STAND. COM. REP. 471
Honolulu, Hawaii
, 2003
RE: H.B. No. 18
Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twenty-Second State Legislature
Regular Session of 2003
State of Hawaii
Sir:
Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 18 entitled:
"A BILL FOR AN ACT RELATING TO PHARMACEUTICAL BENEFIT MANAGEMENT COMPANIES,"
begs leave to report as follows:
The purpose of this bill is to establish pharmaceutical benefit management company (PBM) duties and obligations in the administration and management of prescription drug benefit coverage on behalf of their clients.
Testimony in support of this measure was received from the ILWU Local 142 and the Hawaii State Teachers Association. Pharmaceutical Care Management Association, Medco Health Solutions, Inc., and AdvancePCS submitted testimony in opposition to this bill.
Your Committee finds that prescription drug costs are the fastest rising segment of health care expenditures in our country. According to the research firm IMS Health, prescription drug costs amounted to over $170 billion in the year 2001 alone. Just five years earlier, the amount spent on prescription drugs was less than half of that or roughly $80 billion. To help rein in these expenses, employers who provide health benefits to their workers and health plans (plans) are increasingly turning toward PBMs.
Your Committee finds that PBMs' responsibilities include but are not limited to:
(1) Tracking all prescriptions written by physicians in a plan they have contracted with;
(2) Administering prescription drug claims;
(3) Establishing formularies;
(4) Tracking physician prescribing patterns; and
(5) Providing education to improve efficiency and cost effectiveness.
Although your Committee commends PBMs for having saved billions of dollars in prescription drug costs over the past decade, your Committee has serious concerns regarding the alleged practices currently employed by PBMs regarding patient privacy and rebates.
Your Committee is aware of concerns expressed by some physicians that PBMs are increasingly intruding into patient privacy. Under the guise of properly processing benefit claims, PBMs collect vast amounts of patient-specific information, which may be shared with the patients' employers. A breach of patient confidentiality of this type may have a negative effect on patient care, as many employees may choose not to seek attention for sensitive medical conditions out of fear that their employer will eventually find out about it. Additionally, because some pharmaceutical manufacturers own large PBMs, this patient-specific information may also be used in their marketing efforts.
Furthermore, your Committee believes certain PBMs are faced with an inherent conflict of interest. At the same time that they are purportedly working to find the best prices on prescription drugs for their clients, they are supposedly engaging in the practice of pushing their parent companies' higher-end prescription drugs to obtain higher rebates. If the latter is indeed the case, your Committee has concerns that the rebate system may skew formulary decisions made by PBMs and may encourage the use of high-rebate, brand-name products over cost-effective, generic products. Such a model built on rebates feeds on higher priced products and is extremely unlikely to result in lower costs for the consumer.
The non-partisan General Accounting Office (GAO) has concluded that the keys to profit for two of the largest PBMs are rebates and fees from drug manufacturers, many of which as stated before, are the parent companies of PBMs. On the surface, your Committee finds nothing intrinsically wrong with PBMs accepting rebates. However, when such rebates are not passed on to their beneficiaries, as is apparently the case, your Committee has difficulty discerning whose interest the PBMs are actually serving.
Additionally, your Committee feels that this bill would be unnecessary if PBMs were willing to disclose information regarding their rebate practices, and amounts received from drug manufacturers to promote sales of their products. Unfortunately, to this day, PBMs have claimed that such information is proprietary, and have refused to disclose this information to the GAO.
Your Committee notes that several other states, including West Virginia, Pennsylvania, New York, and all six New England states, are considering similar legislation in their jurisdictions.
In conclusion, although your Committee recognizes the concerns expressed by the opponents of this bill, your Committee feels that establishing duties and obligations for PBMs is a positive step toward transparency in the prescription drug pricing process.
As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 18 and recommends that it be referred to the Committee on Finance.
Respectfully submitted on behalf of the members of the Committee on Consumer Protection and Commerce,
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____________________________ KENNETH T. HIRAKI, Chair |