Joint Committee Committee on Joint Health and Human Services (01/14/2010)

Final
STAFF SUMMARY OF MEETING

COMMITTEE ON JOINT HEALTH AND HUMAN SERVICES

Date:	01/14/2010	ATTENDANCE

Time:	01:32 PM to 03:59 PM	Acree	*
		Apuan	X
Place:	LSB A	Carroll M.	X
		Gagliardi	X
This Meeting was called to order by		Gerou	X
	Representative Riesberg	Kefalas	X
		Kerr J.	*
This Report was prepared by		Lundberg	*
	Elizabeth Burger	Mitchell	*
		Newell	*
		Primavera	X
		Roberts	X
		Sandoval	*
		Schultheis	*
		Swalm	X
		Tyler	X
		Boyd	X
		Riesberg	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Presentation by PhRMA Presentation by the Division of Insurance Colorado Association of Health Plans		- - -

01:33 PM -- Presentation by PhRMA

Senator Boyd gave introductory comments. She explained that this meeting is the first of three meetings scheduled for the Joint Health and Human Services Committee. She introduced the presenters from the Pharmaceutical Research and Manufacturers of America (PhRMA).

01:35 PM

Dr. Kiki Traylor, Amgen, began her presentation related to the development of biologics and the biologics industry in Colorado. She distributed a handout to the committee (Attachment A). Dr. Traylor described biotech medicines. She explained that these medicines include human therapeutics, such as insulin, vaccines, blood products, specialty targeted antibiotics, etc. Most biotech medicines are injectable drugs. She described the complexity of biotech medicines and the differences in manufacturing biotech medicines vs. traditional small molecule pharmaceuticals.

01:43 PM

Dr. Traylor described the processes and costs involved in the research and development process for biotech medicines. She gave the example of the drug Denosumab, stating that the development of the drug took 15 years and cost almost $1 billion.

01:46 PM

Joseph Hammang, Senior Director of Science Policy for Pfizer Pharmaceuticals, described the operating model for the company. He discussed the changing demographics of the pharmaceutical industry, stating that PhRMA had almost 50 members in 1988 and currently has only 28 members. Dr. Hammang gave an overview of the research and development process at Pfizer and the company's collaborations with other laboratories. He discussed the proportion of health care costs that is comprised of pharmaceutical sales, stating that the sale of pharmaceuticals has comprised about 10 percent of total health care costs since 1966. Dr. Hammang discussed spending on research and development by pharmaceutical companies. A handout concerning the bioscience industry in Colorado was distributed to the committee (Attachment B). He discussed the relationship of pharmaceutical companies with institutions of higher education. Dr. Hammang described the percentage of revenues invested by pharmaceutical companies in research and development versus that invested by other industries. He discussed the perception that the pharmaceutical industry spends more on marketing than on research and development.

02:00 PM

Richard Duke, President and CEO of ApopLogic Pharmaceuticals, discussed the impact of the biotech industry on Colorado's economy. He described the funding that state research institutions receive from the National Institutes of Health, stating the funding that is received is leveraged considerably. He discussed the role of venture capital in funding the development of new drugs. He stated that an investment in biotech is necessary in order for Colorado to remain competitive in the industry. He discussed the difficulty in getting a new drug approved for sale, stating that for each cancer drug that is approved, 600 drugs do not make it through the clinical trial process.

02:09 PM

Representative Riesberg asked for information on "off-label" uses of drugs. Dr. Hammang described the process in which pharmaceutical companies find additional uses for existing drugs. Dr. Hamming responded to additional questions from Senator Carroll regarding off-label uses of prescription drugs and patient safety. Dr. Hamming discussed the counterfeiting of prescription drugs, and discussed the reasons why prescription drugs cost more in the United States than in other countries. He stated that the prescription drug industry is suffering in other countries, and that companies are moving their research and development activities to the United States because it is a more supportive environment for innovation.

02:23 PM

Dr. Hammang further responded to questions from Representative Swalm regarding PhRMA's support for health care reform legislation. He responded to questions from Senator Mitchell regarding the profitability of the pharmaceutical industry. He discussed the importance of research and the large number of drugs that are "failures" in the development process. Mr. Duke discussed government funding for drug development.

02:35 PM -- Presentation by the Division of Insurance

Marcy Morrison, Colorado Commissioner of Insurance, began the presentation and introduced her staff. Three handouts regarding the division and the regulation of insurance in the state were distributed to the committee (Attachments C through E).

02:39 PM

John Postolowski, Deputy Commissioner of Finance and Administration, described the different sections of the Division of Insurance and their responsibilities. He explained that the Division of Insurance is responsible for licensing insurers, collecting premium taxes, rate approval. He discussed the types of insurance that have "prior approval" rate systems and "file and use" systems. Mr. Postolowski discussed the division's response when an insurance company files rates the division believes are excessive. The division also reviews the financial statements of insurers to ensure that the insurers are solvent and can pay future claims, and audits insurance companies to make sure that the companies are reporting accurate information. Mr. Postolowski stated that the division has four actuaries on staff who work annually to develop a lost-cost ratio for workers' compensation insurance. He stated that the lost-cost factor was reduce in the past year, which reduced employer's workers compensation premiums this year. He described the division's activities with regard to producer licensing, stating 120,000 individuals and corporations are licensed to sell insurance in the state. He described the market analysis process for large insurance corporations who sell in many states. He explained the jurisdiction of the division and the plans that are regulated by the department. Mr. Postolowski stated that the division only regulates about one-third of the insurance marketplace, and the division does not have authority to intervene with regard to self-insured plans, Medicaid, Medicare, and the Children's Basic Health Plan. He explained that the division does not handle complaints regarding CoverColorado or Pinnacol Assurance.

02:53 PM

Peg Brown, Deputy Commissioner of Consumer Affairs, described the compliance and investigations activities of the department, which focus on wrongful activities by producers. She explained that the division's investigative division also focuses on finding insurers who are illegally selling insurance without a certificate of authorization from the department, as well as illegal self-funded plans. She stated that the number of illegal self-funded plans is increasing nationally. She emphasized that not every insurer is subject to regulation by the state. Ms. Brown described the Senior Health Program, which helps seniors make choices regarding Medicare and long-term care insurance. Ms. Brown highlighted a report produced by the Division of Insurance on complaints against insurers. Ms. Brown described handout E, which provides statistics regarding how individuals get their insurance in Colorado. She reiterated that the Division of Insurance has jurisdiction over about 30 percent of the health plans in the state.

03:03 PM

Jo Donlin, Director of External Affairs, described health insurance-related legislation that has passed in recent years (Attachment D), including bills that required health plans to cover certain benefits. Ms. Brown discussed the regulation of self-funded plans pursuant to the federal Employment Retirement Income Security Act (ERISA), and explained that House Bill 09-1338 made changes to bring the state into compliance with federal ERISA law. Ms. Brown discussed an additional bill, House Bill 09-1349, which relates to continuation of coverage after an employee has involuntarily separated from employment. Ms. Donlin highlighted consumer resources available on the Division of Insurance's website. Ms. Donlin described legislation that provided additional enforcement powers to the Division of Insurance.

03:15 PM

Commissioner Morrison gave concluding remarks. Senator Sandoval asked for clarification of the division's role with regard to CoverColorado, and Mr. Postolowski stated that the division does not have jurisdiction over CoverColorado and any complaints that are received by the Division of Insurance are directed to the company.

03:18 PM -- Presentation by the Colorado Association of Health Plans

Ben Price, Executive Director of the Colorado Association of Health Plans, introduced himself and distributed a handout to the committee (Attachment F). He explained that the association is the trade association for health plans in the state. He listed the members of the association. He described the principles of the association, including that individuals should have access to health care, health care costs are high, that losing a job doesn't mean losing health care coverage, and that the status quo is unacceptable. He described legislation concerning health care reform that the Colorado Association of Health Plans has supported in the past year. Mr. Price described the association's partnership with the Department of Public Health and Environment regarding tobacco cessation activities.

03:25 PM

Marc Reece, Colorado Association of Health Plans, stated that insurance is a heavily regulated market and that health plans work closely with the State Division of Insurance. Mr. Reece described health care costs and waste in the system. He described the proportion of costs that account for health insurance payments. He stated that 13 percent of costs are considered administrative, which includes the costs of complying with government requirements and claims processing. It also includes insurer profits. He discussed health insurers' profit margins in the past year nationally and in Colorado.

03:32 PM

Michael Huotari, Rocky Mountain Health Plans, described Rocky Mountain Health Plans, the services the plan offers, the areas in the state in which it operates, and the clients the plan services.

03:38 PM

Susan Cox, Kaiser Permanente, introduced herself and distributed a handout to the committee (Attachment G). She gave an overview of the enrollment in the Kaiser Permanente, and the benefits offered by the plan. She relayed information regarding Kaiser Permanente's prescription drug program.

03:41 PM

Jairo Ramirez, Kaiser Permanente, further discussed Kaiser Permanente's drug program and prescription drug costs. He highlighted the importance of competition in the drug market, and the impact of generic drugs on drug costs. He highlighted Kaiser's efforts to evaluate the safety of prescription drugs.

03:45 PM

Senator Newell asked Mr. Huotari how Rocky Mountain Health Plans is sharing information regarding its innovative programs. Mr. Huotari responded to questions from Representative Gagliardi regarding CoverColorado, stating that Rocky Mountain Health Plans recently was awarded the contract to administer the program. Senator Sandoval and Senator Carroll asked for clarification on Mr. Reece's comments regarding health plan administrative costs and executive compensation. Mr. Price responded to questions from Senator Newell regarding methods to address the situation in which an individual loses health care coverage if they lose their employment. Senator Newell asked for additional information regarding waste in the health care system. Representative Kefalas asked for additional information on insurers' medical-cost ratios.

03:58 PM

The committee adjourned.