SB2519

Report Title:

Prescription Drug Discount Plan

Description:

Creates a state pharmaceutical discount program for residents who lack drug insurance coverage or are uninsured; directs State to lower prescription drug prices by negotiating rebates from drug manufacturers and discounts from retail pharmacies for Rx program. Directs State to negotiate supplemental Medicaid rebates from drug manufacturers and discounts from retail pharmacies on drugs covered by Medicaid.

THE SENATE	S.B. NO.	2519
TWENTY-FIRST LEGISLATURE, 2002
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 legislature finds that approximately one in four residents of Hawaii have no or wholly inadequate prescription drug insurance coverage. These uninsured residents pay excessive prices for prescription drugs, far higher than prices paid by managed care organizations, insurance companies, and the federal government for the same medicines and dosages. In many cases, these excessive drug prices have the effect of denying residents access to medically necessary care, and thereby threatening their health and safety.

Many Hawaii residents who cannot afford the prescription drugs prescribed for them become sicker and require repeated doctor or medical clinic appointments. Many residents are admitted to or treated at hospitals each year because they cannot afford the prescribed drugs that could have prevented hospitalization. Many others enter expensive institutional care settings because they cannot afford the necessary prescription drugs to support them outside of an institution. In each of these circumstances, state medical assistance programs, including the Medicaid program, literally pay the price.

One major reason uninsured residents pay so much for prescription drugs is that, unlike insured residents, they have no prescription benefit manager negotiating a fair price with the drug companies on their behalf.

The State currently provides prescription drugs and acts as a prescription benefit manager through a variety of health plans and assistance programs. The State is the only agent that, as a practical matter, can play an effective role as a market participant on behalf of all residents who are uninsured, underinsured, or are Medicaid beneficiaries. The State can and should act as a prescription benefit manager, negotiating voluntary drug discounts and supplemental rebates and using these funds to reimburse retail pharmacies for offering lower drug prices.

The State can realize substantial savings in its Medicaid program by negotiating with drug manufacturers for supplemental rebates above and beyond the Medicaid rebates negotiated through the United States Department of Health and Human Services. These Medicaid savings should be utilized to create or expand preventive health care programs or to provide expanded access to health care services for Medicaid beneficiaries and uninsured or underinsured residents.

Recognizing that the State already acts as a prescription benefit manager for a variety of health plans and assistance programs, it is the purpose of this Act to cover new populations by expanding the State's role as a participant in the prescription drug marketplace, negotiating voluntary rebates from drug companies and using the funds to make prescription drugs more affordable to residents. Such a program will improve public health and welfare, promote the economic strength of our society, and substantially benefit the Medicaid program in this State.

SECTION 2. Chapter 321, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part . PRESCRIPTION DRUG DISCOUNT PROGRAM

§321-A Definitions. Whenever used in this part, unless the context otherwise requires:

"Director" means the director of health, or the director's designee.

"Department" means the department of health.

"Manufacturer" means a manufacturer of prescription drugs as defined in 42 United States Code section 1396r-8(k)(5), including a subsidiary or affiliate of a manufacturer.

"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 Code of Federal Regulations section 207.20.

"Participating retail pharmacy" means a retail pharmacy or other business licensed to dispense prescription drugs in this State that:

(1) Participates in the Medicaid program in this State; or

(2) Voluntarily agrees to participate in the Rx prescription drug program under this part.

"Wholesaler" means a business licensed to distribute prescription drugs in this State.

§321-B Rx prescription drug program. (a) The Rx prescription drug program is established within the department to lower prescription drug prices for residents of the State who are uninsured, underinsured, or are Medicare recipients.

(b) The department shall establish a mechanism to purchase prescription drugs for its Medicaid program that provides for rebates in addition to those required under 42 United States Code section 1396r-8.

§321-C Rebate agreement. A drug manufacturer or labeler that sells prescription drugs in this State may voluntarily elect to provide discounts in the form of rebates for the Rx prescription drug program established in this part and may voluntarily elect to enter into a supplemental Medicaid rebate agreement with the department.

§321-D Rebate amount. The director shall negotiate the terms of supplemental Medicaid rebates and discount prices for the Rx prescription drug program from a manufacturer or labeler. In negotiating the supplemental Medicaid rebate amount or Rx prescription drug program discount price, the director shall consider:

(1) The rebate calculated under the Medicaid rebate program pursuant to 42 United States Code section 1396r-8;

(2) The average wholesale price of prescription drugs; and

(3) Any other information on prescription drug prices and price discounts.

§321-E Failure to agree. (a) If the director and a drug manufacturer or labeler fail to reach agreement on the terms of a supplemental Medicaid rebate or discount prices under the Rx prescription drug program, the director shall review whether prior authorization of the manufacturer's or labeler's prescription drugs shall be required as a condition of payment or coverage by the Medicaid program or drug formularies for any other state-funded prescription drug program in this State. Prior authorization requirements for prescription drugs covered under Medicaid shall meet the requirements of 42 United States Code section 1396r-8(d)(5).

(b) The director shall adopt rules creating clear procedures for the implementation of this part. The names of manufacturers and labelers that do not enter into supplemental Medicaid rebate agreements or provide discount pricing for the Rx prescription drug program are public information and the director shall release this information to the public.

(c) The director shall distribute to doctors, pharmacists, and other health professionals information about the relative cost of drugs produced by manufacturers and labelers that enter into rebate agreements compared to those who do not enter into rebate agreements.

§321-F Discounted prices for participants. (a) The director shall establish discounted prices for prescription drugs that are covered by a supplemental Medicaid rebate agreement and by the Rx prescription drug program and shall promote the use of efficacious and reduced-cost drugs, taking into consideration reduced prices for state and federally-capped drug programs, differential dispensing fees, administrative overhead, and incentive payments.

(b) Beginning July 1, 2002, a participating wholesaler that contracts with the department shall provide manufacturers' discounted prescription drugs for distribution to retail pharmacies participating in the Rx prescription drug program.

(c) A participating retail pharmacy shall offer prescription drugs to Rx prescription drug program participants at or below the average wholesale price, minus six per cent, plus a dispensing fee designated by the director.

(d) The director shall calculate initial price levels in subsections (b) and (c) and the dispensing fee shall not be less than that provided under the state Medicaid program.

(e) The average wholesale price is the wholesale price charged on a specific commodity that is assigned by the drug manufacturer and is listed in a nationally recognized drug-pricing file.

(f) A participating retail pharmacy shall offer prescription drugs at or below the initial price levels specified in subsection (d) minus the amount of any rebate paid by the State to the retail pharmacy. These discounted price levels shall be calculated by the director. In determining the discounted price levels, the director shall consider an average of all rebates weighted by sales of drugs subject to these rebates over the most recent twelve-month period for which the information is available.

§321-F Eligibility for participation in the Rx prescription drug program. (a) Any resident of the State who is eligible for participation in the Medicare program or has a net family income at or below three hundred per cent of the federal poverty level is eligible to participate in the program; except that a resident who is eligible for assistance under Medicaid program in this State or is covered by an insurance policy that provides benefits for prescription drugs equal to or greater than the benefits provided under the Rx prescription drug program is ineligible to participate in this program.

(b) The director shall establish simplified procedures for issuing Rx prescription drug program enrollment cards to eligible residents.

(c) The director shall undertake outreach efforts to build public awareness of the Rx prescription drug program and maximize enrollment by eligible residents.

§321-G Operation of the Rx prescription drug program. (a) The board of pharmacy of the State shall adopt rules requiring disclosure by participating retail pharmacies to Rx prescription drug program participants of the amount of savings provided as a result of the program. The rules shall protect information that is proprietary in nature.

(b) The director may not impose transaction charges on retail pharmacies that submit claims or receive payments under the Rx prescription drug program.

(d) On a weekly or biweekly basis, the department shall reimburse a retail pharmacy for discounted prices provided to program participants and dispensing fees set by the director.

(e) The department shall collect from the retail pharmacies utilization data necessary to calculate the amount of the rebate from the manufacturer or labeler. The department shall protect the confidentiality of all information subject to confidentiality protection under state or federal law, rule, or regulation.

§321-H Discrepancies in rebate amounts. (a) Discrepancies in amounts in either the supplemental Medicaid rebate agreement or the discounts negotiated for the Rx prescription drug program shall be resolved using the procedures established in this section.

(b) If there is a discrepancy in the manufacturer's or labeler's favor between the amount claimed by a pharmacy and the amount rebated or discounted by the manufacturer or labeler, the department, at the department's expense, may hire a mutually agreed-upon independent auditor. If a discrepancy still exists following the audit, the manufacturer or labeler shall justify the reason for the discrepancy or make payment to the department for any additional amount due.

(c) If there is a discrepancy against the interest of the manufacturer or labeler in the information provided by the department to the manufacturer or labeler regarding the manufacturer's or labeler's rebate, the manufacturer or labeler, at the manufacturer's or labeler's expense, may hire a mutually agreed-upon independent auditor to verify the accuracy of the data supplied to the department. If a discrepancy still exists following the audit, the department shall justify the reason for the discrepancy or refund to the manufacturer any excess payment made by the manufacturer or labeler.

(d) Following the procedures established in subsection (b) or (c), either the department or the manufacturer or labeler may request an administrative hearing held by the department of health pursuant to chapter 91. Supporting documentation shall accompany the request for a hearing.

§321-I Rx prescription drug program special fund. (a) The Rx prescription drug program special fund is established in the state treasury to receive revenue from manufacturers and labelers who pay Rx prescription drug program and supplemental Medicaid rebates and any appropriations or allocations designated for the special fund.

(b) The purposes of the special fund are to reimburse retail pharmacies for discounted prices provided to Rx program participants, and reimburse the department for the costs of administering the Rx program and the supplemental Medicaid rebate program, including contracted services, computer costs, professional fees paid to retail pharmacies, and other reasonable program costs.

(c) Funds in the special fund shall not lapse to the general fund. Interest on the special fund balances shall accrue to the special fund.

§321-J Annual summary report. The director shall prepare and submit an annual report on the enrollment and financial status of the Rx prescription drug program and the supplemental Medicaid rebate program to the legislature twenty days before the convening of each regular session of the legislature.

§321-K Coordination with other programs. Where the director finds that it is beneficial to both the Rx prescription drug program and another state program, including the supplemental Medicaid rebate program or the Medicaid program in this State, to combine drug pricing negotiations to maximize drug rebates, the director shall do so.

§321-L Rulemaking. The department may adopt rules under chapter 91 to implement this part.

§321-M Waivers. The department or the department of human services may seek any waivers of federal law, rule, or regulation necessary to implement the provisions of this section."

SECTION 3. This Act shall take effect on July 1, 2002.

INTRODUCED BY:	_____________________________