STAND. COM. REP. NO. 2747
Honolulu, Hawaii
RE: S.B. No. 2280
S.D. 1
Honorable Ronald D. Kouchi
President of the Senate
Thirtieth State Legislature
Regular Session of 2020
State of Hawaii
Sir:
Your Committee on Commerce, Consumer Protection, and Health, to which was referred S.B. No. 2280 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 increase transparency and promote, preserve, and protect the public health, safety, and welfare by adopting provisions of certain model acts to:
(1) Prohibit pharmacy benefit managers from engaging in self-serving business practices;
(2) Increase the pharmacy benefit managers' annual reporting requirements; and
(3) Replace the registration requirement for pharmacy benefit managers with a licensure requirement.
Your Committee received testimony in support of this measure from The Queen's Health Systems, Hawai‘i Primary Care Association, Lifeway Pharmacy, Times Pharmacy, 5 Minute Pharmacy, and four individuals. Your Committee received testimony in opposition to this measure from Hawaii Medical Service Association and Hawaii Association of Health Plans. Your Committee received comments on this measure from the Department of Commerce and Consumer Affairs, Department of Health, Department of the Attorney General, Office of Information Practices, and the Pharmaceutical Care Management Association.
Your Committee finds that pharmacy benefit managers have their own way of doing business, and some with little to no transparency. Pharmacy benefit managers control the formularies for drug prices and have the ability to create pricing uncertainty for pharmacies. This measure promotes transparency by increasing reporting requirements and supports efforts to control drug costs by preventing pharmacy benefit managers from promoting medications based on the rebates the pharmacy benefit manager receives from the manufacturer.
Your Committee further finds that, especially for smaller, independent or rural pharmacies, pharmacy benefit managers reimburse pharmacies half of what the cost is to acquire the drug and there is no transparency concerning where the drug is being purchased, in what market, or if it is even available at a certain price in Hawaii. A significant number of independent pharmacies have been forced to close their doors or sell to mainland corporations due to these predatory practices employed by pharmacy benefit managers. Not only do these closures take a toll on local economies, but they also leave residents in less populated areas without a pharmacist to fill prescriptions and provide vital services. Your Committee has also heard the testimony of the Department of Commerce and Consumer Affairs regarding its concerns about replacing the registration requirement for pharmacy benefit managers with a licensing requirement. Accordingly, amendments to this measure are necessary to address these concerns.
Your Committee has amended this measure by:
(1) Inserting language that prohibits certain contracts for managed care entered into after June 30, 2020 from containing a provision that authorizes a pharmacy benefit manager to reimburse a contracting pharmacy on a maximum allowable cost basis, and voids any such provisions in existing managed care contracts, and repealing this prohibition on June 30, 2025;
(2) Inserting language that prohibits pharmacy benefit
managers from engaging in unfair methods of competition or unfair practices;
(3) Inserting language that prohibits pharmacy
benefit managers from retaining any portion of spread pricing;
(4) Inserting language that prohibits pharmacy
benefit managers from reimbursing pharmacies that participate in the federal
drug discount program differently than any other network pharmacy;
(5) Inserting language that prohibits pharmacy
benefit managers from reimbursing independent or rural pharmacies an amount
less than the rural rate for each prescription drug, under certain
circumstances;
(6) Inserting language that prohibits pharmacy benefit
managers from prohibiting a pharmacist or pharmacy to provide certain information
to insureds regarding cost sharing or more affordable alternative drugs;
(8) Clarifying that each pharmacy benefit manager
registered in the State shall file a transparency report with the Insurance Commissioner,
no later than September 1 of each year, that shall contain certain data from
each preceding year and other specified information;
(9) Inserting language that requires the Insurance
Commissioner to perform an annual examination of the negative impacts on independent
and rural pharmacies caused by pharmacy benefit managers and the effects of transactions
between health plan insurers and pharmacy benefit managers on health plan
premiums;
(10) Removing
language that would have required the Insurance Commissioner to publish annual
reports on the Insurance Division's website;
(11) Inserting
language that requires the Insurance Commissioner to file annual reports with
the Legislature no later than twenty days prior to the convening of each
regular session, to include certain information;
(12) Reverting
to existing statutory language regarding the registration requirement for
pharmacy benefit managers, rather than a licensing requirement;
(13) Inserting
a definition for "independent or rural pharmacy";
(14) Removing
language that would have defined "trade secret";
(15) Clarifying
the definition for "covered entity";
(16) Clarifying
the definition for "pharmacy benefit manager";
(17) Clarifying
that a pharmacy benefit manager's registration shall not be transferable;
(18) Clarifying
that a pharmacy benefit manager's application for registration shall include any
information the Insurance Commissioner may deem necessary;
(19) Clarifying
that the Insurance Commissioner may suspend, revoke, or place on prohibition a
registered pharmacy benefit manager if the pharmacy benefit manager commits a
violation of section 480-2 or section 481-1, Hawaii Revised Statutes;
(20) Clarifying
the penalties for a person who acts as a pharmacy benefit manager without first
being registered;
(21) Amending section 1 to
reflect its amended purpose; and
(22) 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. 2280, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2280, S.D. 1, and be referred to your Committee on Judiciary.
Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection, and Health,
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________________________________ ROSALYN H. BAKER, Chair |
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