STAND. COM. REP. NO. 326

Honolulu, Hawaii

RE:    S.B. No. 1158

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2017

State of Hawaii

Sir:

     Your Committee on Commerce, Consumer Protection, and Health, to which was referred S.B. No. 1158 entitled:

"A BILL FOR AN ACT RELATING TO PHARMACY BENEFIT MANAGERS,"

begs leave to report as follows:

     The purpose and intent of this measure is to require pharmacy benefit managers in Hawaii to register with the Insurance Commissioner.

     Your Committee received testimony in support of this measure from the American Diabetes Association and three individuals.  Your Committee received comments on this measure from the Department of Commerce and Consumer Affairs, Express Scripts, and CVS Health.

     Your Committee finds that pharmacy benefit managers are administrators of prescription drug programs and are responsible for developing and maintaining formularies and other clinical management programs, processing prescription drug claims for insurance companies or corporations, and negotiating contracts with pharmaceutical manufacturers.  Pharmacy benefit managers also perform utilization reviews, manage clinical programs targeted to specific disease states, and operate pharmacies, including mail order and specialty pharmacies.  Over the past decade, the role of pharmacy benefit managers in the delivery of health care has increased due to a variety of factors, including coverage expansions under the Medicare Part D prescription drug benefit and the federal Affordable Care Act and an increase in prescription drug spending that has motivated commercial health plans and self-insured employers to outsource the management of their spending on outpatient prescription drugs.

     Your Committee further finds that this measure proposes registration and oversight of pharmacy benefit managers, similar to what is required for health insurance companies or health plans.  Your Committee notes that while pharmacy benefit managers may already register with the Business Registration Division, such registration does not provide sufficient regulation or oversight of this industry.  Your Committee also notes that more than twenty states require some type of registration for pharmacy benefit managers; many of these states require pharmacy benefit managers to register with a state's department or division of insurance.

     Your Committee additionally finds that prescription drugs are a major factor of the spiraling increase in health care costs, of which pharmacy benefit managers are a contributing factor.  This measure gives clear authority to the Insurance Commissioner to regulate pharmacy benefit managers, is an important first step toward regulating this industry, and is necessary to provide transparency and ensure adequate consumer protection.

     Your Committee has amended this measure by:

     (1)  Updating the purpose section;

     (2)  Specifying that notwithstanding any law to the contrary, pharmacy benefit managers must still register with the Insurance Commissioner; and

     (3)  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 Commerce, Consumer Protection, and Health that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1158, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1158, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection, and Health,

________________________________

ROSALYN H. BAKER, Chair