Report Title:

Prescription Drug Cost Containment

Description:

Requires marketing disclosures by drug manufacturers; requires transparency in pharmacy benefit managers. (SD1)

THE SENATE

S.B. NO.

1440

TWENTY-THIRD LEGISLATURE, 2005

S.D. 1

STATE OF HAWAII

  

 

A BILL FOR AN ACT

 

relating to prescription drugs.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The purpose of this Act is to reduce the cost of providing prescription drugs while maintaining high quality in prescription drug therapies for Hawaii's residents.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

PRESCRIPTION DRUG COST CONTAINMENT

§   -1 Pharmaceutical marketers. (a) Before December 31 of each year, every pharmaceutical manufacturing company shall disclose to the board of pharmacy the value, nature, and purpose of any gift, fee, payment, subsidy, or other economic benefit provided in connection with detailing, promotional, or other marketing activities by the company, directly or through its pharmaceutical marketers, to any physician, hospital, nursing home, pharmacist, health benefits plan administrator, or any other person in Hawaii authorized to prescribe, dispense, or purchase prescription drugs in this State, along with the name of the recipient of that benefit. Disclosure shall be made on a form and in a manner prescribed by the board. Initial disclosure shall be made before December 31, 2006, for the twelve-month period ending June 30, 2006. The board shall provide to the office of the attorney general complete access to the information required to be disclosed under this subsection. The office of the attorney general shall report annually on the disclosures made under this section to the legislature and the governor before March 1.

(b) Each company subject to this section shall also disclose to the board, before October 1, 2005, and annually thereafter, the name and address of the individual responsible for the company's compliance with this section.

(c) The board of pharmacy and the office of the attorney general shall keep confidential all trade secret information. The disclosure form prescribed by the board shall permit the company to identify any information that is a trade secret.

(d) The following shall be exempt from disclosure:

(1) The value of free samples of prescription drugs intended to be distributed to patients;

(2) The payment of reasonable compensation and reimbursement of expenses in connection with bona fide clinical trials. As used in this subparagraph, "clinical trial" means an approved clinical trial conducted in connection with a research study designed to answer specific questions about vaccines, new therapies, or new ways of using known treatments;

(3) Any gift, fee, payment, subsidy, or other economic benefit the value of which is less than $25; and

(4) Scholarship or other support for medical students, residents, and fellows to attend a significant educational, scientific, or policy-making conference of a national, regional, or specialty medical or other professional association if the recipient of the scholarship or other support is selected by the association.

(e) The attorney general may bring an action for injunctive relief, costs, and attorneys fees and to impose on a pharmaceutical manufacturing company that fails to disclose as required by this section a civil penalty of no more than $10,000 per violation. Each unlawful failure to disclose shall constitute a separate violation.

(f) As used in this section:

"Board" means the board of pharmacy established by section 461-2.

"Department" means the department of human services.

"Pharmaceutical manufacturing company" means any entity that is engaged in the production, preparation, propagation, compounding, conversion, or processing of prescription drugs, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis, or any entity engaged in the packaging, repackaging, labeling, re-labeling, or distribution of prescription drugs. The term does not include a pharmacist licensed under chapter 461.

"Pharmaceutical marketer" means a person who, while employed by or under contract to represent a pharmaceutical manufacturing company, engages in pharmaceutical detailing, promotional activities, or other marketing of prescription drugs in this State to any physician, hospital, nursing home, pharmacist, health benefits plan administrator, or any other person authorized to prescribe, dispense, or purchase prescription drugs. The term does not include a wholesale drug distributor or the distributor's representative who promotes or otherwise markets the services of the wholesale drug distributor in connection with a prescription drug.

§   -2 Pharmacy benefit management disclosure and transparency. (a) Each pharmacy benefits manager shall perform its duties exercising good faith and fair dealing toward the covered entity.

(b) A covered entity may request that any pharmacy benefits manager with which it has a pharmacy benefits management services contract disclose to the covered entity, the amount of all rebate revenues and the nature, type, and amounts of all other revenues that the pharmacy benefits manager receives from each pharmaceutical manufacturer or labeler with whom the pharmacy benefits manager has a contract. The pharmacy benefits manager shall disclose in writing:

(1) The aggregate amount, and for a list of drugs to be specified in the contract, the specific amount, of all rebates and other retrospective utilization discounts received by the pharmacy benefits manager directly or indirectly, from each pharmaceutical manufacturer or labeler that are earned in connection with the dispensing of prescription drugs to covered individuals of the health benefit plans issued by the covered entity or for which the covered entity is the designated administrator;

(2) The nature, type, and amount of all other revenue received by the pharmacy benefits manager directly or indirectly from each pharmaceutical manufacturer or labeler for any other products or services provided to the pharmaceutical manufacturer or labeler by the pharmacy benefits manager with respect to programs that the covered entity offers or provides to its enrollees; and

(3) Any prescription drug utilization information requested by the covered entity relating to covered individuals.

A pharmacy benefits manager shall provide the information requested by the covered entity for disclosure within thirty days of receipt of the request. If requested, the information shall be provided no less than once each year. The contract entered into between the pharmacy benefits manager and the covered entity shall set forth any fees to be charged for drug utilization reports requested by the covered entity.

(c) A pharmacy benefits manager, unless authorized pursuant to the terms of its contract with a covered entity, may not contact any covered individual without express written permission of the covered entity.

(d) Except for utilization information, a covered entity shall maintain any information disclosed in response to a request pursuant to this section as confidential and proprietary information, and may not use the information for any other purpose or disclose the information to any other person except as provided in this section or in the pharmacy benefits management services contract between the parties. Any covered entity who discloses information in violation of this section is subject to an action for injunctive relief and is liable for any damages which are the direct and proximate result of such disclosure. Nothing in this section prohibits a covered entity from disclosing confidential or proprietary information to the director, upon request. Any such information obtained by the director is confidential and privileged and is not available for public inspection or disclosure.

(e) The covered entity may have the pharmacy benefits manager's books and records related to the rebates or other information described in subsection (b)(1), (2), and (3), to the extent the information relates directly or indirectly to the covered entity's contract, audited in accordance with the terms of the pharmacy benefits management services contract between the parties. However, if the parties have not expressly provided for audit rights and the pharmacy benefits manger has advised the covered entity that other reasonable options are available and subject to negotiation, the covered entity may have the books and records audited as follows:

(1) Audits may be conducted no more frequently than once in each twelve-month period upon not less than thirty business days' written notice to the pharmacy benefits manager;

(2) The covered entity may select an independent firm to conduct an audit, and the independent firm shall sign a confidentiality agreement with the covered entity and the pharmacy benefits manager ensuring that all information obtained during the audit will be treated as confidential. The firm may not use, disclose, or otherwise reveal any such information in any manner or form to any person or entity except as otherwise permitted under the confidentiality agreement. The covered entity shall treat all information obtained as a result of the audit as confidential, and may not use or disclose such information except as may be otherwise permitted under the terms of the contract between the covered entity and the pharmacy benefits manager or if ordered by a court of competent jurisdiction for good cause shown;

(3) Any audit shall be conducted at the pharmacy benefits manager's office where the records are located, during normal business hours, without undue interference with the pharmacy benefits manager's business activities, and in accordance with reasonable audit procedures.

(f) With regard to the dispensation of a substitute prescription drug for a prescribed drug to a covered individual, when the pharmacy benefits manager requests a substitution, the following provisions apply:

(1) The pharmacy benefits manager may request the substitution of a lower-priced generic and therapeutically equivalent drug for a higher-priced prescribed drug;

(2) With regard to substitutions in which the substitute drug's net cost is more for the covered individual or the covered entity than the prescribed drug, the substitution must be made only for medical reasons that benefit the covered individual. If a substitution is being requested pursuant to this subdivision, the pharmacy benefits manager shall obtain the approval of the prescribing health professional.

(g) The insurance commissioner of the department of commerce and consumer affairs shall adopt rules to implement and enforce this chapter. The rules may include the following:

(1) Definition of terms;

(2) Use of prescribed forms;

(3) Reporting requirements;

(4) Enforcement procedures; and

(5) Protection of proprietary information and trade secrets.

(h) Any covered entity may bring a civil action to enforce the provisions of this chapter or to seek civil damages for the violation of its provisions.

(i) As used in this section:

(1) "Covered entity" means a nonprofit hospital or medical service corporation, health insurer, health benefit plan, or health maintenance organization; a health program administered by a department or the state in the capacity of provider of health coverage; or an employer, labor union, or other group of persons organized in the state that provides health coverage to covered individuals who are employed or reside in the state. The term does not include a self-funded plan that is exempt from state regulation pursuant to ERISA, a plan issued for coverage for federal employees, or a health plan that provides coverage only for accidental injury, specified disease, hospital indemnity, medicare supplement, disability income, long- term care, or other limited benefit health insurance policies and contracts;

(2) "Covered individual" means a member, participant, enrollee, contract holder, policy holder, or beneficiary of a covered entity who is provided health coverage by the covered entity. The term includes a dependent or other person provided health coverage through a policy, contract, or plan for a covered individual;

(3) "Generic drug" means a chemically equivalent copy of a brand-name drug with an expired patent;

(4) "Labeler" means an entity or person that receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale and that has a labeler code from the federal Food and Drug Administration under 21 C.F.R. §270.20 (1999);

(5) "Pharmacy benefits management" means the procurement of prescription drugs at a negotiated rate for dispensation within this state to covered individuals, the administration or management of prescription drug benefits provided by a covered entity for the benefit of covered individuals, or any of the following services provided with regard to the administration of the following pharmacy benefits:

(A) Mail service pharmacy;

(B) Claims processing, retail network management, and payment of claims to pharmacies for prescription drugs dispensed to covered individuals;

(C) Clinical formulary development and management service;

(D) Rebate contracting and administration;

(E) Certain patient compliance, therapeutic intervention, and generic substitution programs; and

(F) Disease management programs involving prescription drug utilization;

(7) "Pharmacy benefits manager" means an entity that performs pharmacy benefits management. The term includes a person or entity acting for a pharmacy benefits manager in a contractual or employment relationship in the performance of pharmacy benefits management for a covered entity and includes mail service pharmacy. The term does not include a health carrier when the health carrier or its subsidiary is providing pharmacy benefits management to its own insureds; or a public self-funded pool or a private single employer self-funded plan that provides such benefits or services directly to its beneficiaries;

(8) "Proprietary information" means information on pricing, costs, revenue, taxes, market share, negotiating strategies, customers, and personnel held by private entities and used for that private entity's business purposes;

(9) "Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(A) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."

SECTION 3. (a) Hawaii's health care policies shall promote outcomes based assessment and treatment through the development of a statewide quality assurance system and an effective quality improvement process that integrates best practices research, functional status assessment, patient satisfaction measurements, and cost containment goals. These health care policies are best established and implemented by nongovernmental organizations of health care providers and patients. The role of government should be to support efforts of nongovernmental organizations to remain collaborative in nature and to recognize those efforts.

(b) Subject to the availability of grants from federal government agencies and nongovernmental organizations to support the costs thereof, the director of health shall contract with a qualified nongovernmental organization to conduct an inventory of existing quality assurance measurements used by public and private health plans in Hawaii, by hospitals serving Hawaii residents, and by other entities within state government. The director's contractor shall report to the director with the results of the inventory and with an analysis and identification of any other information necessary to establish a statewide quality assurance system.

(c) The directors of human services and health shall convene a work group to evaluate the results of the inventory, identify common areas of measurements to all and areas lacking measurements, and conduct an analysis of likely areas for change in order to develop a statewide application of a quality assurance measurement. Additionally, the work group may make proposals to the legislature for continued outcomes-based assessments that may identify areas of health care that need improvement, provide for a comparison of the quality of health care provided under public and private health benefits plans, identify ways to focus resources and programs in order to improve the health of beneficiary populations or discrete portions thereof, and develop any other findings and recommendations for expanding access to, improving the quality of, and lowering the cost of Hawaii's health care system. The work group shall include representatives from private and public health plans and any other person or entity deemed appropriate by the directors.

(d) The directors of human services and health shall submit a joint report of their findings and recommendations, including any proposed implementing legislation, to the legislature no later than twenty days before the convening of the regular session of 2006. The report shall include a summary of the activities of the directors and a description of any proposals to implement outcomes-based assessment projects.

SECTION 4. This Act shall take effect on July 1, 2020.