STAND. COM. REP. 2514

Honolulu, Hawaii

, 2004

RE: S.B. No. 3237

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committees on Commerce, Consumer Protection and Housing and Health, to which was referred S.B. No. 3237 entitled:

"A BILL FOR AN ACT RELATING TO PRESCRIPTION DRUGS,"

beg leave to report as follows:

The purpose of this measure is to make improvements to the state discounted prescription drug program known as the Rx Program.

Testimony in support of this measure was received from the following: Department of Human Services (DHS), Department of Health, AARP Hawaii, Hawaii Alliance for Retired Americans, Hawaii State Teachers Association, Hawaii State Teachers Association-Retired, Kokua Council, Faith Action for Community Equity, Hawaii State Commission on the Status of Women, Parents and Children Together, Hawaii State AFL-CIO, ILWU Local 142, and five individuals. AlohaCare testified in opposition to the measure.

Act 76, Session Laws of Hawaii 2002, established the Rx Program to provide Hawaii residents with prescription drugs at discounted prices by authorizing rebate agreements between the State and drug manufacturers, authorizing the products of nonparticipating manufacturers to be placed on a prior authorization list, requiring participating pharmacies to sell drugs to program participants at a discount, and authorizing reimbursements to participating pharmacies.

Hawaii's program was based on a similar program established in Maine. After Maine's program was challenged by the pharmaceutical industry and upheld by the United States Supreme Court in May, 2003, Maine revised its program to address concerns raised by the court. This measure incorporates similar changes, such as the elimination of open enrollment and the adoption of income limitations.

More specifically, this measure amends the existing program by:

(1) Renaming the program "Rx Plus";

(2) Establishing program goals to make prescription drugs for qualified Hawaii residents more affordable, increase the overall health of Hawaii's residents, promote healthy communities, and integrate the program with other state health programs, without discouraging or supplanting employer-sponsored prescription drug benefits programs;

(3) Requiring a participating pharmacist to prescribe drugs on the preferred drug list, subject to exceptions;

(4) Authorizing DHS to make public the names of participating drug manufacturers, in addition to nonparticipating manufacturers, and requiring DHS to establish prior authorization requirements in the QUEST program, as appropriate, to encourage manufacturer participation;

(5) Subject to additional limitations, limiting program eligibility to a "qualified resident" defined as a Hawaii resident with a family income equal to or less than three hundred fifty per cent of the federal poverty level, including a hardship exemption for a resident who incurs unreimbursed drug expenses of five per cent or more of family income or total unreimbursed medical expenses of fifteen per cent or more of family income;

(6) Requiring DHS to conduct ongoing quality assurance activities similar to those used in the Medicaid program;

(7) Excluding from eligibility qualified residents who, three months prior to application, were insured under an employer-sponsored health plan for which the employer paid at least half the cost;

(8) Establishing exceptions to the above ineligibility provision, including "crowd out" provisions intended to prevent employers from dropping coverage for their employees in an attempt to push them into the Rx Plus Program;

(9) Requiring drug manufacturers and labelers that sell prescription drugs in the State though any publicly-supported pharmaceutical assistance program to enter into rebate agreements;

    (10) Requiring the Rx Plus program administrator to use the administrator's best efforts to obtain rebate amounts as favorable as rebates calculated under the Medicaid program and rebates provided to the federal government;

    (11) Establishing a Medicaid Advisory Committee to recommend drugs for the program's preferred drug and prior authorizations lists;

    (12) Requiring that DHS take into account differential dispensing fees when establishing drug discounts, and in lieu of utilizing a rebate average formula, consider the recommendation of the Medicaid Advisory Committee; and

    (13) Establishing new definitions and making other conforming amendments.

Your Committees find that the facts present a compelling and persuasive case in support of this measure. According to an AARP report Lowering the Cost of Prescription Drugs in Hawaii: A 2003 Survey of Residents Age 18:

(1) Six in ten people in Hawaii report having taken prescription medication in the last twelve months, and of the above, three-quarters take medication on a regular basis;

(2) Of respondents taking medication on a regular basis, more than three-quarters take one to three prescription drugs per day and slightly more than ten per cent take four to five prescription drugs per day; and

(3) One-third of those who take medication regularly either delay filling their prescriptions or go without other basic necessities in order to afford their medication.

While these statistics are compelling enough, your Committees also heard first-hand from Hawaii residents who, on a daily basis, are forced to make a Hobson's choice between buying medicine and putting food on the table, or buying drugs to control high blood pressure and high cholesterol and purchasing a bus pass to travel to work. It is your Committees' intent, through this measure, to enable Hawaii's people to afford prescription drugs, so that making these difficult and potentially life-threatening choices is no longer necessary.

The lack of viable alternatives for those needing relief from high drug prices compels the Legislature to act immediately. While the Governor's efforts to provide prescription drugs to the most destitute are laudable, the Administration's Prescription Care Hawaii program is a temporary solution that reaches only a fraction of the persons who stand to benefit from the proposed Rx Plus Program. Further, the recently-enacted Medicare reform law suffers from gaps in coverage. This measure is intended to provide affordable prescription drugs to as many uncovered persons as possible, within legal limitations.

Upon careful consideration of the testimony, your Committees have amended this measure by:

(1) Deleting provisions that:

(a) Establish a Medicaid Advisory Committee and require the committee to recommend drugs covered by a rebate agreement;

(b) Require participating pharmacists to substitute preferred list drugs for prescribed drugs, subject to exceptions;

(c) Define "covered drug" and "medicaid advisory committee";

(d) Exclude from eligibility qualified residents who, three months prior to application, were insured under an employer-sponsored health plan for which the employer paid at least half the cost, and provide for exceptions to disqualification, including for qualified residents who have no coverage due to being "crowded out" of employer-sponsored health plans;

(e) Require the establishment of prior authorization requirements in the QUEST program to encourage manufacturer participation; and

(f) Require, rather than authorize drug manufacturers and labelers to enter into rebate agreements;

(2) Adding provisions that:

(a) Require DHS to establish a Rx Plus preferred drug list;

(b) Define "pharmacy and therapeutic committee" and "preferred drug", the latter which includes but is not limited to drugs listed on the State's Medicaid preferred drug list, antipsychotic drugs, antidepressant drugs, chemotherapy drugs, antiretroviral drugs, immunosuppressive drugs, and other drugs selected pursuant to program requirements;

(c) Establish the Pharmacy and Therapeutic Committee in place of the Medicaid Advisory Committee to review and recommend drugs for the Rx Plus preferred drug list;

(d) Prohibit a rebate contract administrator from receiving any compensation or other benefits from a drug manufacturer;

(e) Prohibit the imposition of transaction fees by DHS upon participating pharmacies for claims or payment transactions; and

(f) Clarify that moneys in the Rx Plus Special Fund may be used to pay for contracted services;

(3) Clarifying the definition of "qualified resident" to include a resident who lacks prescription drug coverage or has exceeded coverage benefits, and to delete a "hardship exemption" that allows a resident to qualify based on a certain amount of unreimbursed drug or medical expenses;

(4) Delaying from January 1, 2005, to July 1, 2005, the date upon which participating pharmacies must offer the secondary discounted price of a drug to program participants; and

(5) Making numerous technical, nonsubstantive amendments to eliminate redundancy and for purposes of clarity, consistency, and style.

Your Committees conclude that, as amended, this measure establishes an improved, more effective discounted drug prescription program over the original program and is intended to generate larger, better-defined, and more immediate savings for a significant segment of Hawaii's consumers.

As affirmed by the records of votes of the members of your Committees on Commerce, Consumer Protection and Housing and Health that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 3237, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 3237, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committees on Commerce, Consumer Protection and Housing and Health,

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ROSALYN H. BAKER, Chair

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RON MENOR, Chair