Monday, June 2, 2008


June 2, 2008

Honorable Colorado House of Representatives
66th General Assembly
Second Regular Session
State Capitol
Denver, CO 80203

Ladies and Gentlemen,

I am filing with the Secretary of State House Bill 08-1032, "Concerning a Change in Payment to Pharmacies for Certain Drugs Under Medicaid." I vetoed this bill as of 10:32 a.m., and this letter sets forth my reasons for doing so.

By way of background, Congress passed the Deficit Reduction Act (DRA) in 2005. The DRA sought to reduce prescription drug costs in Medicaid and the Centers for Medicare and Medicaid Services (CMS) subsequently published rules to reduce Medicaid payments to pharmacists for generic drugs. The pharmacy payment rules resulting from the DRA were set to take effect in January 2008, but a lawsuit was filed challenging the rules. That lawsuit has not yet been resolved and the pharmacy payment rules in question have not taken effect.


House Bill 08-1032 anticipates that the pharmacy payment rules will go into effect and directs the Colorado Department of Health Care Policy and Financing to implement a State Maximum Allowable Cost program to maximize the federally allowable payment for generic drugs under Medicaid.


I am vetoing this bill because it is premature, unnecessary and restrictive.


At this time, it is impossible to know what a reasonable state response to the federal regulations would be given that we don't know if or how the pharmacy payment rules established by CMS will be implemented. Until there is clear direction from the federal government on this matter, it is premature to seek a state solution. 


Further, the Department of Health Care Policy and Financing already has the statutory authority to establish State Maximum Allowable Cost program and the necessary discretion to implement the program to maximize savings to Medicaid. House Bill 08-1032, however, dictates that under the program the state must maximize the federal allowable cost for generic drugs, thus restricting how the Department may implement the program and potentially limiting the cost savings to the state.


Accordingly, I have vetoed this bill.





Bill Ritter, Jr.