Honolulu, Hawaii


RE: S.B. No. 1401

S.D. 1




Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2019

State of Hawaii




Your Committee on Commerce, Consumer Protection, and Health, to which was referred S.B. No. 1401 entitled:




begs leave to report as follows:


The purpose and intent of this measure is to:


(1) Prohibit pharmacy benefit managers from engaging in self-serving business practices;


(2) Replace the registration requirement for pharmacy benefit managers with a license requirement; and


(3) Increase pharmacy benefit manager reporting requirements to the Insurance Commissioner.


Your Committee received testimony in support of this measure from KTA Super Stores; Pahoa Pharmacy; North Shore Pharmacy; Shiigi Drug Co., Inc.; Good Health Pharmacy; Times Supermarket Pharmacy; Hawaii Community Pharmacists; Medical Center Northshore Pharmacy; Oahu County Committee on Legislative Priorities of the Democratic Party of Hawaii; Hawaii Pharmacist Association; and seventeen individuals. Your Committee received comments on this measure from the Department of the Attorney General, Department of Commerce and Consumer Affairs, Office of Information Practices, and Pharmaceutical Care Management Association.


Your Committee finds that there is little to no oversight for pharmacy benefit managers and their business practices. The lack of transparency coupled with the lack of oversight has been a detriment to locally-owned, independent pharmacies. This measure establishes protections to ensure fair drug pricing for patients and health care providers.


Your Committee notes that it has requested the Department of Commerce and Consumer Affairs to produce information concerning other states that have provided oversight and licensure of pharmacy benefit managers to be further considered by your Committee on Ways and Means. Additionally, your Committee recommends that your Committee on Ways and Means consider a budget ceiling increase that may be required for the year this measure may ultimately become effective.


Your Committee has amended this measure by:


(1) Clarifying that information provided under the transparency report to the Insurance Commissioner, and identifiable to a pharmacy benefit manager, is not disclosable as a public record, but permitting the Commissioner to report nonidentifiable aggregated information of multiple pharmacy benefit managers;


(2) Increasing pharmacy benefit manager application and renewal fees and the penalty for failure to renew a license from $140 to $500;


(3) Inserting an effective date of July 1, 2050, to encourage further discussion; and


(4) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.


As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Health that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1401, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1401, S.D. 1, and be referred to your Committee on Ways and Means.


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