Honolulu, Hawaii



RE:    S.B. No. 975

       S.D. 1




Honorable Ronald D. Kouchi

President of the Senate

Thirty-First State Legislature

Regular Session of 2021

State of Hawaii




     Your Committee on Health, to which was referred S.B. No. 975 entitled:




begs leave to report as follows:


     The purpose and intent of this measure is to establish procedures for the auditing of pharmacies.


     Your Committee received testimony in support of this measure from the National Community Pharmacists Association; Molokai Drugs, Inc.; Times Supermarket and Times Pharmacy; Pharmacy Audit Assistance Services, LLC; Kamehameha Pharmacy, LLC; and one individual.  Your Committee received testimony in opposition to this measure from Kaiser Permanente Hawaii.  Your Committee received comments on this measure from the Department of Health; Hawaii Employer-Union Health Benefits Trust Fund; and CVS Health, Inc.


     Your Committee finds that pharmacy audits are a necessary practice to identify fraud, abuse, and wasteful spending.  However, your Committee also finds that pharmacy audits are often abused by pharmacy benefit managers as additional revenue sources by targeting community pharmacies and recouping money for harmless clerical errors where the correct medication was properly dispensed, and no financial harm was incurred.  In many instances, the pharmacy benefit manager not only recoups the money paid to the pharmacy for the claim in question, but also recoups the money paid for every refill of that claim, even if all other fills were dispensed without error.  This measure establishes procedures and rules for pharmacy audits that are necessary to prevent abuse of pharmacy audits.


     Your Committee recognizes the testimony of Kaiser Permanente Hawaii, which raised concerns that the measure, as drafted, will have the unintended consequence of promoting healthcare fraud,

waste, and abuse, and requests amendments to the measure to prevent abuse and ensure contract pharmacy compliance.


     Accordingly, your Committee has amended this measure by:


     (1)  Removing the requirement that the auditing entity give the pharmacy being audited at least two weeks written notice prior to conducting an initial audit;


     (2)  Removing the requirement that the period covered by an audit not exceed one year from the date the claim was submitted to or adjudicated by an auditing entity;


     (3)  Removing the requirement that an audit not take place during the first seven days of the month, unless otherwise consented to by the pharmacy;


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


     (5)  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 Health that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 975, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 975, S.D. 1, and be referred to your Committee on Commerce and Consumer Protection.


Respectfully submitted on behalf of the members of the Committee on Health,