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February 25, 2022 HB 22-1122
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 22-0243
Rep. Will
Sen. Jaquez Lewis
Date:
Bill Status:
Fiscal Analyst:
February 25, 2022
House Health & Insurance
Annie Scott | 303-866-5851
Annie.Scott@state.co.us
Bill Topic: PHARMACY BENEFIT MANAGER PROHIBITED PRACTICES
Summary of
Fiscal Impact:
☐ State Revenue
☒ State Expenditure
☒ State Transfer
☐ TABOR Refund
☒ Local Government
☐ Statutory Public Entity
This bill requires pharmacy benefit managers to reimburse pharmacies at certain rates,
and also creates the 340B Prescription Drug Program Anti-Discrimination Act. The bill
increases state expenditures on an ongoing basis.
Appropriation
Summary:
For FY 2022-23, the bill requires an appropriation of $17,109 to the Department of
Regulatory Agencies.
Fiscal Note
Status:
The fiscal note reflects the introduced bill.
Table 1
State Fiscal Impacts Under HB 22-1122
Budget Year
FY 2022-23
Out Year
FY 2023-24
Revenue
- -
Expenditures Cash Funds $17,109 $20,530
Centrally Appropriated $6,164 $6,797
Total Expenditures $23,273 $27,327
Total FTE 0.3 FTE 0.3 FTE
Diversion General Fund ($23,273) ($27,327)
Cash Funds $23,273 $27,327
Net Diversion $0 $0
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February 25, 2022 HB 22-1122
Summary of Legislation
For all contracts between a pharmacy benefit manager (PBM) and a pharmacy entered into or renewed
on or after January 1, 2023, the bill prohibits a PBM or their representative from reimbursing a
pharmacy for a prescription drug in an amount that is less than:
the national average drug acquisition (NADA) cost at the time the drug is administered or
dispensed, plus a professional dispensing fee; or
the wholesale acquisition cost of the drug, plus a professional dispensing fee, if the NADA is not
available.
The bill also creates the 340B Prescription Drug Program Anti-Discrimination Act, which, among its
provisions, prohibits a third party that reimburses a 340B covered entity for 340B drugs from imposing
fees, charge backs, or other adjustments on covered entities or contract pharmacies based on their
participation in the 340B drug pricing program, or requiring a claim for a drug to include a modifier
to indicate that the drug is a 340B drug unless the claim is for payment, directly or indirectly, by the
Medicaid program.
A PBM or any other third party that makes payment for the 340B drugs for an eligible patient must
not discriminate against a 340B covered entity in a manner that prevents or interferes with the patient's
choice to receive the drugs from that entity. Violation of the 340B Prescription Drug Program
Anti-Discrimination Act by a third party is an unfair or deceptive act or practice. The Commissioner
of Insurance may adopt rules to enforce the bill.
Background
The 340B Prescription Drug Program is named for Section 340B of the federal Public Health Service
Act, passed in 1992. To have their drugs covered by Medicaid and Medicare Part B, pharmaceutical
manufacturers enter into a pricing agreement with the Secretary of Health and Human Services to
provide discounts on covered outpatient drugs purchased by covered entities that serve vulnerable
patients.
Assumptions
The fiscal note assumes that the bill will generate 200 complaints per fiscal year and that each
complaint will require 3 hours of Division of Insurance (DOI) staff time for:
• taking complaint information;
• corresponding with and gathering information from the involved carrier;
• conducting an investigation; and
• determining whether the carrier is in compliance with the statute.
The fiscal note also assumes the DOI will receive 200 inquiries per fiscal year, each requiring
15 minutes of staff time. If additional information becomes available to clarify these assumptions, the
fiscal note will be revised to reflect the new information. Page 3
February 25, 2022 HB 22-1122
State Diversion
The bill diverts $23,273 from the General Fund to the Division of Insurance Cash Fund in FY 2022-23,
and $27,327 in FY 2023-24. This revenue diversion occurs because the bill increases costs in the DOI,
which is funded with premium tax revenue that would otherwise be credited to the General Fund.
State Expenditures
The bill increases state expenditures in the DOI in Department of Regulatory Agencies by $23,273 in
FY 2022-23, and $27,327 in FY 2023-24 from the Division of Insurance Cash Fund. Expenditures are
shown in Table 2 and detailed below.
Table 2
Expenditures Under HB 22-1122
FY 2022-23 FY 2023-24
Department of Regulatory Agencies
Personal Services $17,109 $20,530
Centrally Appropriated Costs
1
$6,164 $6,797
Total Cost $23,273 $27,327
Total FTE 0.3 FTE 0.3 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
Department of Regulatory Agencies. Beginning in FY 2022-23, based on the assumptions listed
above, the DOI requires 0.3 FTE to address complaints and inquiries generated by the bill. The DOI
will also experience a workload increase for rulemaking, which can be accomplished within existing
appropriations and budgeted legal services hours.
Health Care Policy and Financing. It is assumed that any changes to rates under Child Health Plan
Plus (CHP+) program will be addressed through the annual budget process.
State employee insurance. The bill may result in increased costs for prescription drugs leading to
higher insurance premiums, which will be shared by state agencies and employees after the first plan
year. In addition, changes to prescription drug costs will need to be adopted by the Division of
Workers’ Compensation and charged to the workers’ compensation claims of each agency through
the Workers’ Compensation actuarial process. Any increase in costs will be addressed through the
annual budget process.
Centrally appropriated costs. Pursuant to a Joint Budget Committee policy, certain costs associated
with this bill are addressed through the annual budget process and centrally appropriated in the Long
Bill or supplemental appropriations bills, rather than in this bill. These costs, which include employee
insurance and supplemental employee retirement payments, are shown in Table 2.
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February 25, 2022 HB 22-1122
Local Government
Similar to state employee insurance, to the extent that the costs increase for local government
insurance plans, cost increases will be shared by local governments and employees.
Effective Date
The bill takes effect 90 days following adjournment of the General Assembly sine die, assuming no
referendum petition is filed.
State Appropriations
For FY 2022-23, the bill requires an appropriation of $17,109 to the Department of Regulatory Agencies
from Division of Insurance Cash fund, and 0.3 FTE.
State and Local Government Contacts
Health Care Policy and Financing Information Technology
Law Personnel
Public Health and Environment Regulatory Agencies
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit: leg.colorado.gov/fiscalnotes.