Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Human Services and Health, to which was referred H.B. No. 1317, H.D. 1, entitled:

beg leave to report as follows:

The purpose of this measure is to prohibit the Department of Human Services (DHS) from taking any action or expending state resources to remove prescription drug benefits from managed care plans under medicaid.

Your Committees received testimony in support of this measure from the Hawaii Association of Health Plans, Kaiser Permanente (Kaiser), and two individuals. Testimony in opposition was received from the DHS, the Attorney General, and the Department of Health. Comments were received from the First Health Services Corporation.

Your Committees find that managed care organizations such as Kaiser are responsible providers of the medicaid program, including drug coverages. Kaiser is a pioneer in managed care in Hawaii and preceded the advent of the MedQUEST program. Kaiser has managed its patients' use of pharmaceuticals from diagnosis and prescribing by the doctors to filling the prescription in their pharmacies.

On the other hand, the DHS testified that this measure would unduly restrict its ability to implement new programs that would result in significant cost savings under the medicaid programs. The DHS joined a multi-state drug purchasing pool to increase the State's negotiating strength with drug manufacturers in order to get better rebates. The pooling arrangement does not remove prescription drug benefits from managed care plans. These are two separate drug purchasing plans.

Testimony of the DHS indicates that the pool purchasing of preferred drug list medications provides increased negotiating strength with drug manufacturers.

As affirmed by the records of votes of the members of your Committees on Human Services and Health that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 1317, H.D. 1, and recommend that it pass Second Reading and be referred to the Committee on Ways and Means.