Report Title:

Prescription Drugs

 

Description:

Adds a new part on fair prescription drug prices.

 

THE SENATE

S.B. NO.

250

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 uninsured residents of Hawaii pay excessive prices for prescription drugs. In many cases, excessive drug prices deny residents access to medically necessary health care, and thereby threaten their health and safety. Many residents are admitted to or treated at hospitals each year because they can not afford the drugs prescribed for them that could have prevented the need for hospitalization. Many others must enter expensive institutional care settings because they can not afford the necessary prescription drugs that could have supported them outside of an institution. All Hawaii residents 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.

Residents of Hawaii and other Americans pay the highest prices in the world for prescription drugs, prices that result in extremely high profits for drug companies. Excessive pricing for prescription drugs undermines the economy of Hawaii by diminishing the ability of its residents to contribute as employees and employers.

This Act is enacted by the legislature as a positive measure to make prescription drugs more affordable to Hawaii residents, thereby increasing the overall health of our families, benefiting employers, employees, and the fiscal strength of our society, promoting healthy communities, and improving the public health and welfare.

SECTION 2. Chapter 328, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part . fair prescription drug prices

328-A Definitions. As used in this part:

"Board" means the board of pharmacy under chapter 461.

"Labeler" means an entity or person that:

(1) Receives prescription drugs from a manufacturer or wholesaler;

(2) Repackages those drugs for later retail sale; and

(3) Has a labeler code from the Federal Food and Drug Administration under title 21 Code of Federal Regulations section 207.20.

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

"Retail pharmacy" means a retail pharmacy or other business granted a permit under chapter 461 to dispense prescription drugs in this State, and that dispenses drugs covered by a rebate agreement under the Rx program under section 328-B.

328-B Rx program. (a) The Rx program is established within the department to provide discounted prescription drug prices to uninsured residents of the State.

(b) A drug manufacturer or labeler that sells prescription drugs in the State through any state funded or state operated program shall enter into a rebate agreement with the department for the Rx 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 department.

(c) The director shall negotiate the amount of the rebate required from a manufacturer or labeler as follows:

(1) The director shall take into consideration the rebate calculated under the Medicaid rebate program pursuant to title 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) The director shall 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 title 42 United States Code section 1396r-8; and

(3) With respect to the rebate which shall take effect no later than January 1, 2002, the director 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.

(d) A retail pharmacy shall discount the price of drugs covered by the Rx program and sold to Rx program participants as follows:

(1) 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;

(2) Beginning July 1, 2001, a retail pharmacy shall offer prescription drugs at or below the average wholesale price, minus six per cent, plus the dispensing fee provided under the state Medicaid program. These initial price levels shall be specified by the director. The average wholesale price is 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; and

(3) No later than January 1, 2002, a retail pharmacy shall offer prescription drugs at or below the initial price levels specified in paragraph (2) minus the amount of any rebate paid by the State to the retail pharmacy. These discounted price levels shall be specified by the director. In determining the discounted price levels, the director shall consider an average of all rebates weighted by sales of drugs subject to these rebates over the most recent twelve-month period for which the information is available.

328-C Eligibility for individuals to participate in the Rx program; department responsibility. Residents of the State are eligible to participate in the Rx program if they do not have prescription drug coverage under any health insurance plan or under any public program. The department shall establish simplified procedures for determining eligibility and issuing Rx program enrollment cards to eligible residents. The department shall undertake outreach efforts to build public awareness of the Rx program and maximize enrollment by eligible residents. The department may adjust the requirements and terms of the Rx program to accommodate any new federally funded prescription drug programs.

328-D Operation of the Rx program. The board shall adopt rules under chapter 91 requiring disclosure by retail pharmacies to Rx program participants of the amount of savings provided as a result of the Rx program. The rules shall consider and protect information that is proprietary in nature.

A retail pharmacy shall submit claims to the department to verify the amount charged to Rx program participants.

The department shall not impose transaction charges on retail pharmacies that submit claims or receive payments under the Rx program.

On a quarterly basis, the department shall reimburse a retail pharmacy for discounted prices provided to Rx program participants and professional fees set by the director. The initial professional fee shall be $3 per prescription.

The department shall collect from the retail pharmacies utilization data 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.

328-E Manufacturers and labelers that do not participate in the Rx program. The names of manufacturers and labelers that do not enter into rebate agreements are public information and the department shall release this information to the public. The department shall impose prior authorization requirements in the state Medicaid program, as permitted by law, for the dispensing of prescription drugs provided by those manufacturers and labelers.

328-F Discrepancies in rebate amounts. Discrepancies in rebate amounts shall be resolved using the process as follows:

(1) 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. 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; or

(2) 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 any excess payment made by the manufacturer or labeler.

Following the procedures established in paragraph (1) or (2), either the department or the manufacturer or labeler may request a hearing under chapter 91. Supporting documentation shall accompany the request for a hearing.

328-G Rx special fund. The Rx special fund is established to receive revenue from manufacturers and labelers who pay rebates and any appropriations or allocations designated for the fund. The purposes of the fund are to:

(1) Reimburse retail pharmacies for discounted prices provided to Rx program participants;

(2) Reimburse the department for the costs of administering the program, including contracted services, computer costs, professional fees paid to retail pharmacies; and

(3) Pay for other reasonable program costs.

Interest on Rx special fund moneys shall accrue to the fund.

328-H Annual summary report. The department shall report annually the enrollment and financial status of the Rx program to the legislature.

328-I Coordination with other programs. In implementing this part, the department may 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 Rx program to the beneficiaries of other programs.

328-J Rulemaking. The department may adopt rules under chapter 91 to implement this part.

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

328-L Determination of fair prices. By April 1, 2003, the director shall determine whether the prices for prescription drugs provided to Rx program participants are 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 director 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 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;

(3) For each prescription drug listed in paragraph (2), the director shall determine the cost for each drug for Rx program participants on a certain date. The average cost for each drug shall be calculated;

(4) For each prescription drug listed in paragraph (2), the director 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 Rx program. The average cost for each drug shall be calculated; and

(5) If the average cost for one or more prescription drugs under the Rx 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 director shall establish maximum retail prices for any or all prescription drugs sold in the State. Maximum prescription drug prices established under this paragraph shall take effect October 1, 2003.

328-M Select prescription drugs. In making a determination under section 328-L, the director 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.

328-N Public health or welfare. The director 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.

328-O Appeals. A retail pharmacy may appeal the maximum retail price of a prescription drug established pursuant to this section under chapter 91.

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

(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 part.

328-Q Right of action, damages, and penalties. (a) The department may bring a civil action for a direct or indirect injury to any person, group of persons, the State, or any county of the State caused by a violation of this part. There shall be a right to a jury trial in any action brought under this part. 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 wilful or repeated violation of this part, punitive damages may be awarded. After deduction of the costs of distribution, the damages shall be equitably distributed by the department to all injured parties.

(b) In addition to other remedies for violation of this part, the attorney general may obtain 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.

328-R Criminal penalty. A violation of the maximum retail prices established under this part is a misdemeanor."

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, for the purposes of this Act.

The sum appropriated shall be expended by the department of health for the purposes of this Act.

SECTION 4. In codifying new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 5. This Act shall take effect on July 1, 2001.

INTRODUCED BY:

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