THE SENATE

S.B. NO.

2443

THIRTY-FIRST LEGISLATURE, 2022

S.D. 2

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 it is in the interest of consumers to prohibit pharmacy benefit managers from engaging in certain practices, including contractually limiting the ability of pharmacies and pharmacists from disclosing certain information and requiring consumers to pay more than the cash price for prescriptions. The legislature further finds that it is desirable to increase fees and penalties assessed under chapter 431S, Hawaii Revised Statutes.

The purpose of this Act is to:

(1) Prohibit a pharmacy benefit manager from limiting a pharmacist's ability to disclose certain information to consumers;

(2) Prohibit a pharmacy benefit manager from reimbursing a 340B pharmacy differently than any other network pharmacy based on its status as a 340B pharmacy;

(3) Provide additional enforcement authority to the insurance commissioner, including increasing certain fees;

(4) Amend sections of the Hawaii Revised Statutes, that reference pharmacy benefit managers for consistency and clarity;

(5) Amend the definition of "covered entity" in chapter 431S to align with entities over which the insurance commissioner exercises significant jurisdiction;

(6) Provide the insurance commissioner with authority to suspend or revoke a pharmacy benefit manager's registration under certain conditions;

(7) Repeal section 328-106, Hawaii Revised Statutes, which requires the department of health to enforce the terms of contracts pertaining to pharmacy benefit managers; and

(8) After December 31, 2022, prohibiting any contract for managed care to contain a provision that authorizes a pharmacy benefit manager to reimburse a contracting pharmacy on a maximum allowable cost basis.

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) In any participation contracts between a pharmacy benefit manager and pharmacists or pharmacies providing prescription drug coverage for a prescription drug benefit plan, no pharmacy or pharmacist shall be prohibited or restricted from, or penalized for disclosing to any covered person, health care information that the pharmacy or pharmacist deems appropriate regarding:

(1) The nature of treatment, risks, or alternatives;

(2) The availability of alternate therapies, consultations, or tests;

(3) The decision of utilization reviewers or similar persons to authorize or deny services;

(4) The process that is used to authorize or deny health care services or benefits; or

(5) Information on financial incentives and structures used by the insurer.

(b) A pharmacy benefit manager shall not prohibit a pharmacy or pharmacist from discussing information regarding the total cost-share for pharmacist services for a prescription drug or from selling a more affordable alternative to the covered person if a more affordable alternative is available.

(c) A pharmacy benefit manager contract with a participating pharmacist or pharmacy shall not prohibit, restrict, or limit disclosure of information to the commissioner, law enforcement, or state and federal government officials; provided that:

(1) The recipient of the information has the obligation, to the extent provided by state or federal law, to maintain proprietary information as confidential; and

(2) Prior to disclosure of information designated as confidential under the pharmacy benefit manager contract, the pharmacist or pharmacy marks as confidential any document in which the information appears or requests confidential treatment for any oral communication of that information.

(d) A pharmacy benefit manager shall not require a covered person purchasing a covered prescription drug to pay an amount greater than the lesser of the covered person's cost-sharing amount under the terms of the prescription drug benefit plan or the amount the covered person would pay for the drug if the covered person were paying the cash price.

A pharmacy benefit manager shall not reimburse a 340B pharmacy differently than any other network pharmacy based on its status as a 340B pharmacy; provided that, for purposes of this subsection, "340B pharmacy" means a pharmacy that is authorized to purchase drugs at a discount under title 42 United States Code section 256b.

Any amount paid by a covered person under this section shall be attributable toward any deductible or, to the extent consistent with section 2707, Public Health Service Act, the annual out-of-pocket maximums under the covered person's health benefit plan.

431S-   Enforcement. (a) The commissioner is authorized to enforce compliance with the requirements of this chapter.

(b) The commissioner may examine or audit the books and records of a pharmacy benefit manager providing claims processing services or other prescription drug or device services for a prescription drug benefit plan to determine compliance with this chapter.

(c) The information or data acquired during an examination under subsection (b) shall:

(1) Be considered proprietary and confidential;

(2) Not be disclosable under chapter 92F;

(3) Not be subject to subpoena; and

(4) Not be subject to discovery or admissible as evidence in any private civil action.

(d) The commissioner may use any document or information provided pursuant to this section in the performance of the commissioner's duties to determine compliance.

(e) The commissioner may impose a penalty on a pharmacy benefit manager or the covered entity with which it is contracted, or both, for a violation of this chapter. The penalty shall not exceed $           per entity for each violation of this chapter, except as provided under chapter 431S-5.

(f) Notwithstanding section 480-11, or any other law to the contrary, in addition to any penalty authorized pursuant to this section, each violation of this chapter shall also be a violation of chapter 480 and subject to any penalty authorized thereunder."

SECTION 3. Section 431R-1, Hawaii Revised Statutes, is amended by amending the definition of "pharmacy benefit manager" to read as follows:

""Pharmacy 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.] has the same meaning as in chapter 431S and is registered pursuant to chapter 431S."

SECTION 4. Section 431S-1, Hawaii Revised Statutes, is amended as follows:

1. By adding six new definitions to be appropriately inserted and to read:

""Claims processing services" means the administrative services performed in connection with the processing and adjudicating of claims relating to pharmacist services that include:

(1) Receiving payments for pharmacist services;

(2) Making payments to pharmacists or pharmacies for pharmacist services; or

(3) Both.

"Covered person" means a member, policy holder, subscriber, enrollee, beneficiary, dependent, or other individual participating in a prescription drug benefits plan.

"Other prescription drug or device services" means services other than claims processing services, provided directly or indirectly, whether in connection with or separate from claims processing services, including but not limited to:

(1) Negotiating rebates, discounts, or other financial incentives and arrangements with drug companies;

(2) Disbursing or distributing rebates;

(3) Managing or participating in incentive programs or arrangements for pharmacist services;

(4) Negotiating or entering into contractual arrangements with pharmacists or pharmacies, or both;

(5) Developing and maintaining formularies;

(6) Designing prescription benefit programs; or

(7) Advertising or promoting services.

"Pharmacist" means a registered pharmacist licensed by the board of pharmacy of the State pursuant to chapter 461.

"Pharmacist services" means products, goods, and services or any combination of products, goods, and services, provided as a part of the practice of pharmacy.

"Pharmacy" means a store, shop, or place permitted as a pharmacy by the board of pharmacy of the State pursuant to chapter 461."

2. By amending the definition of "covered entity" to read:

""Covered entity" means:

(1) A [health benefits plan regulated under chapter 87A;] health insurer regulated under article 10A of chapter 431; mutual benefit society regulated under article 1 of chapter 432; or health maintenance organization regulated under chapter 432D; [provided that a "covered entity" under this paragraph shall not include a health maintenance organization regulated under chapter 432D that owns or manages its own pharmacies;] or

(2) A health program administered by the State in the capacity of a provider of health coverage[; or].

[(3) An employer, labor union, or other group of persons organized in the State that provides health coverage to covered persons employed or residing in the State.]

"Covered entity" shall not include any plans issued for coverage for federal employees or specified disease or limited benefit health insurance as provided by section 431:10A-607."

3. By amending the definition of "pharmacy benefit manager" to read:

""Pharmacy 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[.]; provided that the term shall not include a consultant who only provides advice as to the selection or performance of a pharmacy benefit manager, or a covered entity to the extent that it performs any claims processing and other prescription drug or device services exclusively for its enrollees."

SECTION 5. Section 431S-3, Hawaii Revised Statutes, is amended to read as follows:

"431S-3 Registration 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 issued by the commissioner pursuant to this chapter.

(b) Each person seeking to register 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; and

(3) A nonrefundable issuance fee [of $140.] as required under section 431:7-101.

The commissioner may, upon showing of good cause, waive or modify, in whole or part, the fee in this subsection by order.

(c) The commissioner may suspend or revoke the registration of a pharmacy benefit manager if the commissioner determines that the pharmacy benefit manager, or any individual responsible for the conduct of affairs of the pharmacy benefit manager, has been found to have violated the insurance laws of the State or any other jurisdiction, or has had an insurance or other certificate of authority or license denied or revoked for cause by any jurisdiction.

(d) Before the commissioner may suspend or revoke the registration of a pharmacy benefit manager, the commissioner shall conduct a hearing in accordance with chapter 91."

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 by March 31 each year.

(b) When renewing its registration, 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 service fee [of $140.] as required under section 431:7-101.

The commissioner may, upon showing of good cause, waive or modify, in whole or part, the fee in this subsection by order."

SECTION 7. Section 431S-5, Hawaii Revised Statutes, is amended to read as follows:

"[[]431S-5[]] Penalty. Any person who acts as a pharmacy benefit manager in this State without first being registered pursuant to this chapter shall be subject to a fine of [$500] $1,000 for each violation."

SECTION 8. Section 328-106, Hawaii Revised Statutes, is repealed.

["[328-106]  Pharmacy benefit manager; maximum allowable cost. (a) A pharmacy benefit manager that reimburses a contracting pharmacy for a drug on a maximum allowable cost basis shall comply with the requirements of this section.

(b) The pharmacy benefit manager shall include the following in the contract information with a contracting pharmacy:

(1) Information identifying any national drug pricing compendia; or

(2) Other data sources for the maximum allowable cost list.

(c) The pharmacy benefit manager shall make available to a contracting pharmacy, upon request, the most up-to-date maximum allowable cost price or prices used by the pharmacy benefit manager for patients served by the pharmacy in a readily accessible, secure, and usable web-based or other comparable format.

(d) A drug shall not be included on a maximum allowable cost list or reimbursed on a maximum allowable cost basis unless all of the following apply:

(1) The drug is listed as "A" or "B" rated in the most recent version of the Orange Book or has a rating of "NR", "NA", or similar rating by a nationally recognized reference;

(2) The drug is generally available for purchase in this State from a national or regional wholesaler; and

(3) The drug is not obsolete.

(e) The pharmacy benefit manager shall review and make necessary adjustments to the maximum allowable cost of each drug on a maximum allowable cost list at least once every seven days using the most recent data sources available, and shall apply the updated maximum allowable cost list beginning that same day to reimburse the contracted pharmacy until the pharmacy benefit manager next updates the maximum allowable cost list in accordance with this section.

(f) The pharmacy benefit manager shall have a clearly defined process for a contracting pharmacy to appeal the maximum allowable cost for a drug on a maximum allowable cost list that complies with all of the following:

(1) A contracting pharmacy may base its appeal on one or more of the following:

(A) The maximum allowable cost for a drug is below the cost at which the drug is available for purchase by similarly situated pharmacies in this State from a national or regional wholesaler; or

(B) The drug does not meet the requirements of subsection (d);

(2) A contracting pharmacy shall be provided no less than fourteen business days following receipt of payment for a claim to file the appeal with the pharmacy benefit manager;

(3) The pharmacy benefit manager shall make a final determination on the contracting pharmacy's appeal no later than fourteen business days after the pharmacy benefit manager's receipt of the appeal;

(4) If the maximum allowable cost is upheld on appeal, the pharmacy benefit manager shall provide to the contracting pharmacy the reason therefor and the national drug code of an equivalent drug that may be purchased by a similarly situated pharmacy at a price that is equal to or less than the maximum allowable cost of the drug that is the subject of the appeal; and

(5) If the maximum allowable cost is not upheld on appeal, the pharmacy benefit manager shall adjust, for the appealing contracting pharmacy, the maximum allowable cost of the drug that is the subject of the appeal, within one calendar day of the date of the decision on the appeal and allow the contracting pharmacy to reverse and rebill the appealed claim.

(g) A contracting pharmacy shall not disclose to any third party the maximum allowable cost list and any related information it receives, either directly from a pharmacy benefit manager or through a pharmacy services administrative organization or similar entity with which the pharmacy has a contract to provide administrative services for that pharmacy."]

SECTION 9. (a) No contract for managed care entered into pursuant to part II of chapter 346, Hawaii Revised Statutes, after December 31, 2022, shall contain a provision that authorizes a pharmacy benefit manager to reimburse a contracting pharmacy on a maximum allowable cost basis.

(b) Any provision of a contract for managed care authorized pursuant to part II of chapter 346, Hawaii Revised Statutes, to reimburse a contracting pharmacy for a drug on a maximum allowable cost basis in accordance with section 328-106, Hawaii Revised Statutes, or chapter 431S, Hawaii Revised Statutes, that was in effect on or before December 31, 2022, shall be null and void.

SECTION 10. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 11. 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 12. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 13. This Act shall take effect on January 1, 2050.


 


 

Report Title:

Pharmacy Benefit Managers; Enforcement; Registration

 

Description:

Addresses and defines pharmacy benefit manager practices. Creates enforcement authority by the Insurance Commissioner to suspend or revoke a pharmacy benefit manager's registration and impose fines. Repeals the requirement for the Department of Health to enforce the terms of private contracts pertaining to pharmacy benefit managers. Effective 1/1/2050. (SD2)

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.