhRMA.

“Because the D.C. Act stood, ‘as an obstacle to the federal patent laws balance of objectives,’ the state law was invalidated,” Rogers said. “If SB-175 becomes law in its current form, it will likely face the same fate: invalidation by federal courts on preemption grounds. Again, the solution is to eliminate the mandatory upper payment limit provision of SB-175.”

But two separate reports written in 2020, one by the National Academy for State Health Policy and one by the national law firm Ropes and Gray, concluded that upper price limit legislation on the state level can avoid infringing on federal patent law by not focusing on exclusively patented products, and rather focusing on prescription drugs on the whole.

The proposed PDAB for Colorado does not solely specify patented drugs as targets for the upper price limits.

Also, some states have boards that can cap the cost of products like electricity and car-insurance premiums; those states have managed to avoid lawsuits over those upper payment limits.

SB-175 passed through the Health and Human Services Committee on a 4-3 vote on party lines and was sent to the Senate Appropriations Committee.