THE SENATE	S.B. NO.	1381
THIRTY-SECOND LEGISLATURE, 2023		S.D. 1
STATE OF HAWAII		H.D. 1
		C.D. 1

A BILL FOR AN ACT

RELATING TO THE REPEAL OF SECTION 328-106, HAWAII REVISED STATUTES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that the department of health has historically regulated the safety and integrity of food, drugs, and cosmetics to protect the health of Hawaii's residents and visitors pursuant to the authority provided in chapter 328, Hawaii Revised Statutes (chapter 328). The department's regulatory purview with respect to pharmaceuticals under chapter 328 is analogous to that of the federal Food and Drug Administration under the Federal Food, Drug, and Cosmetic Act. The federal Food and Drug Administration exercises its regulatory authority to ensure the efficacy and overall safety of prescription drugs, but not to control their cost or the business practices of the insurance companies and independent pharmacies that supply them.

Section 328-106, Hawaii Revised Statutes, requires the department of health to police the insurance industry, a task for which it is not well-suited. Section 328-106, Hawaii Revised Statutes, requires pharmacy benefit managers to maintain certain information related to the cost of prescription drugs and provide a process for a contracting pharmacy to appeal the maximum allowable cost for reimbursement. Regulatory oversight of what was intended as a price control function, however, is not within the department of health's area of expertise. Additionally, section 328-106, Hawaii Revised Statutes, does not provide an adequate remedy for violations; rather, it prescribes certain aspects of an appeal process to be utilized by the pharmacy benefit managers who nonetheless retain exclusive control over both the administration of the appeal process itself and of any decision ultimately rendered.

Therefore, the legislature finds that section 328-106, Hawaii Revised Statutes, is inconsistent with the purpose of chapter 328 generally and does not achieve a meaningful balance in the contractual relationship between pharmacy benefit managers and pharmacies. The regulatory burden this section places on the department of health is outside the scope of the department of health's mission to protect public health. Regulation of the insurance industry's process for reimbursement to pharmacies of prescription drug costs, and of the contractual relationship between them, is likely more effectively achieved by other means. As a result, the legislature finds that repealing section 328-106, Hawaii Revised Statues, is appropriate.

Accordingly, the purpose of this Act is to repeal section 328-106, Hawaii Revised Statues, which requires the department of health to regulate business practices between private entities engaged in the selling, billing, and reimbursement of pharmaceuticals.

SECTION 2. Section 328-106, Hawaii Revised Statutes, is repealed.

["[§328-106] Pharmacy benefit manager; maximum allowable cost. (a) A pharmacy benefit manager that reimburses a contracting pharmacy for a drug on a maximum allowable cost basis shall comply with the requirements of this section.

(b) The pharmacy benefit manager shall include the following in the contract information with a contracting pharmacy:

(1) Information identifying any national drug pricing compendia; or

(2) Other data sources for the maximum allowable cost list.

(c) The pharmacy benefit manager shall make available to a contracting pharmacy, upon request, the most up-to-date maximum allowable cost price or prices used by the pharmacy benefit manager for patients served by the pharmacy in a readily accessible, secure, and usable web-based or other comparable format.

(d) A drug shall not be included on a maximum allowable cost list or reimbursed on a maximum allowable cost basis unless all of the following apply:

(1) The drug is listed as "A" or "B" rated in the most recent version of the Orange Book or has a rating of "NR", "NA", or similar rating by a nationally recognized reference;

(2) The drug is generally available for purchase in this State from a national or regional wholesaler; and

(3) The drug is not obsolete.

(e) The pharmacy benefit manager shall review and make necessary adjustments to the maximum allowable cost of each drug on a maximum allowable cost list at least once every seven days using the most recent data sources available, and shall apply the updated maximum allowable cost list beginning that same day to reimburse the contracted pharmacy until the pharmacy benefit manager next updates the maximum allowable cost list in accordance with this section.

(f) The pharmacy benefit manager shall have a clearly defined process for a contracting pharmacy to appeal the maximum allowable cost for a drug on a maximum allowable cost list that complies with all of the following:

(1) A contracting pharmacy may base its appeal on one or more of the following:

(A) The maximum allowable cost for a drug is below the cost at which the drug is available for purchase by similarly situated pharmacies in this State from a national or regional wholesaler; or

(B) The drug does not meet the requirements of subsection (d);

(2) A contracting pharmacy shall be provided no less than fourteen business days following receipt of payment for a claim to file the appeal with the pharmacy benefit manager;

(3) The pharmacy benefit manager shall make a final determination on the contracting pharmacy's appeal no later than fourteen business days after the pharmacy benefit manager's receipt of the appeal;

(4) If the maximum allowable cost is upheld on appeal, the pharmacy benefit manager shall provide to the contracting pharmacy the reason therefor and the national drug code of an equivalent drug that may be purchased by a similarly situated pharmacy at a price that is equal to or less than the maximum allowable cost of the drug that is the subject of the appeal; and

(5) If the maximum allowable cost is not upheld on appeal, the pharmacy benefit manager shall adjust, for the appealing contracting pharmacy, the maximum allowable cost of the drug that is the subject of the appeal, within one calendar day of the date of the decision on the appeal and allow the contracting pharmacy to reverse and rebill the appealed claim.

(g) A contracting pharmacy shall not disclose to any third party the maximum allowable cost list and any related information it receives, either directly from a pharmacy benefit manager or through a pharmacy services administrative organization or similar entity with which the pharmacy has a contract to provide administrative services for that pharmacy."]

SECTION 3. Statutory material to be repealed is bracketed and stricken.

SECTION 4. This Act shall take effect upon its approval.

Report Title:

DOH; Pharmacy Benefit Managers; Maximum Allowable Cost; Repeal

Description:

Repeals section 328-106, Hawaii Revised Statutes, which requires the Department of Health to regulate business practices between private entities engaged in the selling, billing, and reimbursement of pharmaceuticals. (CD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.