SB2047 HD1

SECTION 1. The legislature finds that pharmacy benefit managers are third party administrators that contract with health plans, employers, unions, and government entities to manage prescription drug programs on behalf of health plan beneficiaries. Over the past decade, the role of pharmacy benefit managers in the delivery of health care has significantly increased. However, a recent report has found that pharmacy benefit managers have had an adverse impact on the overall costs and prices of prescription drugs.

The legislature further finds that a maximum allowable cost list is a list of the maximum amounts that a pharmacy benefit manager will reimburse a pharmacy for various drugs. In general, no two maximum allowable cost lists are alike and will vary according to the drug, pharmacy benefit manager, and plan sponsor. However, the lack of transparency surrounding maximum allowable cost pricing has enabled pharmacy benefit managers to pay aggressively low reimbursements to pharmacies, while charging significantly higher amounts for the same drug to plan sponsors. This large discrepancy between the list price of prescription drugs and the transaction price often results in much higher patient copayments.

The legislature also finds that nearly all health plans require some level of cost sharing, either via a fixed copayment or some percentage of the cost of care. However, in certain situations, a pharmacy benefit manager may set an insurance copayment at a higher amount than the actual cost of the medication and later take back the excess amount from a pharmacy, in a practice known as copay clawbacks.

The legislature additionally finds that the State had previously regulated pharmacy benefit manager maximum allowable cost lists under section 328-106, Hawaii Revised Statutes. This section was later repealed because it placed the regulatory responsibility on the department of health, which lacked the expertise to oversee what was intended as a price control function. The section also lacked an adequate remedy for violations, an appropriate enforcement mechanism, and incentives for pharmacy benefit managers to comply with disclosure of maximum allowable cost lists. Since section 328-106, Hawaii Revised Statutes, was repealed, no new laws have been enacted to regulate maximum allowable cost lists for pharmacy benefit managers.

The legislature finds that it is appropriate to restore statutory protections relating to pharmacy benefit managers maximum allowable cost lists and place these protections within chapter 431R, Hawaii Revised Statutes, which governs prescription drug benefits under the purview of the department of commerce and consumer affairs. These protections will encourage transparency amongst pharmacy benefit managers while protecting the State's independent pharmacies and consumers by strengthening the ability of pharmacies to receive timely maximum allowable cost lists, establishing a complaints process for violations, and clarifying penalties for violations.

Accordingly, the purpose of this Act is to:

(1) Establish certain requirements for pharmacy benefit managers, other than health maintenance organizations that own and operate their own pharmacies, that reimburse contracting pharmacies for drugs on a maximum allowable cost basis; and

(2) Require pharmacy benefit managers to disclose lower‑priced equivalent drugs when a maximum allowable cost is upheld on appeal and allow contracting pharmacies to reverse and rebill claims if a maximum allowable cost is denied on appeal and recoup any overpayment.

SECTION 2. Chapter 431R, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§431R- Pharmacy benefit managers; maximum allowable cost. (a) This section shall apply to all pharmacy benefit managers that reimburse a contracting pharmacy for a drug on a maximum allowable cost basis.

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

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

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

(c) Upon request, a pharmacy benefit manager shall make available to a contracting pharmacy a comprehensive report for all drugs on the maximum allowable cost list for a plan, which shall contain the most up-to-date maximum allowable cost price or prices used by the pharmacy benefit manager for patients served by the contracting pharmacy, in a readily accessible and secure electronic or usable web-based format.

(d) No drug shall be included on a maximum allowable cost list or reimbursed on a maximum allowable cost basis unless:

(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) A pharmacy benefit manager shall review and make any 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. The pharmacy benefit manager shall reimburse a contracting pharmacy based on the most recently updated maximum allowable cost list.

(f) Each pharmacy benefit manager shall establish a clearly defined process for a contracting pharmacy to appeal the maximum allowable cost for a drug on a maximum allowable cost list that includes the following provisions:

(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 the State from a national or regional wholesaler; or

(B) The drug does not meet the requirements of subsection (d) for reimbursement on a maximum allowable cost basis;

(2) Upon receipt of payment for a claim, a contracting pharmacy shall have no less than fourteen business days to file an appeal with the pharmacy benefit manager; and

(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; provided that:

(A) If the maximum allowable cost is upheld on appeal, the pharmacy benefit manager shall provide the contracting pharmacy with the reason for the determination 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

(B) If the maximum allowable cost is not upheld on appeal, the pharmacy benefit manager shall adjust the maximum allowable cost of the drug within one calendar day of the date of the final determination and allow the contracting pharmacy to reverse and rebill the claim that is the subject of the appeal, and all claims for the same drug at the plan level, which shall be reimbursed at the maximum allowable cost established by the appeal, until the maximum allowable cost list is updated pursuant to subsection (e).

(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 contracting pharmacy has a contract to provide administrative services for that contracting pharmacy.

(h) The insurance commissioner may establish an external review process by rule for complaints of violations of this section, which, except to the extent that the parties have other remedies available under applicable federal or state law, may be binding on the complaining contracting pharmacy and the pharmacy benefit manager against whom the complaint is made. The insurance commissioner may assign any costs associated with the external review process to the complaining contracting pharmacy and the pharmacy benefit manager against whom a complaint is made.

(i) This section shall not apply to a health maintenance organization that is part of a fully integrated delivery system in which enrollees primarily use pharmacies that are owned and operated by the health maintenance organization."

SECTION 3. Section 431R-1, Hawaii Revised Statutes, is amended by adding five new definitions to be appropriately inserted and to read as follows:

""Contracting pharmacy" means a non-affiliated pharmacy that is not part of a regional or national chain.

"Maximum allowable cost" means the maximum amount that a pharmacy benefit manager reimburses a contracting pharmacy for the cost of a drug.

"Maximum allowable cost list" means a list of drugs or other methodology used by a pharmacy benefits manager to directly or indirectly set the maximum allowable payment to a contracting pharmacy or pharmacist for a generic drug, brand-name drug, biologic product, or other prescription drug. "Maximum allowable cost list" includes but is not limited to:

(1) Average acquisition cost, including national average drug acquisition cost;

(2) Average manufacturer price;

(3) Average wholesale price;

(4) Brand effective rate or generic effective rate;

(5) Discount indexing;

(6) Federal upper limits;

(7) Wholesale acquisition cost; and

(8) Any other term that a pharmacy benefits manager or a health insurer may use to establish reimbursement rates to a pharmacist or pharmacy for pharmacist services.

"Obsolete" means a drug that may be listed in a national drug pricing compendia but cannot be dispensed based on the expiration date of the last lot manufactured.

"Orange Book" has the same meaning as defined in section 328-91."

SECTION 4. Section 431R-5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The insurance commissioner may assess a fine of up to $10,000 for each violation by a pharmacy benefit manager or prescription drug benefit plan provider who is in violation of section 431R-2 [or], 431R-3[.], or 431R- . In addition, the insurance commissioner may order the pharmacy benefit manager to take specific affirmative corrective action or make restitution."

SECTION 5. Section 328-91, Hawaii Revised Statutes, is amended by deleting the definitions of "maximum allowable cost", "maximum allowable cost list", and "obsolete".

["~~"Maximum allowable cost" means the maximum amount that a pharmacy benefit manager shall reimburse a pharmacy for the cost of a drug.~~

~~"Maximum allowable cost list" means a list of drugs for which a maximum allowable cost has been established by a pharmacy benefit manager.~~

~~"Obsolete" means a drug that may be listed in a national drug pricing compendia but cannot be dispensed based on the expiration date of the last lot manufactured.~~"]

SECTION 6. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2026-2027 for the insurance division of the department of commerce and consumer affairs to effectuate the purposes of this Act.

The sum appropriated shall be expended by the department of commerce and consumer affairs for the purposes of this Act.

SECTION 7. This Act shall not be applied so as to impair any contract existing as of the effective date of this Act in a manner violative of either the Hawaii State Constitution or article 1, section 10, of the United States Constitution.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on January 30, 2050.

THE SENATE	S.B. NO.	2047
THIRTY-THIRD LEGISLATURE, 2026		S.D. 2
STATE OF HAWAII		H.D. 1