A practice by health insurers to shift more drugs into high-cost “specialty” categories is pushing those treatments out of the reach of California patients with chronic and life-threatening diseases and caught the attention of the state’s policymakers who are looking for ways to rein in consumer costs.

“In recent years we’ve been paying sky-high prices for specialty drugs without knowing why,” said Assemblyman David Chiu, D-San Francisco, who has authored one of two Assembly bills to address the problem. “The costs for these drugs have been exploding without any transparency about how these drugs are priced. These high prices are not only impacting lives of patients who need them, but the overall costs of delivering health care.”

The most glaring example of the price escalation is a new hepatitis C drug that pharmaceutical companies are offering wholesale at $1,000 a pill. The insurance companies are passing much of that cost onto patients.

This “specialty” category has grown as prescription drugs have evolved from simple compounds to complex biologic therapies that cost drugmakers billions of dollars to produce and require years of clinical trial testing for approval. They include long-term therapies for more common conditions like rheumatoid arthritis, cancer and other diseases, and depending on a person’s insurance plan, can cost several hundred dollars per prescription.

Covered California, the state agency that offers health insurance under the federal health law, is trying to address the problem but even that is fraught with controversy.

On Thursday, Covered California’s board is set to vote on a plan to limit patient spending to $500 per prescription. But the state’s insurance commissioner and several patient advocacy groups said Wednesday that the plan doesn’t go far enough to protect patients from sticker shock.

“Setting the cap that high creates an insurmountable affordability barrier for patients, particularly those who struggle with chronic and life-threatening conditions,” said Dave Jones, commissioner of the state Department of Insurance, on a press call urging the agency’s board to adopt a monthly $200 cap per specialty drug.

Michael Smith of San Francisco deals with this reality daily.

Smith, 53, has a severe form of celiac disease, an immune reaction to eating gluten that also affects his body’s ability to absorb nutrients. Smith’s disease went undetected for years, during which time his bones deteriorated and he suffered numerous breaks, including his femur bones.

His doctor put him on a bone-strengthening drug called Forteo last fall, and Smith, who is covered by Kaiser through a Covered California policy, was paying $50 a month for the daily injection. In January, without warning, Smith said his share jumped to $650 a month, or $400 after he met the deductible.

No choice

“I have to pay it. I don’t have a choice,” said Smith, a self-employed transit technology consultant, who will pay over $5,000 a year for that one drug, on top of his premiums and other drug expenses. “The people who are affected by this are in this situation where they don’t have a lot of choice.”

Covered California officials acknowledged that spending up to $500 a month per drug may be tough for some consumers, but said the goal is to spread costs out over the year rather than having consumers reach their annual out-of-pocket requirements in the first month or two. The annual spending limit for individual Covered California consumers is $6,600.

“This is just the beginning of addressing a very complicated issue that impacts potentially all of our consumers,” said James Scullary, spokesman for Covered California.

Meanwhile, Bay Area lawmakers have introduced two bills this year to address specialty-drug costs.

Chiu’s Assembly Bill 463 would require drugmakers to disclose the development and manufacturing costs as well as profits of all drugs that cost $10,000 or more a year.

Another bill, by Assemblyman Rich Gordon, D-Menlo Park, would prohibit insurers from putting most or all drugs designed to treat a specific condition into the highest cost tier and limit the costs they can pass on to patients.

The bill, AB339, could have prevented a controversial decision by Kaiser to push most of its HIV drugs into a high-tier system that would have cost patients hundred of dollars per month. A backlash by politicians and patients forced Kaiser in February to reverse the policy, which went into effect Jan. 1.

Pointing fingers

Health insurers, for their part, blame the pharmaceutical industry for setting high drug prices and forcing them to pass on the costs.

“We have to address the prices,” said Nicole Kasabian Evans of the California Association of Health Plans, a trade group that supports Chiu’s bill and opposes Gordon’s. “When we just focus on out-of-pocket costs, we’re masking the problem and giving drug companies a free ride to continue unreasonable and unsustainable pricing.”

The pharmaceutical industry points to the huge risks companies make in investing and developing new drugs.

“For every one compound that’s approved, there were nine that didn’t make it,” said Priscilla VanderVeer, spokeswoman for Pharmaceutical Research and Manufacturers of America, which represents the drug industry. “If we didn’t invest money back into research and development, we wouldn’t have a drug that cures 90 percent of hep C cases.”

What’s clear is, this problem isn’t likely to resolve soon.

The impact of these prices hits consumers and health insurers as well as the state budget. Gov. Jerry Brown’s new budget proposal allocated some $300 million for high-cost specialty medications, including those used to treat hepatitis C.

Gordon, who introduced similar legislation last year that failed, said the time to deal with the rising cost of specialty drugs is now.

“It’s not too far off in the distant future where they’re going to be able to create a drug based on our DNA,” he said. “That’s going to be a very expensive drug.”

Victoria Colliver is a San Francisco Chronicle staff writer. E-mail: vcolliver@sfchronicle.com Twitter: @vcolliver

Spending big on specialty drugs

U.S. spending for prescription drugs jumped 13 percent to $374 billion in 2014, the biggest percentage increase since 2001, according to a report released this week.

Hepatitis C drug costs accounted for about $11 billion of that spending. The new hepatitis C drugs Sovaldi and Harvoni run $84,000 to $94,500 for a single course of treatment.

U.S. spending on specialty drugs in 2012 was about $87 billion. Estimates suggest that it could quadruple by 2020, reaching about $400 billion.

The average price of cancer drugs has doubled over the past decade, with an increasing number now costing more than $100,000 a year.