Honolulu, Hawaii

, 2002

RE: S.B. No. 2520

S.D. 2



Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii


Your Committee on Ways and Means, to which was referred S.B. No. 2520, S.D. 1, entitled:


begs leave to report as follows:

The purpose of this measure is to establish the Hawaii Rx program to reduce prescription drug costs for residents of Hawaii. The bill establishes a Prescription Drug Advisory Commission to review access to prescription drugs in Hawaii and advise the program administrator on drug prices and access, as well as rules needed to implement the program.

In addition, the measure:

(1) Authorizes the Department of Human Services to contract with a third party to administer a component or combination of Hawaii Rx components;

(2) Provides that all Hawaii residents are eligible to participate in Hawaii Rx;

(3) Allows manufacturers that sell prescription drugs in Hawaii to enter a rebate program, with the Hawaii Rx administrator to negotiate the rebate amount;

(4) Authorizes a review to determine whether products made by nonparticipating manufacturers will require prior authorization in state funded prescription drug programs;

(5) Requires manufacturers of drugs dispensed in Hawaii to file an annual report of their marketing costs to the Department of Human Services;

(6) Provides that retail pharmacy participation is voluntary, but requires participating pharmacies to sell drugs covered by Hawaii Rx to program participants at a discount price established by the Department of Human Services and allows a pharmacy to charge a dispensing fee not greater than Medicaid fee;

(7) Establishes the Hawaii Rx program special fund to receive rebate and other funds to be used to reimburse retail pharmacies, pay administrative costs, including contracted services;

(8) Requires retail pharmacies to disclose the amount saved to Hawaii Rx participants;

(9) Authorizes the Department of Human Services to seek waivers of federal law required to implement Hawaii Rx;

(10) Appropriates funds for positions for outreach activities, to contract for claims management services, and for costs of issuing prescription cards for the program.

Your Committee finds that the rising cost of prescription drugs affects public programs, consumers, health care plans and insurers, and private businesses or employers. High costs most often negatively impact the health and financial well being of individuals who lack prescription drug benefits, particularly the low to moderate income elderly and the disabled. Residents without health insurance or prescription drug benefits fill prescriptions less often than individuals with drug coverage, placing their health at risk. When the uninsured do buy prescription drugs, they pay two or three times the amount paid by a person with drug benefits for the same prescription drug.

Thirty-one states have established or authorized a state pharmaceutical assistance program. Most use state revenues to provide prescription drugs at a nominal cost to a target population, generally low-income seniors, and sometimes the disabled. The program established by this measure is based on Maine Rx, a program intended to offer prescription drugs at discounted prices to any Maine resident. Maine Rx, however, is not yet operational. Litigation in federal court has halted its implementation until the issues are resolved. Unlike Maine Rx, Hawaii Rx provides that rebates from drug manufacturers are not mandatory. Participation by manufacturers and retail pharmacies is voluntary. Your Committee is hopeful that Hawaii Rx can avoid legal challenges encountered by Maine Rx, making access to more affordable prescription drugs available to all residents of Hawaii.

Your Committee has amended this measure by clarifying various issues relating to the Hawaii Rx special fund. Specifically, the reference to a special account within the Hawaii Rx special fund was deleted and permitted expenditures and sources of funding to be deposited were clarified.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2520, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 2520, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,