Report Title:

Prescription Drugs; Hawaii Rx Program

 

Description:

Creates pharmaceutical discount program for all state residents under which State obtains manufacturers' rebates on drugs that are offered at discounted prices to program participants. Provides reimbursement to participating pharmacists. Establishes advisory commission and special fund. (SD2)

THE SENATE

S.B. NO.

2520

TWENTY-FIRST LEGISLATURE, 2002

S.D. 2

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

"PART . HAWAII RX PROGRAM

328-A Definitions. As used in this part:

"Administrator" means the director of human services.

"Department" means the department of human services.

"Manufacturer" means anyone who is engaged in manufacturing, preparing, propagating, compounding, processing, packaging, repackaging, or labeling a prescription drug.

"Program" means the Hawaii Rx program except as otherwise provided.

328-B Hawaii Rx program. There is established within the department, the Hawaii Rx program. The program will combine the purchasing power of all persons to reduce prescription drug costs for those in the group. The department may contract with a third party or third parties in accordance with chapter 103F to administer any single component, or combination of components of the program including outreach, eligibility, claims, administration, rebate recovery, and redistribution.

328-C Prescription drug advisory commission. (a) There is created within the department for administrative purposes only, the prescription drug advisory commission that shall serve in an advisory capacity to the program. The commission shall consist of nine members. The attorney general, director of commerce and consumer affairs, director of health, and director of human services, or their respective representatives shall serve as ex officio nonvoting members of the commission. The remaining five members shall be appointed by the governor, subject to section 26-34, as follows:

(1) Two members of the public, one of whom shall represent the interests of senior citizens, shall be appointed from a list of nominees submitted by the senate president; 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;

(2) Two members of the public, one of whom shall represent the interests of senior citizens, shall be appointed from a list of nominees submitted by the speaker of the house of representatives; 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

(3) One member shall be a pharmacist who:

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

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

(C) Is a resident of this State.

At least one appointed member shall be from each of the counties of Hawaii, Kauai, and Maui, and the city and county of Honolulu.

(b) All appointed members shall be selected on the basis of their interest in and knowledge of policy relating to prescription drugs, and their ability to contribute to the development of prescription drug policy in this State.

(c) With the exception of certain initial appointees, all members of the commission shall serve for terms of four years and may be reappointed. With the exception of the pharmacist member, appointed members may serve out their complete term regardless of whether during the term of their membership their profession or qualifications vary from requirements under subsection (a).

(d) The commission shall meet at least four times per year at times and places agreed upon by the members of the commission. The chair shall be elected annually by all members of the commission and shall not be a representative of a government agency. Members shall serve without compensation but shall be reimbursed for necessary expenses incurred in the discharge of their duties.

328-D Duties of prescription drug advisory commission. The commission shall:

(1) Review access to prescription drugs for state residents, including pricing and affordability information;

(2) Advise the administrator on access to prescription drugs and prescription drug prices, including insurance and third-party payments for prescription drugs; and

(3) Advise the administrator on the adoption of rules necessary to implement this part.

328-E Program eligibility. (a) All residents of the State shall be eligible to participate in the Hawaii Rx program.

(b) The department:

(1) Shall establish simplified procedures for determining eligibility and shall issue program enrollment cards to eligible residents;

(2) Shall undertake outreach efforts to build public awareness of the program and maximize the enrollment of eligible residents; and

(3) May adjust the requirements and terms of the program by rule to accommodate any new federally funded prescription drug program.

328-F Rebate agreement. (a) Any prescription drug manufacturer that sells prescription drugs in the State may enter into a rebate program with the department for the prescription drug access program. The rebate agreement shall require the manufacturer to make rebate payments to the State each calendar quarter or according to a schedule established by the department.

(b) The administrator shall negotiate the amount of the rebate required from a manufacturer.

328-G Nonparticipating manufacturers. If the department and a drug manufacturer fail to reach agreement on the terms of a rebate, the department shall:

(1) Prompt a review of whether to place that manufacturer's products on the prior authorization list or formularies for any other state-funded prescription drug program in accordance with this chapter; and

(2) Take similar actions involving prior authorization or formularies for any other state-funded drug program.

The department shall adopt rules under chapter 91 creating clear procedures for the implementation of this section. The department may release the names of manufacturers that do not enter into rebate agreements. This information shall be deemed public information. The department may also publicize to doctors, pharmacists, and other health professionals information about the relative cost of drugs produced by manufacturers that enter in rebate agreements compared to the cost of drugs produced by those that do not enter into rebate agreements.

328-H Marketing costs of prescription drugs. (a) Manufacturers of prescription drugs dispensed in this State that employ, direct, or use marketing representatives in this State shall report the costs of marketing prescription drugs in this State. The costs of marketing prescription drugs in this State shall be reported to the department for the purposes of:

(1) Assisting the department in its role as a purchaser of prescription drugs and as an administrator of prescription drug programs;

(2) Enabling the State to determine the scope of prescription drug marketing; and

(3) Furthering the role of the State as a guardian of the public interest.

(b) Manufacturers of prescription drugs shall file an annual report with the department as provided by rules.

(c) The annual report shall include the following information as it pertains to marketing activities conducted within this State:

(1) All costs associated with marketing, advertising, and direct promotion of prescription drugs through radio, television, magazines, newspapers, direct mail, and telephone communications; and

(2) All costs associated with educational programs, seminars, entertainment, trips, remuneration for promoting or participating in informational sessions regarding prescription drugs, product samples of prescription drugs in excess of $10 in value, and promotional gifts in excess of $10 in value.

(d) Except as protected from disclosure by law, rule, or regulation, the content of the annual reports filed under this section is public information and all information held by the department under this section is a public record.

(e) The department shall provide an annual report on prescription drug marketing activities and the costs of those activities to the legislature no later than twenty days prior to the convening of each regular session.

328-I Discounted retail prices for program participants. (a) Each retail pharmacy voluntarily participating in the Hawaii Rx program shall discount the price of drugs covered by the program and sold to program participants.

(b) 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:

(1) Reduced prices for state and federally capped drug programs;

(2) Differential dispensing fees;

(3) Administrative overhead;

(4) Incentive payments; and

(5) The average of all rebates provided pursuant to section 328-F, 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 for a selected number of prescription drugs where the list of drugs selected is:

(1) Representative of the prescription drug needs of the residents of the State; and

(2) Made public.

(d) Beginning July 1, 2002, a participating retail pharmacy shall offer prescription drugs at or below the average wholesale price, minus six per cent, plus a dispensing fee designated by the department. These initial price levels shall be calculated by the department and the dispensing fee shall not be less than that provided under the state Medicaid program. 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.

(e) No later than January 1, 2003, a participating retail pharmacy shall offer prescription drugs at or below the initial price levels specified in subsection (d), minus the amount of any rebate paid by the State to the retail pharmacy.

328-J Pharmacy 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 department shall reimburse each retail pharmacy for discounted prices of prescription drugs provided to program participants plus a professional fee of $3 or other amount as the board of pharmacy may provide by rule under section 461- .

(b) The department shall collect retail pharmacy use data necessary to calculate the amount of the manufacturer rebate under section 328-F. The department shall protect the confidentiality of information received as required under state or federal law, rule, or regulation.

328-K Discrepancies in rebate amounts. (a) If there is a discrepancy in the manufacturer's favor between the amount claimed by a pharmacy and the amount rebated by the manufacturer, the department, at the department'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 manufacturer 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 in the information provided by the department to the manufacturer regarding the manufacturer's rebate, the manufacturer, at the manufacturer'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.

328-L Hawaii Rx program special fund. (a) There is established within the state treasury, to be administered by the department, the Hawaii Rx program special fund into which shall be deposited:

(1) All moneys received from manufacturers who pay rebates as provided in section 328-F;

(2) Appropriations made by the legislature to the fund; and

(3) Other revenues or allocations designated for the fund.

(b) Moneys in the Hawaii Rx program special fund shall be used for the following purposes:

(1) Reimbursement payments to retail pharmacies for discounted prices provided to program participants;

(2) Professional fees paid to participating retail pharmacies under section 328-J;

(3) The cost of administering the Hawaii Rx program, including contracted services, computer costs, professional fees paid to retail pharmacies, and other reasonable program costs; and

(4) Assist in offsetting program expenses.

All interest on special fund balances shall accrue to the special fund. Moneys in the Hawaii Rx special fund shall be used solely for purposes of the Hawaii Rx program.

(c) The agency shall adopt rules in accordance with chapter 91 to establish reasonable fees for the purposes of this part.

328-M Annual report. The department shall report the enrollment and financial status of the Hawaii Rx program to the legislature no later than twenty days prior to the convening of each regular session, beginning with the 2003 regular session."

SECTION 2. 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 Hawaii Rx program. (a) The department shall adopt rules requiring retail pharmacies to disclose to participants of the Hawaii Rx program the amount saved as a result of the program. In adopting rules, the department shall consider and protect proprietary information.

(b) The department may adjust the professional fee under section 328-J by rule."

SECTION 3. The administrator of the Hawaii Rx program 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 title 42 United States Code, section 1396r-8.

SECTION 4. In implementing this Act, the department of human services 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 proposals to amend eligibility for the Hawaii Rx program to provide program benefits to the beneficiaries of other programs.

The department may seek waivers of federal law, rule, or regulation necessary to implement the provisions of this Act.

SECTION 5. 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 2002-2003, to establish       positions in the department of human services for outreach activities for the Hawaii Rx program, and to contract for claims management services.

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

SECTION 6. 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 2002-2003, for the costs associated with the issuance of prescription cards for the Hawaii Rx program.

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

SECTION 7. 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 8. In codifying the new sections added by section 1 and referenced in 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 9. New statutory material is underscored.

SECTION 10. This Act shall take effect on July 1, 2050.