Bill Text: HI SB602 | 2021 | Regular Session | Amended
Bill Title: Relating To Pharmacy Benefit Managers.
Spectrum: Moderate Partisan Bill (Democrat 8-1)
Status: (Engrossed - Dead) 2021-03-18 - The committee(s) on HHH recommend(s) that the measure be deferred. [SB602 Detail]
Download: Hawaii-2021-SB602-Amended.html
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THE SENATE |
S.B. NO. |
602 |
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THIRTY-FIRST LEGISLATURE, 2021 |
S.D. 2 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO PHARMACY BENEFIT MANAGERS.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that pharmacy benefit managers are companies that manage prescription drug benefits on behalf of health insurers and other payors. By negotiating with drug manufacturers and pharmacies to control drug spending, pharmacy benefit managers have a significant behind-the-scenes impact in determining total drug costs for insurers, shaping patients' access to medications, and determining how much pharmacies are paid.
Because pharmacy benefit managers have the ability to negotiate larger rebates from manufacturers, pharmacy benefit managers may have an incentive to favor high-priced drugs over drugs that are more cost-effective. Furthermore, because pharmacy benefit managers often receive rebates that are calculated as a percentage of the manufacturer's list price, pharmacy benefit managers may receive a larger rebate for more expensive drugs than they do for ones that may provide better value at a lower cost. Drug manufacturers have argued that the growing rebates they pay pharmacy benefit managers are forcing them to raise list prices for their products.
The legislature further finds that independent and rural pharmacies are struggling due to decreased reimbursement rates for prescription drugs, as determined by pharmacy benefit managers. A 2019 analysis by the Pharmacists Society of the State of New York found that pharmacy benefit manager markups for medicaid prescriptions at independent pharmacies in the state doubled from 2016 to 2017. Additionally, according to research by the RUPRI Center for Rural Health Policy Analysis at the University of Iowa, more than sixteen per cent of rural, independently-owned pharmacies closed between 2003 and 2018, including over six hundred locations that served as their community's sole pharmacy. Reimbursement rates below the pharmacy's purchase cost for a drug is an unsustainable model that could force independent pharmacies out of business, especially pharmacies that do not have a supplemental retail market like many large pharmacy chains. Not only would these closures take a toll on local economies, they could also leave residents in less populated areas without a pharmacist to fill prescriptions and provide other vital services. Rural residents already have fewer options for health care services, and pharmacies in these communities are one of the few increasing reliable sources for clinical advice.
Accordingly, the purpose
of this Act is to increase transparency and fairness and promote, preserve, and
protect public health, safety, and welfare by:
(3) Prohibiting a pharmacy benefit manager from reimbursing
a 340B pharmacy differently than any other network or mail service pharmacy;
(4) Prohibiting a pharmacy benefit manager from reimbursing
an independent or rural pharmacy an amount less than the rural rate for each prescription
drug, under certain circumstances;
(6) Inserting language that provides, in responding
to the State's request, any information provided in response to a data call from
the insurance commissioner or designee shall be treated confidential and privileged;
(7) Increasing the pharmacy benefit managers'
annual reporting requirements;
(8) Requiring the insurance commissioner to make annual
reports to the legislature;
(9) Increasing pharmacy benefit manager registration
and renewal fees; and
(10) Making certain violations of pharmacy benefit managers
subject to the penalties provided in chapters 480 and 481, Hawaii Revised Statutes.
SECTION 2. Chapter 346, Hawaii Revised Statutes, is amended by adding a new section to part II to be appropriately designated and to read as follows:
"§346- Pharmacy
benefit managers; contracting pharmacies; reimbursements; maximum allowable cost
basis; prohibition. (a) No
contract for managed care entered into pursuant to this part, after June 30, 2021,
shall contain a provision that authorizes a pharmacy benefit manager to reimburse
a contracting pharmacy on a maximum allowable cost basis in accordance with section
328-106 or chapter 431S.
(b) Any
provision of a contract for managed care authorized pursuant to this part to reimburse
a contracting pharmacy for a drug on a maximum allowable cost basis in accordance
with section 328-106 or chapter 431S that was in effect on or before June 30, 2021,
shall be void."
SECTION
3. Chapter 431S, Hawaii Revised Statutes,
is amended by adding four new sections to be appropriately designated and to
read as follows:
"§431S- Pharmacy benefit
manager business practices; prohibitions; independent or rural pharmacy reimbursement
rate; disclosure of information to commissioner or governmental officials. (a) A pharmacy benefit manager shall not engage in
unfair methods of competition pursuant to chapter 480, or unfair practices pursuant
to chapter 481, in the conduct of pharmacy benefit management, as defined in section
431S-1. A violation of this section by a
pharmacy benefit manager shall constitute a separate violation under chapter 480
and chapter 481.
(b) A pharmacy benefit manager shall not reimburse
a 340B pharmacy differently than any other network pharmacy or mail service pharmacy
based on its status as a 340B pharmacy. For
purposes of this subsection, a "340B pharmacy" means a pharmacy that is
authorized to purchase drugs at a discount under Title 42 United States Code section
256b.
(c) A pharmacy benefit manager shall not reimburse
an independent or rural pharmacy an amount less than the rural rate for each prescription
drug; provided that:
(1) Pharmacy benefit
managers shall file with the commissioner a list of the rural rates for each prescription
drug in a form and manner prescribed by the commissioner; and
(2) A pharmacy benefit
manager shall be prohibited from changing the rural rate without providing thirty
days' notice to all contracting independent or rural pharmacies of any change in
the rural rate and filing a report with the commissioner identifying the rural rate
changes.
(d) A contract between a pharmacy benefit manager and
a participating pharmacist or pharmacy shall not prohibit, restrict, or limit disclosure
of information to the commissioner, law enforcement, or federal or state governmental
officials; provided that:
(1) The recipient of
the information represents it has the authority, to the extent provided by federal
or state law, to maintain proprietary information as confidential; and
(2) Prior to disclosure
of information designated as confidential, the pharmacist or pharmacy shall:
(A) Mark
as confidential any document in which the information appears; or
(B) Request
any oral communication of the information be treated as confidential.
(e) A pharmacy benefit manager shall not terminate
a contract or penalize a pharmacist or pharmacy due to the pharmacist or the pharmacy:
(1) Disclosing information
about pharmacy benefit manager practices, except for information determined to be
a trade secret, as determined by state law or the commissioner; or
(2) Sharing any portion
of the pharmacy benefit manager contract with the commissioner pursuant to a complaint
or a query regarding whether the contract is in compliance with this section.
§431S- Gag clause prohibited. (a) In
any participation contracts between a pharmacy benefit manager and pharmacists or
pharmacies providing prescription drug coverage for health benefit plans, no pharmacist
or pharmacy shall be prohibited, restricted, or penalized in any way from disclosing
to any covered person any health care information that the pharmacist or pharmacy
deems appropriate regarding:
(1) The nature of treatment,
risks, or alternatives thereto;
(2) The availability of alternate
therapies, consultations, or tests;
(3) The decision of
utilization reviewers or similar persons to authorize or deny services;
(4) The process that
is used to authorize or deny health care services or benefits; or
(5) Information on financial
incentives and structures used by the insurer.
(b) A pharmacy benefit manager shall not prohibit a
pharmacist or pharmacy from discussing information regarding the total cost of pharmacist
services for a prescription drug or from selling a more affordable alternative to
the covered person if a more affordable alternative is available.
§431S-
Data calls. In response to the State's request, any
information provided in response to a data call from the commissioner or the commissioner's
designee, shall be treated as confidential and privileged. The information provided shall not be subject to
subpoena and shall not be subject to discovery or admissible as evidence in any
private civil action, unless so ordered by the court. No waiver of privilege or confidentially shall
occur as a result of responding to a data call.
§431S-
Annual transparency report; commissioner
report to the legislature. (a) No later than September 1, 2021, and annually
thereafter, each pharmacy benefit manager registered under this chapter shall
submit a transparency report containing data from the preceding calendar year
to the commissioner that shall include:
(1) The names of each
party with which the pharmacy benefit manager contracts to provide pharmacy benefit
management, as defined in section 431S-1, and each party's number of locations;
(2) The aggregate amount of all rebates that the
pharmacy benefit manager received from all pharmaceutical manufacturers for all
covered entity clients and for each covered entity client;
(3) The aggregate administrative fees that the
pharmacy benefit manager received from all pharmaceutical manufacturers for all
covered entity clients and for each covered entity client;
(4) The aggregate retained rebates that the
pharmacy benefit manager received from all pharmaceutical manufacturers that were
not passed through to covered entities;
(5) The aggregate retained rebate percentage;
(6) The highest, lowest, and mean aggregate
retained rebate percentage for all covered entity clients and for each covered
entity client; and
(7) Utilization information, in a form prescribed
by the commissioner, which shall be reported for each prescription drug and
each type of payor prescribed by the commissioner, and shall include:
(A) The
number of prescriptions paid;
(B) The
total amount paid per prescription prior to rebates;
(C) The
total rebates received prior to paying any rebates to a covered entity; and
(D) Number
of covered persons.
(b) The commissioner shall submit a report to the
legislature no later than twenty days prior to the convening of each regular
session, which shall include:
(1) A summary of the
information collected from the pharmacy benefit managers' annual transparency reports,
including a list of all pharmacy benefit managers registered under this chapter;
provided that the commissioner shall aggregate information from all pharmacy benefit
managers so that it is not identifiable to any particular pharmacy benefit manager;
and
(2) Recommendations and any proposed legislation."
SECTION
4. Section 431S-1, Hawaii Revised
Statutes, is amended as follows:
1.
By adding seven new definitions to be appropriately
inserted and to read:
""Aggregate
retained rebate percentage" means the percentage of all rebates received
from a manufacturer or other entity to a pharmacy benefit manager for
prescription drug utilization that is not passed on to pharmacy benefit
managers' covered entity clients. The
percentage shall be calculated for each covered entity for rebates in the prior
calendar year as follows:
(1) The sum total dollar amount of rebates
received from all pharmaceutical manufacturers for all utilization of covered
persons of a covered entity that was not passed through to the covered entity;
and
(2) Divided by the sum total dollar amount of
all rebates received from all pharmaceutical manufacturers for covered persons
of a covered entity.
"Independent or rural pharmacy"
means a retail pharmacy contracted by a pharmacy benefit manager to sell prescription
drugs to beneficiaries of a prescription drug benefit plan administered by the pharmacy
benefit manager that:
(1) Is not owned or
operated by a publicly traded company;
(2) Is not directly
affiliated with any chain pharmacy having more than fifty stores;
(3) Is located and licensed
in this State; and
(4) Serves rural, uninsured, or underinsured patients.
"Mail service pharmacy"
means a pharmacy, the primary business of which is to receive prescriptions by
mail, telefax, or electronic submissions, and dispense medications to covered
persons through the use of the United State Postal Service or other contract carrier
services and that provides electronic, rather than face-to-face consultations, with
patients.
"Network
pharmacy" means a retail pharmacy located and licensed in the State and
contracted by the pharmacy benefit manager to sell prescription drugs to beneficiaries
of a prescription drug benefit plan administered by the pharmacy benefit manager.
"Rebates" means
all price concessions paid by a manufacturer to a pharmacy benefit manager or
covered entity, including rebates, discounts, and other price concessions that
are based on actual or estimated utilization of a prescription drug. "Rebates" also includes price
concessions based on the effectiveness of a drug as in a value-based or
performance-based contract.
"Retail pharmacy"
means a pharmacy permitted by the board of pharmacy pursuant to section 461-14
that is open to the general public, dispenses prescription drugs to the general
public, and makes available face-to-face consultations between licensed
pharmacists and the general public to whom prescription drugs are dispensed.
"Rural" has the same meaning as defined in section 1B‑1(c)."
2. By amending the definition of "covered entity" to read:
""Covered entity" means:
(1) A health benefits plan regulated under chapter 87A; health insurer regulated under article 10A of chapter 431; mutual benefit society regulated under article 1 of chapter 432; or health maintenance organization regulated under chapter 432D; provided that a "covered entity" under this paragraph shall not include a health maintenance organization regulated under chapter 432D that owns or manages its own pharmacies;
(2) A health program administered by the State in the capacity of a provider of health coverage; or
(3) An employer, labor union, or other group of persons organized in the State that provides health coverage to covered persons employed or residing in the State.
"Covered entity" [shall] does
not include any plans issued for coverage for federal employees or specified
disease or limited benefit health insurance as provided by section 431:10A-607."
SECTION 5. Section 431S-3, Hawaii Revised Statutes, is amended to read as follows:
"[[]§431S-3[]] Registration required. (a)
Notwithstanding any law to the contrary, no person shall act or operate
as a pharmacy benefit manager without first obtaining a valid registration
issued by the commissioner pursuant to this chapter. The registration shall not be transferable.
(b) The commissioner may issue a registration under
this chapter if the commissioner is satisfied that the applicant possesses the
necessary organization, background expertise, and financial integrity to supply
the services sought to be offered pursuant to this chapter.
(c) The commissioner may issue a registration subject to restrictions or limitations upon the authorization, including the types of services that may be supplied or the activities in which the applicant may be engaged.
[(b)] (d) Each person seeking to register as a pharmacy
benefit manager shall file with the commissioner an application on a form
prescribed by the commissioner. The
application shall include:
(1) The name, address, official position, and professional qualifications of each individual who is responsible for the conduct of the affairs of the pharmacy benefit manager, including all members of the board of directors; board of trustees; executive commission; other governing board or committee; principal officers, as applicable; partners or members, as applicable; and any other person who exercises control or influence over the affairs of the pharmacy benefit manager;
(2) The name and
address of the applicant's agent for service of process in the State; [and]
(3) A nonrefundable application
fee of [$140.] $ ;
and
(4) Any
other information the commissioner deems necessary or helpful to determine whether
the applicant has the necessary organization, background, expertise, and financial
integrity to supply the services sought to be offered pursuant to this chapter.
(e) The commissioner may suspend, revoke, or place
on probation a pharmacy benefit manager registered under this chapter if:
(1) The pharmacy benefit manager has engaged in
fraudulent activity in violation of federal or state law;
(2) The commissioner receives consumer complaints
that justify an action under this subsection to protect the safety and interest
of consumers;
(3) The pharmacy benefit manager fails to pay required
fees under this chapter;
(4) The pharmacy benefit manager fails to
comply with any other requirement under this chapter; or
(5) The pharmacy benefit manager commits a violation
of section 480-2 or section 481-1."
SECTION 6. Section 431S-4, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:
"(b) When renewing its registration, a pharmacy benefit manager shall submit to the commissioner the following:
(1) An application for renewal on a form prescribed by the commissioner; and
(2) A renewal fee of [$140.]
$ .
(c)
Failure on the part of a pharmacy benefit manager to renew its
registration as provided in this section shall result in a penalty of [$140]
$ and may
cause the registration to be revoked or suspended by the commissioner until the
requirements for renewal have been met."
SECTION 7. Section 431S-5, Hawaii Revised Statutes, is amended to read as follows:
"[[]§431S-5[]] Penalty.
Any person who acts as a pharmacy benefit manager in this State without
first being registered pursuant to this chapter shall be subject to a fine of [$500]
$ for each
violation. The penalty prescribed
in this section shall be in addition to any other penalties prescribed by this chapter."
SECTION 8. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 9. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.
SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 11. This Act shall take effect on July 1, 2050; provided that section 2 of this Act shall be repealed on June 30, 2026.
Report Title:
Pharmacy Benefit Managers; Independent or Rural Pharmacies; Rural Rate of Reimbursement; Insurance Commissioner; Licensure; Reporting
Description:
Prohibits certain contracts for managed care entered into after June 30, 2021, 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. Prohibits pharmacy benefit managers from engaging in unfair methods of competition or unfair practices. Prohibits a pharmacy benefit manager from reimbursing a 340B pharmacy differently than any other network pharmacy. Prohibits a pharmacy benefit manager from reimbursing an independent or rural pharmacy an amount less than the rural rate for each drug under certain circumstances. Prohibits a pharmacy benefit manager from restricting a pharmacist's ability to provide certain information to insureds. Increases pharmacy benefit managers' annual reporting requirements. Requires the insurance commissioner to file annual reports with the legislature. Increases pharmacy benefit manager registration and renewal fees by an unspecified amount. Makes certain violations of pharmacy benefit managers subject to the penalties provided in chapters 480 and 481, Hawaii Revised Statutes. Effective 7/1/2050. Repeals certain provisions on 6/30/2026. (SD2)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
