STAND. COM. REP. NO. 398

 

Honolulu, Hawaii

                  

 

RE:    S.B. No. 667

       S.D. 1

 

 

 

Honorable Donna Mercado Kim

President of the Senate

Twenty-Seventh State Legislature

Regular Session of 2013

State of Hawaii

 

Madam:

 

     Your Committees on Health and Commerce and Consumer Protection, to which was referred S.B. No. 667 entitled:

 

"A BILL FOR AN ACT RELATING TO HEALTH,"

 

beg leave to report as follows:

 

     The purpose and intent of this measure is to regulate pharmacy benefit management companies in Hawaii.  Specifically, this measure:

 

     (1)  Requires the registration of and regulates the practices of pharmacy benefit management companies beginning on January 1, 2014; and

 

     (2)  Authorizes periodic audits of pharmacies that submit claims to pharmacy benefit management companies.

 

     Your Committees received testimony in support of this measure from three individuals.  Testimony in opposition to this measure was submitted by the Hawaii Medical Service Association, CVS Caremark Corporation, and Pharmaceutical Research and Manufacturers of America.

 

     Your Committees find that pharmacy benefit management companies provide prescription drug services on behalf of plan sponsors, including self-insured employers, insurers, unions, mutual benefit societies, and health maintenance organizations.  As part of these services, pharmacy benefit management companies act as intermediaries that negotiate services and costs with pharmacies and rebate earnings with pharmaceutical companies.  This measure regulates pharmacy benefit management companies to ensure financial reliability, regulate the licensing of pharmacy benefit management companies, prevent predatory pricing, and mandate disclosure of drug costs and financial contracts.

 

     Your Committees note the following concerns raised in the written testimony submitted in opposition to this measure.  The Hawaii Medical Service Association raised concerns that this measure implies that pharmacy benefit management companies dictate pharmacy benefits, such as restrictive network, mandatory mail order, and copayments, but employer groups and other payers are the entities that make these benefits design decisions, not pharmacy benefit management companies.  CVS Caremark Corporation testified that by regulating pharmacy benefit management companies, this measure may open the door to fraud, abuse, and wasteful spending in health care.

 

     Accordingly, your Committees have amended this measure by:

 

     (1)  Deleting the provisions that:

 

          (A)  Requires pharmacy benefit management companies to register with the Insurance Commissioner by January 1, 2014;

 

          (B)  Require an auditing entity to conduct an audit of the records of a pharmacy for claims submitted for payments after July 1, 2013, in accordance with specified criteria;

 

          (C)  Require each pharmacy benefit management company to make available to its enrollees specified information;

 

          (D)  Prohibit certain activities committed by a pharmacy benefit management company; and

 

          (E)  Establish penalties;

 

     (2)  Clarifying that the Insurance Commissioner is required to consult with the Board of Pharmacy in adopting rules to implement this measure;

 

     (3)  Inserting an effective date of January 1, 2050, to encourage further discussion; and

 

     (4)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

 

     As affirmed by the records of votes of the members of your Committees on Health and Commerce and Consumer Protection that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 667, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 667, S.D. 1, and be referred to the Committee on Judiciary and Labor.

 

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

 

____________________________

ROSALYN H. BAKER, Chair

 

____________________________

JOSH GREEN, Chair