Establishes the Prescription Drug Access Program.
HOUSE OF REPRESENTATIVES
TWENTY-FIRST LEGISLATURE, 2001
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO 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 to 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, they may not be able to afford their doctor’s recommended treatment.
Citizens 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. Furthermore, 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 citizens, 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 work force and has a negative effect on Hawaii’s economy.
In light of this, the legislature believes that there is a need to take immediate and necessary steps to reduce the cost of prescription drugs to the consuming public, thus improving the health and welfare of our citizenry.
Under this Act, the State enters into a contract with each individual drug manufacturer that agrees to sell a particular drug in the State at the lowest cost the manufacturer sells the drug to anyone. This is the same arrangement that is used for the Medicaid program. By combining the rebate program with the Medicaid program in terms of medication volume, the State is able to contract for a large quantity of medications at the lowest possible price.
In simplified terms, the rebate program works as follows:
(1) The consumer presents a prescription for a covered medication to the pharmacist, along with the drug card;
(2) The pharmacist fills the prescription and collects the appropriate copayment amount;
(3) The pharmacist then bills the State for the difference between the agreed-upon selling price for that medication, plus a dispensing fee, and the copayment actually collected;
(4) The State reimburses the pharmacy on a quarterly basis;
(5) The State then informs the manufacturer the amount of that medication prescribed and filled under the program, and the manufacturer reimburses the State for the agreed amount of the rebate; and
(6) The rebate funds received by the State are deposited into a special account of the state health planning and development special fund to pay for more prescription drugs.
To ensure that prescription drugs are affordable and thus accessible, this Act also empowers the State to set the maximum retail prices of prescription drugs.
The purpose of this Act is to enable the State to serve 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 legislature to discourage employers from offering or paying for prescription drugs for their employees or to replace employer-sponsored prescription drug benefit plans that provide benefits comparable to those made available to qualified Hawaii residents.
SECTION 2. Chapter 323D, Hawaii Revised Statutes, is amended by adding eleven new sections to part II to be appropriately designated and to read as follows:
"§323D- Prescription drug access program. There is established within the agency the prescription drug access program. The primary responsibility of the program shall be to control increases in prescription drug costs for Hawaii’s uninsured population, including but not limited to Medicare recipients who are without coverage for prescription drugs. The agency may contract with a third party or third parties in accordance with chapter 103F to administer any or all components of the program, including, but not limited to, outreach, eligibility, claims, administration and rebate recovery and redistribution.
§323D- Prescription drug advisory commission. (a) There is created a state prescription drug advisory commission within the agency for administrative purposes. The commission shall consist of sixteen members. Four members shall serve as ex officio nonvoting members, including the attorney general, the director of commerce and consumer affairs, the director of health, and the director of human services, or their respective representatives. The remaining twelve members shall be appointed as follows:
(1) Three members of the public shall be appointed by the President of the Senate, one of whom shall represent the interests of senior citizens; provided that of the initial appointees, one shall be appointed for a two-year term and two shall be appointed for a three-year term;
(2) Three members of the public shall be appointed by the Speaker of the House, one of whom shall represent the interests of senior citizens; provided that of the initial appointees, two shall be appointed for a two-year term and one shall be appointed for a three-year term;
(3) Two members of the health care community who are authorized by law to prescribe drugs shall be appointed by the governor; provided that of the initial appointees, one shall be appointed for a two-year term and one shall be appointed for a three-year term; and
(4) Two members shall be pharmacists appointed by the governor; provided that the pharmacist members shall:
(A) Be licensed to practice pharmacy and 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 provided further that of the initial appointees, one shall be appointed for a two-year term and one shall be appointed for a three-year term;
(b) With the exception of the initial appointees, all members of the commission shall serve for terms of three years and may be reappointed. With the exception of the pharmacist members, if the profession or qualifications of a commission member changes during the term of commission membership, the member may continue to complete the term for which the appointment was made.
(c) All appointed members shall be selected on the basis of their interest and knowledge in, and their ability to make contributions to the development of policy relating to prescription drugs. Of the appointed members, there shall be at least one member from each of the counties of Hawaii, Honolulu, Kauai, and Maui.
(d) The commission shall meet at least four times per year. The chair shall be elected annually by all members of the commission; provided that the chair shall not be a representative of the government or a government agency. The members shall serve without compensation but shall be reimbursed for necessary expenses in attending meetings of the commission and in the discharge of their duties. There shall be no less than four meetings of the commission each year to be held at times and places agreed upon by the members of the commission.
§323D- Duties of commission. The commission shall:
(1) Review access to prescription drugs for residents of the State, including, but not limited to, pricing and affordability information;
(2) Advise the administrator on access to prescription drugs and prescription drug prices, including, but not limited to, insurance and third-party payments for prescription drugs, the need for maximum retail prices, and, if maximum retail prices are established, the procedures for adoption and periodic review of maximum retail prices, the procedures for establishing maximum retail prices for new prescription drugs and for reviewing maximum retail prices of selected drugs and the procedures for phasing out or terminating maximum retail prices; and
(3) Advise the administrator on the adoption of rules necessary to implement this part.
§323D- Rebate agreement. (a) All prescription drug manufacturers or labelers that sell prescription drugs in the State in accordance with chapter 328 through any state funded or state operated program shall enter into a rebate program with the agency for the prescription drug access program. The rebate agreement shall require the manufacturer or labeler to make rebate payments to the State each calendar quarter according to a schedule established by the agency.
(b) The administrator shall negotiate the amount of the rebate required from a manufacturer or labeler. In calculating the rebate amount, the administrator shall take into consideration:
(1) The rebate calculated under the Medicaid Rebate Program pursuant to 42 United States Code, Section 1396r-8;
(2) The average wholesale price of prescription drugs; and
(3) Any other information on prescription drug prices and price discounts.
§323D- Discounted prices for program participants. (a) Each retail pharmacy that sells prescription drugs in accordance with chapters 328 and 461 shall discount the price of drugs covered by the program and sold to program participants. The agency 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:
(1) Reduced prices for state and federally capped drug programs;
(2) Differential dispensing fees;
(3) Administrative overhead; and
(4) Incentive payments.
(b) In determining the amount of discounted prices, the agency shall consider the average of all rebates provided pursuant to section 328D- , weighted by sales of drugs subject to those rebates over the most recent twelve-month period for which the information is available.
(c) In making a determination under this section, the administrator 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.
(d) The administrator may take actions that the administrator deems 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, including but not limited to the establishment of maximum retail prices for prescription drugs.
(e) A retail pharmacy may appeal the maximum retail price of a prescription drug established pursuant to this section in accordance with Chapter 91.
§323D- Program eligibility. (a) Any resident of the State that does not have prescription drug coverage under any health insurance plan nor under any public program may be eligible to participate in the program. The agency shall establish simplified procedures for determining eligibility and issuing program enrollment cards to eligible residents.
(b) The agency shall undertake outreach efforts to build public awareness of the program and maximize enrollment by eligible residents.
(c) The agency may adjust the requirements and terms of the program by rule to accommodate any new federally funded prescription drug programs.
§323D- Reimbursement. (a) A retail pharmacy shall submit claims to the department to verify the amount charged to program participants. On a weekly or biweekly basis, the agency shall reimburse each retail pharmacy for discounted prices provided to program participants plus any professional fees established by the board of pharmacy in accordance with section 461- .
(b) The agency shall collect from the retail pharmacy utilization data necessary to calculate the amount of the rebate from the manufacturer or labeler. The agency shall protect the confidentiality of all information subject to confidentiality protection under State or federal law, rule or regulation.
§323D- Nonparticipating manufacturers and labelers. (a) The agency shall release the names of manufacturers and labelers that do not enter into rebate agreements. This information shall be deemed public information.
(b) The Department of Human Services shall impose prior authorization requirements in the State Medicaid program, as permitted by law, for the dispensing of prescription drugs provided by nonparticipating manufacturers and labelers.
§323D- Discrepancies in rebate amounts. (a) 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 agency, at the agency’s expense, may hire a mutually agreed-upon independent auditor. 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 agency. If a discrepancy still exists following the audit, the agency shall justify the reason for the discrepancy and refund to the manufacturer or labeler any excess payment made by the manufacturer or labeler.
§323D- Annual report. The agency shall report the enrollment and financial status of the program to the legislature no later than twenty days prior to the convening of each regular session."
SECTION 3. Chapter 328, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
§328- Profiteering in prescription drugs. (a) A manufacturer, labeler, or distributor of prescription drugs engages in illegal profiteering if that manufacturer, labeler, or distributor either:
(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 provisions of this chapter.
(b) The State may bring a civil action for a direct or indirect injury to any person, group of persons, the State, or any political subdivision of the State caused by a violation of this section. There is 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 section, punitive damages may be awarded. After deduction of the costs of distribution, the damages shall be equitably distributed by the State to all injured parties.
(c) Each violation of this section shall constitute 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 cost of suit, including necessary and reasonable investigative costs, reasonable expert fees and reasonable attorney’s fees.
(d) Any person who violates this section shall be deemed to have engaged in an unfair method of competition or unfair and deceptive act or practice in the conduct of any trade or commerce within the meaning of section 480-2."
SECTION 4. Chapter 461, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§461- Operation of the prescription drug access program. (a) The board shall adopt rules requiring disclosure by retail pharmacies to the participants of the prescription drug access program of the amount of savings provided as a result of the program. In adopting the rules, the Board shall consider and protect information that is proprietary in nature.
(b) The professional fee added to the reimbursement amount in accordance with section 323D- shall be $3 per prescription filled. The Board may adjust the professional fee as may be necessary by rule."
SECTION 5. Section 323D-12, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) The state agency shall:
(1) Have as a principal function the responsibility for promoting accessibility for all the people of the State to quality health care services at reasonable cost. The state agency shall conduct such studies and investigations as may be necessary as to the causes of health care costs including inflation. The state agency may contract for services to implement this paragraph. The certificate of need program mandated under part V shall serve this function. The state agency shall promote the sharing of facilities or services by health care providers whenever possible to achieve economies and shall restrict unusual or unusually costly services to individual facilities or providers where appropriate;
(2) Serve as staff to and provide technical assistance and advice to the statewide council and the subarea councils in the preparation, review, and revision of the state health services and facilities plan;
(3) Conduct the health planning activities of the State in coordination with the subarea councils, implement the state health services and facilities plan, and determine the statewide health needs of the State after consulting with the statewide council; and
(4) Administer the state certificate of need program pursuant to part V[
(5) Review access to and the pricing of prescription drugs for residents of the State, and take actions that are necessary to prevent severe limitations or shortages of or lack of access to prescription drugs in the State that could threaten or endanger the public health or welfare."
SECTION 6. Section 323D-12.6, Hawaii Revised Statutes, is amended to read as follows:
§323D-12.6[ ]] State health planning and development special fund; created; deposits; expenditures; fees. (a) There is established within the state treasury, to be administered by the state health planning and development agency, the state health planning and development special fund into which shall be deposited all moneys collected under chapter 323D.
Moneys] There is established within the special fund the prescription drug access program special account:
(1) To which all revenues received from manufacturers and labelers who pay rebates and any appropriations or allocations designated for the account shall be deposited;
(2) From which all moneys for reimbursement to retail pharmacies for discounted prices provided to program participants shall be expended; and
(3) From which all moneys for reimbursement to the agency for the cost of administering the program, including contracted services, computer costs, professional fees paid to retail pharmacies, and other reasonable program costs shall be expended.
Moneys in the special account shall only be used for purposes of the program and may not be used for any other purpose. In addition, all interest on special account balances shall accrue to the special account.
(c) Except as otherwise provided in subsection (b), moneys in the special fund shall be expended by the state health planning and development agency to assist in offsetting program expenses of the agency.
(c)](d) The agency shall adopt rules in accordance with chapter 91 to establish reasonable fees for the purposes of this chapter."
SECTION 7. Initial Rebate. (a) The administrator of the state health planning and development agency shall use the administrator’s best efforts to obtain an initial rebate amount equal to or greater than the rebate calculated under the Medicaid program pursuant to 42 United States Code, Section 1396r-8.
(b) With respect to the rebate taking effect no later than January 1, 2002, the administrator shall use the administrator’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.
(c) Beginning July 1, 2002, each retail pharmacy that sells prescription drugs in accordance with chapter 461 shall offer prescription drugs at or below the average wholesale price, minus six percent, plus the dispensing fee provided under the state Medicaid program. The initial price levels shall be set by the administrator. For purposes of this section, the "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.
(d) No later than January 1, 2003, each retail pharmacy that sells prescription drugs in accordance with chapter 461 shall offer prescription drugs at or below the initial price levels specified in subsection (c) minus the amount of any rebate paid by the State to the retail pharmacy. The discounted price levels shall be specified by the administrator.
SECTION 8. Initial determination of fair prices. By July 1, 2003, the administrator of the State health planning and development agency shall determine whether the prices for prescription drugs provided to program participants is reasonably comparable to the lowest cost paid for the same drugs delivered or dispensed. In making this determination, the following provisions shall apply:
(1) The administrator shall review prescription drug use in the Medicaid program using data from the most recent six-month period for which data is available;
(2) Using the data reviewed in paragraph (1), the administrator 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;
(3) For each prescription drug listed in paragraph (2), the administrator shall determine the cost for each drug for program participants on a certain date; provided that the average cost for each such drug shall be calculated;
(4) For each prescription drug listed in paragraph (2), the administrator shall determine the lowest cost for each drug paid by any purchaser on the date that is used for paragraph (3) 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 program; provided that the average cost for each such drug shall be calculated;
(5) If the average cost for one or more prescription drugs under the program as determined in paragraph (3) is not reasonably comparable to the average lowest cost for the same drug or drugs as determined in paragraph (4), the administrator shall establish maximum retail prices for any or all prescription drugs sold in the State; provided that maximum prescription drug prices established under this paragraph shall take effect on October 1, 2003.
SECTION 9. Coordination with other government agencies. (a) In implementing this Act, the state health planning and development agency shall coordinate with other governmental programs and may take actions to enhance efficiency, reduce the cost of prescription drugs, and maximize the benefits of this and other governmental programs, including providing the benefits of the prescription drug access program to the beneficiaries of other programs.
(b) The agency may seek any waivers of federal law, rule, or regulation necessary to implement the provisions of this Act.
SECTION 10. 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, for the establishment of one full-time equivalent (1.00 FTE) permanent position in the department of the attorney general to provide legal services for the prescription drug access program.
SECTION 11. 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, for the establishment of six full-time equivalent (6.00 FTE) permanent positions in the state health planning and development agency for outreach activities, and to contract for claims management services.
SECTION 12. 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, for the costs associated with the issuance of prescription cards.
SECTION 13. The sums appropriated shall be expended by the departments of the attorney general and health, respectively, for the purposes of this Act.
SECTION 14. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.
SECTION 15. Statutory material to be repealed is bracketed. New Statutory materials is underscored.
SECTION 16. This act shall take effect on July 1, 2001.