Colorado Is Trying to Cap a Drug’s Price. Big Pharma Has Other Plans
A state board in Colorado is working to make history by becoming the first in the country to cap the price of a drug it deems unaffordable. Amid an aggressive industry lobbying campaign, Colorado lawmakers are now weighing a poison pill measure that would blow up the plan and similar efforts in the future.
The episode highlights the vast power of Big Pharma and how difficult it is to lower drug prices in the United States. The U.S. is an outlier among the rest of the world because Congress for decades barred Medicare from negotiating drug prices, as virtually all other nations do. It’s a major reason why Americans pay the world’s highest prices for products that are developed with support from the U.S. government, even when those drugs have been around for decades.
Enbrel, the rheumatoid arthritis drug being targeted by Colorado officials, is an extreme example of this phenomenon. Manufactured by Amgen, Enbrel costs 373 percent more in the U.S. than in European countries — even though the drug was developed with a staggering $2.6 billion in funding from the U.S. National Institutes of Health. First approved in 1998, Enbrel has no competition: Its manufacturer built “a patent thicket” that has successfully blocked biosimilars from coming to market, even after its primary patent expired in 2010.
Last year, the Biden administration announced that Enbrel was included on the list of medicines that would be part of the first-ever round of Medicare drug price negotiations. The law only allows for negotiations each year on a handful of expensive drugs that are older and have no generic competition.
Colorado’s Prescription Drug Affordability Board, established by the Democratic-controlled legislature in 2021, recently found that a year’s worth of Enbrel costs $46,000 per patient, and that patients are responsible for about $2,300 of that if they have a commercial insurance plan or privatized Medicare Advantage coverage.
Last week, the Colorado PDAB voted to declare that Enbrel is unaffordable, and start the process of setting an upper payment limit for the drug. Several states have set up similar drug affordability boards, but advocates believe this is the first time a state has moved to step in and formally set a price cap on a medicine.
“What’s really important here is demonstrating that states have a way of coming to the table and helping to put some downward pressure on pricing, which is just entirely out of control,” says Bethany Pray, deputy director for the Colorado Center on Law and Policy. “If there’s an upper payment limit put on Enbrel, and that results in the price coming down somewhat, manufacturers [will] have to be aware that that mechanism is out there and that it’s doable, and may behave differently.”
Amgen warned investors in its recent annual financial disclosure that government actions at the state level can “create additional pressure on our pricing decisions.” The disclosure specifically cites the Colorado PDAB’s review of Enbrel, warning that the medication “could be subject to an upper payment limit as early as Q4 2024.”
In state filings, Amgen has warned, obliquely, that efforts to impose a price cap on Enbrel could harm patients. In one letter, the company wrote that policymakers “must move beyond a focus on a medicine’s list price or else risk unintended consequences for access and innovation.”
It’s an odd threat. Enbrel is wildly profitable. In 2021, the trade publication BioPharma Dive reported that the medication’s “sales have already topped $74 billion and, by 2029, could approach $100 billion — an incredible sum matched only by a few other pharmaceutical products in history.”
This sum hasn’t required much in the way of spending on innovation: A 2021 report from House Democrats found that, over a 15-year period, Amgen had spent about $2 billion on “Enbrel R&D expenditures,” equal to about 3.5 percent of its U.S. net revenue from the drug. Of course, as The Lever recently reported, Enbrel was developed with $2.6 billion in funding from the NIH, meaning that patients already paid a fortune to finance the blockbuster drug they could supposedly lose access to if Colorado state officials were to try to impose a maximum price.
“Pharma’s not coming to the table to answer the question: If you had to take a little less profit, you would deprive people of this drug?” says Pray. “I hope not.”
Amgen’s CEO, Robert Bradway, received more than $21 million in compensation last year.
According to Bloomberg Law, analysts expect the Colorado PDAB’s move to set a maximum Enbrel price will result in litigation. In a recent letter to state officials, Amgen raised a series of objections about how the board arrived at the decision to set an upper payment limit on its medication, and warned about “the introduction of bias from the board’s and staff’s selective targeting of stakeholders for input.”
Some Colorado lawmakers have offered legislation to preempt the drug board’s effort to cap the price of Enbrel. The bill, which has already advanced through committee, would exempt so-called “orphan drugs,” or special designation drugs that treat rare diseases, from the Colorado PDAB’s review.
That might sound sensible, but many orphan drugs used for rare diseases are also approved to treat more common diseases. The 2021 report from House Democrats found that pharmaceutical companies have “sought orphan drug protections for widely used and commercially successful drugs,” and have “used orphan drug approval to justify charging high prices.”
In the case of Enbrel, a 2021 study published in Health Affairs found that roughly 94 percent of spending on the medication is assigned to nonorphan indications; only 1.4 percent of spending was assigned to Enbrel’s orphan indications.
Colorado state Sen. Barbara Kirkmeyer (R) is one of the lead sponsors of the bill to exempt orphan drugs from PDAB reviews. Explaining the need for the bill, she told Colorado Newsline, “It sets a chilling effect on all of these people with rare diseases,” adding: “I’m not here for Big Pharma. I know they make money on stuff. That’s not the issue — it’s what happens if you were to put an upper payment limit on the drug, or just even present the possibility.”
At least 15 pharmaceutical companies, drug distributors, and industry lobbying groups have reported lobbying on the legislation, according to state records. Amgen has disclosed “monitoring” the bill, which was read for a second time in the state Senate on Tuesday.
Kristen Nordenholz, an emergency physician in Aurora and the Colorado state lead of the Committee to Protect Health Care, says “this bill is a Big Pharma giveaway that would gut Colorado’s Prescription Drug Affordability Board — and that’s its goal.”
“The board must be able to have the latitude to do this life saving work,” she says. “What this bill would do is allow pharmaceutical corporations to keep charging a fortune for life-saving pills while patients like mine suffer.”
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