THIRTIETH LEGISLATURE, 2020
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO PHARMACY BENEFIT MANAGERS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that pharmacy benefit managers are entities that contract with health plans, employers, unions, and government entities to manage prescription drug coverage on behalf of health plan beneficiaries. The role of pharmacy benefit managers in the delivery of health care has significantly increased over time; however, there is growing concern that pharmacy benefit managers may be contributing to rising prescription drug costs throughout the country.
The legislature further finds that nearly all health insurance plans require some level of cost sharing, either via a fixed copayment or some percentage of the cost share. However, in certain situations, a pharmacy benefit manager may require patient drug cost sharing in an amount that exceeds a pharmacy's actual cost for a prescription drug, which can increase a patient's out-of-pocket costs.
The legislature additionally finds that pharmacy benefit manager operations are not transparent. Some pharmacy benefit manager business practices also appear to benefit the entity at the expense of patients, health insurance plans, and pharmacies. The legislature recognizes that transparency is a key factor in understanding the drivers and impacts of prescription drug costs for consumers in Hawaii.
Accordingly, the purpose of this Act is to increase transparency and improve the business practices of pharmacy benefit managers and protect the public health, safety, and welfare by:
(1) Establishing business practice and transparency reporting requirements for pharmacy benefit managers;
(2) Replacing the registration requirement for pharmacy benefit managers with a licensing requirement; and
(3) Increasing penalties for violations of the pharmacy benefit managers law.
SECTION 2. Chapter 431S, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:
"§431S- Business practices. (a) A pharmacy benefit manager shall perform its duties with care, skill, prudence, diligence, and professionalism. A pharmacy benefit manager shall have a fiduciary duty to a covered entity client and shall discharge that duty in accordance with federal and state law.
(b) A pharmacy benefit manager shall notify a covered entity client in writing of any activity, policy, or practice of the pharmacy benefit manager that directly or indirectly presents any conflict of interest with the duties imposed in this section.
(c) A pharmacy benefit manager shall not require pharmacy or other provider accreditation standards or certification requirements that are inconsistent with, more stringent than, or in addition to requirements of the board of pharmacy or other federal or state entity.
(d) A covered entity or pharmacy benefit manager shall not require a covered person to make a payment at the point of sale for a covered prescription drug in an amount greater than the lesser of:
(1) The applicable copayment for the prescription drug;
(2) The allowable claim amount for the prescription drug;
(3) The amount a covered person would pay for the prescription drug if the covered person purchased the prescription drug without using a prescription drug benefit plan or any other source of prescription drug benefits or discounts; or
(4) The amount the pharmacy will be reimbursed for the drug from the pharmacy benefit manager or covered entity.
(e) A covered entity or pharmacy benefit manager shall be prohibited from penalizing, requiring, or providing financial incentives, including variations in premiums, deductibles, copayments, or coinsurance, to covered persons as incentives to use a specific retail pharmacy, mail order pharmacy, or other network pharmacy provider in which a pharmacy benefit manager has an ownership interest or that has an ownership interest in a pharmacy benefit manager.
(f) No pharmacy benefit manager shall retain any portion of spread pricing.
§431S- Transparency report. (a) Beginning June 1, , and annually thereafter, each licensed pharmacy benefit manager shall submit a transparency report containing data from the prior calendar year to the commissioner.
(b) The transparency report shall include:
(1) The aggregate amount of all rebates that the pharmacy benefit manager received from all pharmaceutical manufacturers for all covered entity clients and for each covered entity client;
(2) The aggregate administrative fees that the pharmacy benefit manager received from all pharmaceutical manufacturers for all covered entity clients and for each covered entity client;
(3) The aggregate retained rebates that the pharmacy benefit manager received from all pharmaceutical manufacturers and did not pass through to covered entities;
(4) The aggregate retained rebate percentage; and
(5) The highest, lowest, and mean aggregate retained rebate percentage for all covered entity clients and for each covered entity client.
(c) A pharmacy benefit manager that provides information under this section may designate that material as a trade secret; provided that disclosure may be ordered by a court of this State for good cause shown or made in a court filing.
(d) Within sixty calendar days of receipt, the commissioner shall publish the transparency report of each pharmacy benefit manager on the official website of the insurance division in a way that does not violate chapter 482B."
SECTION 3. Section 431R-1, Hawaii Revised Statutes, is amended by amending the definition of "pharmacy benefit manager" to read as follows:
benefit manager" means any person, business, or entity that performs
pharmacy benefit management, including but not limited to a person or entity
under contract with a pharmacy benefit manager to perform pharmacy benefit
management on behalf of a managed care company, nonprofit hospital or medical
service organization, insurance company, third-party payor, or health program
administered by the State[
.] and that is duly licensed pursuant to
SECTION 4. Section 431S-1, Hawaii Revised Statutes, is amended as follows:
1. By adding eight new definitions to be appropriately inserted and to read:
""Aggregate retained rebate percentage" means the percentage of all rebates received from a pharmaceutical manufacturer or other entity to a pharmacy benefit manager for prescription drug utilization that is not passed on to the pharmacy benefit manager's covered entity clients. The percentage shall be calculated for each covered entity for rebates in the prior calendar year as follows:
(1) The sum total dollar amount of rebates received from all pharmaceutical manufacturers for all utilization of covered persons of a covered entity that was not passed through to the covered entity; and
(2) Divided by the sum total dollar amount of all rebates received from all pharmaceutical manufacturers for covered persons of a covered entity.
"Mail order pharmacy" means a pharmacy whose primary business is to receive prescriptions by mail or facsimile, or through other electronic means, and dispense medication to covered persons through the use of the United States Postal Service or other contract carrier services and that provide electronic, rather than face-to-face, consultations with patients.
"Network pharmacy" means a retail pharmacy or other permitted pharmacy provider that contracts with a pharmacy benefit manager.
"Pharmacy" means an established location, either physical or electronic, that has been issued a permit to operate in the State by the board of pharmacy and has entered into a network contract with a pharmacy benefit manager or a covered entity.
"Rebates" means all price concessions paid by a pharmaceutical manufacturer to a pharmacy benefit manager or covered entity, including rebates, discounts, and other price concessions that are based on actual or estimated utilization of a prescription drug. "Rebates" also includes price concessions based on the effectiveness of a drug as in a value-based or performance-based contract.
"Retail pharmacy" means a chain pharmacy, a supermarket pharmacy, a mass merchandiser pharmacy, an independent pharmacy, or a network of independent pharmacies that is permitted by the board of pharmacy pursuant to section 461-14 and that dispenses prescription drugs to the general public.
"Spread pricing" means any amount charged or claimed by a pharmacy benefit manager to a covered entity that is in excess of the amount the pharmacy benefit manager paid to the pharmacy that filled the prescription.
"Trade secret" shall have the same meaning as defined in section 482B-2."
2. By amending the definition of "pharmacy benefit manager" to read:
benefit manager" means any person [
that performs pharmacy benefit
management, including but not limited to a person or entity in a contractual or
employment relationship with a pharmacy benefit manager to perform pharmacy
benefit management for a covered entity.], business, or other entity
that, pursuant to a contract or under an employment relationship with a covered
entity, a self-insured plan, or other third-party payer, either directly or
through an intermediary, manages the prescription drug benefit plan provided by
the covered entity, self-insured plan, or other third payer, including the
processing and payment of claims for prescription drugs, performance of drug
utilization review, processing of drug prior authorization requests,
adjudication of appeals or grievances related to prescription drug benefit plan
coverage contracting with network pharmacies, and controlling the cost of
covered prescription drugs."
SECTION 5. Section 431S-3, Hawaii Revised Statutes, is amended to read as follows:
Registration] License required. (a)
Notwithstanding any law to the contrary, no person shall act or operate
as a pharmacy benefit manager without first obtaining a valid [ registration]
license issued by the commissioner pursuant to this chapter. Any license issued under this chapter shall
be valid for a period of three calendar years from the date of issuance or
Each person seeking [
to register] a license as a pharmacy
benefit manager shall file with the commissioner an application on a form
prescribed by the commissioner. The
application shall include:
(1) The name, address, official position, and professional qualifications of each individual who is responsible for the conduct of the affairs of the pharmacy benefit manager, including all members of the board of directors; board of trustees; executive commission; other governing board or committee; principal officers, as applicable; partners or members, as applicable; and any other person who exercises control or influence over the affairs of the pharmacy benefit manager;
(2) The name and
address of the applicant's agent for service of process in the State; [
(3) The name of the pharmacy benefit manager;
(4) The address and contact telephone number for the pharmacy benefit manager; and
(5) The name and address of the pharmacy benefit manager agent for service of process in the State; and
(3)] (6) A nonrefundable application fee of $140.
(c) The commissioner may issue a license subject to restrictions or limitations upon the authorization, including the types of services that may be supplied or the activities in which the applicant may be engaged. The license shall be granted only when the commissioner is satisfied that the applicant possesses the necessary organization, background expertise, and financial integrity to supply the services sought to be offered.
(d) No license issued under this chapter shall be transferable."
SECTION 6. Section 431S-4, Hawaii Revised Statutes, is amended to read as follows:
§431S-4[ ]] Annual renewal requirement. (a)
Each pharmacy benefit manager shall renew its [ registration] license
by March 31 each year.
(b) When renewing its [
a pharmacy benefit manager shall submit to the commissioner the following:
(1) An application for renewal on a form prescribed by the commissioner; and
(2) A renewal fee of $140.
(c) Failure on the part of a pharmacy benefit
manager to renew its [
registration] license as provided in this
section shall result in a penalty of $140 and may cause the [ registration]
license to be revoked or suspended by the commissioner until the
requirements for renewal have been met."
SECTION 7. Section 431S-5, Hawaii Revised Statutes, is amended to read as follows:
Penalty.] Penalties. (a)
The commissioner may suspend, revoke, or place on probation a pharmacy
benefit manager's license if:
(1) The pharmacy benefit manager has engaged in fraudulent activity in violation of federal or state law;
(2) The commissioner receives consumer complaints that justify an action under this subsection to protect the safety and interest of consumers;
(3) The pharmacy benefit manager fails to pay the required fees under this chapter; or
(4) The pharmacy benefit manager fails to comply with any other requirement under this chapter.
(b) Any person who acts as a pharmacy benefit
manager in this State without first being [
registered] licensed pursuant
to this chapter shall be subject to a fine of [ $500] not more than
$5,000 per day for each violation."
SECTION 8. 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 that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.
SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 10. This Act shall take effect on January 1, 2021.
Pharmacy Benefit Managers; Insurance Commissioner, Licensure; Reporting
Establishes business practice and transparency reporting requirements for pharmacy benefit managers. Replaces the registration requirement for pharmacy benefit managers with a licensing requirement. Increases penalties for violations of the pharmacy benefit managers law. Effective 1/1/2021.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.