Report Title:

Prescription Drugs; Fair Access

 

Description:

Creates mechanism to reduce prescription drug prices, receive discounts, enter into rebate agreements, and prevent profiteering and manufacturer retaliation. Creates prescription drug advisory commission. Requires State to act as pharmaceutical benefit manager for residents.

 

HOUSE OF REPRESENTATIVES

H.B. NO.

142

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to fair pricing for prescription drugs.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that pharmaceutical companies are charging the citizens of Hawaii excessive prices for prescription drugs, denying Hawaii citizens access to medically necessary health care and thereby threatening their health and safety. Many Hawaii citizens are admitted to or treated at hospitals each year because they cannot afford the drugs prescribed for them that could have prevented the need for hospitalization. Many others must enter expensive institutional care settings because they cannot afford their necessary prescription drugs that could have supported them outside of an institution. All Hawaii citizens are threatened by the possibility that when they need medically necessary prescription drugs most, they may be unable to afford their doctor's recommended treatment.

The legislature further finds that residents of Hawaii and other Americans pay the highest prices in the world for prescription drugs, prices that result in extremely high profits for pharmaceutical companies. Prescription drug costs represent the fastest growing item in health care and are a driving force in rapidly increasing hospital costs and insurance rates. Excessive pricing for prescription drugs threatens Hawaii's ability to assist with the health care costs of Hawaii residents, undermines the financial capacity of Hawaii communities to meet the educational needs of Hawaii children, hurts the ability of the Hawaii business community to provide health insurance coverage to Hawaii's workforce, and has a negative effect on Hawaii's economy. The legislature finds that affordability is critical in providing access to prescription drugs for Hawaii residents.

The purpose of this Act is to make prescription drugs more affordable for Hawaii residents, thereby increasing the overall health of our families, benefiting employers and employees and the fiscal strength of our society, promoting healthy communities, and increasing the public health and welfare, by reducing prescription drug prices for residents of the State. In order to achieve this goal, it is the intent of the legislature to require the State to utilize manufacturer rebates and pharmacy discounts to reduce prescription drug prices. In implementing the program, the State shall serve as a pharmacy benefit manager in establishing rebates and discounts on behalf of qualified residents.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

fair access to PRESCRIPTION drugs

PART I. HAWAII prescription drug PROGRAM

   -1 Hawaii prescription drug program established; goals. (a) The Hawaii prescription drug program is established to reduce prescription drug prices for residents of the State.

(b) The legislature finds that affordability is critical in providing access to prescription drugs for Hawaii residents. This part is intended to enable the State to act as a pharmacy benefit manager in order to make prescription drugs more affordable for qualified Hawaii residents, thereby increasing the overall health of Hawaii residents, promoting healthy communities, and protecting the public health and welfare. It is not the intention of the State to discourage employers from offering or paying for prescription drug benefits for their employees or to replace employer-sponsored prescription drug benefit plans that provide benefits comparable to those made available to qualified Hawaii residents under this part.

   -2 Definitions. As used in this part, unless the context clearly requires otherwise:

"Average wholesale price" means the wholesale price charged on a specific commodity that is assigned by the drug manufacturer and is listed in a nationally recognized drug-pricing file.

"Department" means the department of human services.

"Initial discounted price" means a price that is less than or equal to the average wholesale price, minus six per cent.

"Labeler" means an entity or person that receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale and that has a labeler code from the United States Food and Drug Administration under 21 Code of Federal Regulations, 207.20 (1999).

"Manufacturer" means a manufacturer of prescription drugs and includes a subsidiary or affiliate of a manufacturer.

"Participating retail pharmacy" or "retail pharmacy" means a retail pharmacy located in this State, or another business licensed to dispense prescription drugs in this State, that participates in the program and that provides discounted prices to residents as provided in section    -5.

"Pharmacy benefit manager" means an entity that procures prescription drugs at a negotiated rate under a contract.

"Program" means the Hawaii prescription drug program.

"Qualified resident" means a resident of the State who has obtained from the department of human services a Hawaii prescription drug enrollment card.

"Secondary discounted price" means a price that is equal to or less than the initial discounted price minus the amount of any rebate paid by the State to the participating retail pharmacy.

   -3 Rebate program. A drug manufacturer or labeler that sells prescription drugs in this State, including through the Hawaii QUEST drug program or any other publicly supported pharmaceutical assistance program shall enter into a rebate agreement with the department for this program. The rebate agreement must require the manufacturer or labeler to make rebate payments to the State each calendar quarter or according to a schedule established by the department.

   -4 Rebate amount. The director of human services shall negotiate the amount of the rebate required from a manufacturer or labeler in accordance with this section. The director of human services shall:

(1) Take into consideration the rebate calculated under the Medicaid Rebate Program pursuant to 42 United States Code, Section 1396r-8, the average wholesale price of prescription drugs, and any other information on prescription drug prices and price discounts;

(2) Use the director's best efforts to obtain an initial rebate amount equal to or greater than the rebate calculated under the Medicaid rebate program pursuant to 42 United States Code, Section 1396r-8; and

(3) With respect to the rebate taking effect no later than October 1, 2002, the director of human services shall use the director's best efforts to obtain an amount equal to or greater than the amount of any discount, rebate, or price reduction for prescription drugs provided to the federal government.

   -5 Discounted prices for qualified residents. (a) Any participating retail pharmacy that sells prescription drugs covered by a rebate agreement pursuant to section    -3 shall discount the retail price of those drugs sold to qualified residents. The department shall establish discounted prices for drugs covered by a rebate agreement and shall promote the use of efficacious and reduced-cost drugs, taking into consideration reduced prices for state and federally capped drug programs, differential dispensing fees, administrative overhead, and incentive payments.

(b) Beginning on January 1, 2002, a participating retail pharmacy shall offer the initial discounted price.

(c) No later than October 1, 2002, a participating retail pharmacy shall offer the secondary discounted price.

(d) In determining the amount of discounted prices, the department shall consider an average of all rebates provided pursuant to section    -4, weighted by sales of drugs subject to these rebates over the most recent twelve-month period for which the information is available.

   -6 Operation of program. (a) This section shall apply to participating retail pharmacies. The Hawaii board of pharmacy shall adopt rules pursuant to chapter 91 requiring disclosure by participating retail pharmacies to qualified residents of the amount of savings provided as a result of the program. The rules must consider and protect information that is proprietary in nature.

(b) The department may not impose transaction charges under this program on retail pharmacies that submit claims or receive payments under the program.

(c) A participating retail pharmacy shall submit claims to the department to verify the amount charged to qualified residents under section    -5.

(d) On a weekly or biweekly basis, the department must reimburse a participating retail pharmacy for discounted prices provided to qualified residents under section    -5 and professional fees, which shall be set by the director of human services. The amount of the initial professional fee shall be set at $3 per prescription.

(e) The department shall collect utilization data from the participating retail pharmacies submitting claims necessary to calculate the amount of the rebate from the manufacturer or labeler. The department shall protect the confidentiality of all information subject to confidentiality protection under state or federal law, rule, or regulation.

   -7 Action with regard to nonparticipating manufacturers and labelers. The names of manufacturers and labelers who do not enter into rebate agreements pursuant to this part are public information. The department shall release this information to health care providers and the public. The department shall impose prior authorization requirements, as permitted by law, for the dispensing of prescription drugs provided by those manufacturers and labelers.

   -8 Discrepancies in rebate amounts. (a) Discrepancies in rebate amounts must be resolved using the process established in this section. If there is a discrepancy in the manufacturer's or labeler's favor between the amount claimed by a pharmacy and the amount rebated by the manufacturer or labeler, the department, at the department's expense, may hire a mutually agreed-upon independent auditor to perform an audit. If a discrepancy still exists following the audit, the manufacturer or labeler shall justify the reason for the discrepancy or make payment to the department for any additional amount due.

(b) If there is a discrepancy against the interest of the manufacturer or labeler in the information provided by the department to the manufacturer or labeler regarding the manufacturer's or labeler's rebate, the manufacturer or labeler, at the manufacturer's or labeler's expense, may hire a mutually agreed-upon independent auditor to verify the accuracy of the data supplied to the department. If a discrepancy still exists following the audit, the department shall justify the reason for the discrepancy or refund to the manufacturer or labeler any excess payment made by the manufacturer or labeler.

(c) Following the procedures established in subsection (a) or (b), either the department or the manufacturer or labeler may request a hearing. Supporting documentation must accompany the request for a hearing.

   -9 Hawaii prescription drug program fund. (a) The Hawaii prescription drug program fund is established within the treasury of the State and to be administered by the department of human services, to receive revenue from manufacturers and labelers who pay rebates as provided in section    -4 and any appropriations or allocations designated for the fund. Any other law to the contrary notwithstanding, moneys in the fund shall not lapse into the general fund. Interest on fund balances shall accrue to the fund. Surplus moneys in the fund shall be used for the benefit of the program.

(b) The purposes of the fund are to:

(1) Reimburse retail pharmacies for discounted prices provided to qualified residents pursuant to section    -5; and

(2) Reimburse the department for contracted services, administrative and associated computer costs, professional fees paid to participating retail pharmacies, and other reasonable program costs.

   -10 Annual summary report. The department shall report the enrollment and financial status of the program to the legislature at least twenty days prior to the convening of each regular session.

   -11 Obligations of department. The department shall establish simplified procedures for determining eligibility and issuing Hawaii prescription drug enrollment cards to qualified residents and shall undertake outreach efforts to build public awareness of the program and maximize enrollment of qualified residents. The department may adjust the requirements and terms of the program to accommodate any new federally funded prescription drug programs.

   -12 Contracting. The department may contract with a third party or parties to administer any or all components of the program, including, but not limited to, outreach, eligibility, claims, administration, and rebate recovery and redistribution.

   -13 Hawaii medical assistance programs. The department shall administer the program and other medical and pharmaceutical assistance programs, including Hawaii QUEST, in a manner that is advantageous to the programs and to the enrollees in those programs. In implementing this section, the department may coordinate the other programs and this program and may take actions to enhance efficiency, reduce the cost of prescription drugs, and maximize the benefits to the programs and enrollees, including providing the benefits of this program to enrollees in other programs.

   -14 Rules. The department may adopt rules in accordance with chapter 91 to implement the purposes of this part.

   -15 Waivers. The department may seek any waivers of federal law, rule, or regulation necessary to implement this part.

PART II. PRESCRIPTION DRUG PRICE REDUCTION

   -21 Prescription drug advisory commission. (a) The prescription drug advisory commission is established within the department of human services for administrative purposes only to review access to and the pricing of prescription drugs for residents of the State, to advise the director of human services on prescription drug pricing, and to provide periodic reports to the director, the governor, and the legislature.

(b) The commission shall consist of the following twelve members:

(1) Three members from the general public appointed by the president of the senate, one of whom must represent the interests of senior citizens. Of the initial appointees, one member shall be appointed for a term of two years and two members for a term of three years;

(2) Three members from the general public, appointed by the speaker of the house of representatives, one of whom must represent the interests of senior citizens. Of the initial appointees, one shall be appointed for a term of two years and two members for a term of three years;

(3) Two members, appointed by the governor, who represent the health care community and who are authorized by the laws of this State to prescribe drugs. Of the initial appointees, one member shall be appointed for a term of two years and one member for a term of three years;

(4) Two pharmacists, appointed by the governor. Of the initial appointees, one member shall be appointed for a term of two years and one member for a term of three years. To be appointed to and remain on the commission, each pharmacist must:

(A) Be licensed to practice pharmacy and be engaged in the practice of retail pharmacy in this State;

(B) Have at least five years of experience in this State as a licensed pharmacist; and

(C) Be a resident of this State; and

(5) The director of health and the insurance commissioner, or their designees, shall serve as ex-officio, voting members.

All initial appointment shall be made no later than thirty days after the effective date of this part.

(c) With the exception of the initial appointees, each member shall serve for a term of three years and may be reappointed. With the exception of the pharmacist members, if the profession or qualification of a commission member changes during the term of the member, the member may continue to complete the term for which the appointment was made. Members of the commission shall select a chairperson from among the members.

(d) A member whose term has expired may continue in office as a holdover member until a successor is elected; provided that the holdover shall not hold office beyond the end of the second regular legislative session following the expiration of the member's term of office.

(e) Vacancies occurring before the expiration of a member's term shall be filled by election of the commission. Individuals elected to fill a vacancy shall serve only for the remainder of the unexpired term.

(f) Seven members shall constitute a quorum, whose affirmative vote shall be necessary for all actions by the commission.

(g) If five vacancies exist at any one time, no remaining member shall resign until at least one vacancy has been filled in accordance with this section.

(h) Members shall serve without compensation, but may be reimbursed for the necessary expenses, including travel expenses, incurred in the performance of their duties.

(i) The commission shall meet at least four times per year. Additional meetings may be called by the chair or by a majority of commission members at any time.

(j) The department of human services shall provide necessary staff and support services to the commission.

   -22 Duties of commission. The commission shall have the following duties:

(1) Review access to prescription drugs for residents of the State, including, but not limited to, pricing and affordability information;

(2) Advise the director of human services on access to prescription drugs and prescription drug prices, including, but not limited to:

(A) Insurance and third party payments for prescription drugs;

(B) The need for maximum retail prices, and, if maximum retail prices are established, the procedures for:

(i) Adoption and periodic review of maximum retail prices;

(ii) Establishing maximum retail prices for new prescription drugs and for reviewing maximum retail prices of selected drugs; and

(iii) Phasing out or terminating maximum retail prices;

(3) Advise the director of human services on the adoption of rules necessary to implement this part; and

(4) Report to the director of human services, the legislature, and the governor by April 1, 2002, and annually thereafter at least twenty days prior to the convening of each regular session. The reports shall include any recommendations for action regarding access to and the pricing of prescription drugs.

   -23 Emergency drug pricing. In order to achieve the public health purposes set for in this chapter, maximum retail prices for prescription drugs sold in Hawaii may be established pursuant to this section. The following shall apply to determinations regarding maximum retail prices for prescription drugs and to the procedures for establishing those prices:

(1) By July 1, 2003, the department of human services shall adopt rules pursuant to chapter 91 establishing procedures for adoption and periodic review of maximum retail prices, the procedures for:

(A) Establishing maximum retail prices for new prescription drugs;

(B) Reviewing maximum retail prices of selected drugs; and

(C) Phasing out or terminating maximum retail prices;

Prior to adopting rules, the director of human services shall consult with and consider the recommendations of the commission.

(2) By January 5, 2004, the director shall determine whether the cost of prescription drugs provided to qualified residents under the Hawaii prescription drug program pursuant to part I is reasonably comparable to the lowest cost paid for the same drugs delivered or dispensed in the State. In making this determination the following shall apply:

(A) The director shall review prescription drug use in the Medicaid program using data from the most recent six-month period for which data is available;

(B) Using the data reviewed in subparagraph (A), the director shall determine the one hundred drugs for which the most units were provided and the one hundred drugs for which the total cost was the highest;

(C) For each prescription drug listed in subparagraph (B), the director shall determine the cost for each drug for qualified residents provided those drugs under the Hawaii prescription drug program on a certain date. The average cost for each such drug must be calculated;

(D) For each prescription drug listed in subparagraph (B), the director shall determine the lowest cost for each drug paid by any purchaser on the date that is used for subparagraph (C) delivered or dispensed in the State, taking into consideration the federal supply schedule and prices paid by pharmaceutical benefits managers and by large purchasers and excluding drugs purchased through the Hawaii prescription drug program. The average cost for each such drug must be calculated; and

(E) If the average cost for one or more prescription drugs under the Hawaii prescription drug program as determined in subparagraph (C) is not reasonably comparable to the average lowest cost for the same drug or drugs as determined in subparagraph (D), the director shall establish maximum retail prices for any or all prescription drugs sold in the State. Maximum prescription drug prices established under this subparagraph must take effect on July 1, 2004; and

(3) In establishing maximum retail prices under this paragraph, the director shall consider the advice of the commission and shall follow procedures set forth by rules adopted by the department of human services.

   -24 Select prescription drugs. In making a determination under this section, the director of human services may rely on pricing information on a selected number of prescription drugs if that list is representative of the prescription drug needs of the residents of the State and is made public as part of the process of establishing maximum retail prices.

   -25 Public health or welfare. The director of human services may take actions that the director determines necessary if there is a severe limitation or shortage of or lack of access to prescription drugs in the State that could threaten or endanger the public health or welfare.

   -26 Appeals. A retailer of prescription drugs may appeal the maximum retail price of a prescription drug established pursuant to this chapter.

   -27 Enforcement. A violation of the maximum retail prices established under this section is a violation of chapter 481A.

PART III. PROFITEERING IN PRESCRIPTION DRUGS

   -31 Profiteering in prescription drugs. Prescription drugs are a necessity of life. Profiteering in prescription drugs is unlawful and shall be subject to this section. This section shall apply to manufacturers, distributors, and labelers of prescription drugs.

   -32 Profiteering. A manufacturer, distributor, or labeler of prescription drugs engages in illegal profiteering if that manufacturer, distributor, or labeler:

(1) Exacts or demands an unconscionable price;

(2) Exacts or demands prices or terms that lead to any unjust or unreasonable profit;

(3) Discriminates unreasonably against any person in the sale, exchange, distribution, or handling of prescription drugs dispensed or delivered in the State; or

(4) Intentionally prevents, limits, lessens, or restricts the sale or distribution of prescription drugs in this State in retaliation for the requirements of this chapter.

   -33 Right of action and damages. The State may institute a civil action for a direct or indirect injury to any person, group of persons, the State, or a county caused by a violation of this part. There shall be a right to a jury trial in any action brought under this section. If the State prevails, the defendant shall pay three times the amount of damages and the costs of suit including necessary and reasonable investigative costs, reasonable expert fees, and reasonable attorney's fees. For a willful or repeated violation of this part, punitive damages may be awarded. After deduction of the costs of distribution, the damages must be equitably distributed by the State to all injured parties.

   -34 Civil violation. Each violation of this part is a civil violation for which the attorney general may obtain, in addition to other remedies, injunctive relief and a civil penalty in an amount not to exceed $100,000, plus the costs of suit, including necessary and reasonable investigative costs, reasonable expert fees, and reasonable attorney's fees.

   -35 Enforcement. A violation of this part is a violation of chapter 481A.

   -36 Attorney general investigation. (a) The attorney general, upon the attorney general's own initiative, or upon petition of the director of human services, or of fifty or more residents of the State, shall investigate suspected violations of this part.

(b) The attorney general may require, by summons, the attendance and testimony of witnesses and the production of books and papers related to any matter under investigation. The summons shall be served in the same manner as summonses for witnesses in criminal cases, and all provisions of law related to criminal cases shall apply to summonses issued under this section so far as they are applicable. All investigations or hearings under this section to which witnesses are summoned or called upon to testify or to produce books, records, or correspondence are public or private at the choice of the person summoned. All hearings must be held in the county in which the act investigated is alleged to have been committed, or if the investigation is on petition, it must be held in the county in which the petitioner resides.

(c) A justice of the supreme court, by order and upon application of the attorney general, may compel the attendance of witnesses, the production of books and papers including correspondence, and the giving of testimony before the attorney general in the same manner and to the same extent as before the supreme court. Any failure to obey such an order may be punishable by that court as a contempt.

   -37 Agreements with governments of other jurisdictions and other entities. The State may negotiate and enter into purchasing alliances and regional strategies with the governments of other jurisdictions and with other public and private entities for the purpose of reducing prescription drug prices for residents of the State."

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $         , or so much thereof as may be necessary for fiscal year 2001-2002, to fund the Hawaii prescription drug program fund created in section 2 of this Act. The sum appropriated shall be expended by the department of human services for the purposes of this Act.

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $         , or so much thereof as may be necessary for fiscal year 2001-2002, and the same sum, or so much thereof as may be necessary for fiscal year 2002-2003, to fund the implementation of chapter       created in section 2 of this Act. The sums appropriated shall be expended by the department of human services for the purposes of this Act.

SECTION 5. This Act shall take effect upon its approval, except that sections 3 and 4 appropriating funds shall take effect on July 1, 2001.

INTRODUCED BY:

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