Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committees on Consumer Protection and Commerce and Health, to which was referred H.B. No. 2834 entitled:

beg leave to report as follows:

The purpose of this bill is to establish the Hawaii RX Program to make prescription drugs more affordable to all residents of the State.

Testimony in support of this measure was received from the Lieutenant Governor, Commissioner for the Maine Department of Human Services, Assistant Attorney General for the State of Maine, AARP Hawaii, Hawaii Alliance for Retired Americans, Hawaii State AFL-CIO, Hawaii State Teachers Association, ILWU Local 142, Kokua Council, Policy Advisory Board for Elder Affairs, Legal Aid Society of Hawaii, Healthcare Association of Hawaii, Hawaii Academy of Physician Assistants, The Medicine Bank, Unity House, Inc., Retirees Unit of the Hawaii Government Employees Association, and several concerned individuals. The Department of Commerce and Consumer Affairs and Department of Health supported the intent of this bill. Pharmaceutical Research and Manufacturers of America testified in opposition (PhRMA).

Your Committees heard testimony in overwhelming support of the Hawaii RX Program. Approximately 25 percent of Hawaii's population, or about 250,000 persons, do not have drug insurance and must pay full retail prices for prescription drugs. More than 70,000 elderly and disabled individuals in Hawaii receive medical coverage under Medicare but do not have outpatient drug coverage. Therefore, your Committees find that establishment of a state prescription drug assistance program is critical.

Compelling testimony was heard regarding individuals who have suffered as a result of the high cost of prescription drugs. In many instances, families who are unable to afford prescription medications must forego filling their prescriptions in order to buy food and other necessities. Others try to "stretch" medications by taking less than the prescribed dosage, thereby reducing their effectiveness. When access to prescription drugs is restricted due to prohibitive costs, public health problems arise and overall health-care costs increase.

Pharmaceutical drug manufacturers, who generally oppose state prescription drug assistance programs, contend that many pharmaceutical companies have already implemented patient assistance programs. Through these programs, patients are provided with medications either free of charge or at reduced prices. Your Committees recognize that manufacturer-sponsored programs help some individuals, but program income limits and strict eligibility requirements, exclude many. Furthermore, pharmaceutical companies may terminate their programs at any time. The Hawaii Rx Program is designed to provide all Hawaii residents with uninterrupted access to affordable prescription drugs.

Manufacturers further contend that "prior authorization," an essential component of this bill, will greatly limit access to medicine. This component authorizes DOH to exclude a manufacturer's products from State prior authorization lists if the manufacturer and Director of Health fail to reach a drug rebate agreement. Manufacturers argue that prior authorization would remove the profit incentive for companies to research and develop new medicines.

Your Committees find that this argument is contradicted by data released by the Henry J. Kaiser Family Foundation which includes:

Finally, some testifiers expressed concern regarding lawsuits challenging the legality of state prescription drug assistance programs. Specifically, in the State of Maine, PhRMA filed a lawsuit challenging the constitutionality of the Maine Rx Program, the same program upon which the Hawaii Rx Program is modeled. The Maine Rx Program was upheld by the First Circuit United States (U.S.) Court of Appeals, which found that the program did not violate the Supremacy or Commerce Clause of the U.S. Constitution.

Your Committees agree with following quote of Supreme Court Justice Louis Brandeis, in the Court of Appeals' opinion:

As affirmed by the records of votes of the members of your Committees on Consumer Protection and Commerce and Health that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 2834 and recommend that it pass Second Reading and be referred to the Committee on Finance.