Hawaii-2011-SB645-Introduced

SECTION 1. The legislature finds that the Hawaii managed care organizations who handle the State's medicaid drug plans use different formularies to determine what drugs they will provide to medicaid patients. Through guidelines and individual contracts, the department of human services guides the managed care organizations regarding what classes of drugs for specific conditions they must have in their formularies but there is a wide berth within the guidelines for variation. This situation is exacerbated by the fact that many managed care organizations outsource determination of their medicaid drug formularies and drug prior authorization policies to out-of-state "pharmacy benefit managers". Many pharmacists and physicians in the State have found many of these policies to appear arbitrary and unreasonable. This has created confusion and severe administrative burdens for physicians and pharmacists across the State to the point where many are inclined to stop accepting medicaid. The various formularies and policies have also created difficulty for medicaid patients in obtaining their medications, particularly if they move between the different medicaid programs, which are managed by different organizations, as their age or life circumstances change. The department of human services uses a single state-determined formulary for Hawaii's medicaid fee-for–service patients, who constitute approximately one per cent of the State's medicaid recipients.

A single statewide formulary for all medicaid recipients will decrease prior authorization burdens, eliminate confusion for healthcare providers, and provide more accountability to doctors, pharmacists, and patients. Single formularies have proven to be cost-effective and patient-friendly in Ohio, Massachusetts, New York, and a number of other states, with prior authorizations in Ohio being reduced by as much as seventy per cent.

The legislature further finds that under current federal law, drug manufacturers who want their drugs covered by medicaid must rebate a portion of those payments to the federal and state governments. Currently these rebates are only available for the drugs purchased for the State's fee-for-service medicaid program; drugs purchased by managed care organizations under contract with state medicaid agencies are not eligible for the rebate. To receive these rebates on all drugs purchased for state medicaid, the State must "carve out" medicaid prescription drug coverage from the managed care organization's managed care plans and convert it to the state fee-for service program. The "carve out" would only be for drugs to be administered in the patient's home and would not include drugs administered in a provider setting such as a physician's office, hospital, clinic, dialysis center, or infusion center. The Ohio department of jobs and family services estimates that its pharmacy "carve-out" for medicaid will save $243,600,000 throughout fiscal year 2011.

Prior to switching the majority of medicaid drug benefit plans to managed care organizations, the State had both a drug utilization committee and a pharmacy and therapeutics committee. The federal Centers for Medicare and Medicaid Services requires that some form of board or committee exist to handle drug formularies in order for federal assistance and cooperation in state medicaid programs. Currently the State has only the drug utilization committee to handle duties as required by the Centers.

The purpose of this Act is to create a state pharmacy and therapeutics board under the department of human services to develop and determine a single statewide drug formulary, including prior authorization policies for all medicaid programs, and to require the department to "carve out" prescription drugs from the services included in contracts with the managed care organizations. Under the "carve-out" the State will manage the drug benefit and pay for it on a fee-for-service basis. The pharmacy and therapeutics board will carry out price negotiations with drug companies for the State's medicaid programs.

SECTION 2. Chapter 346, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"§346‑A Prescription drug coverage; standardized statewide formulary. (a) No later than July 1, 2012, the department shall develop and implement a standardized statewide formulary for prescription drugs for medicaid recipients' prescription drug plans. The formulary shall include anti-seizure medications, human immunodeficiency virus medications, and anti‑psychotics and be in accordance with section 346-59.9. The formulary shall be determined by the pharmacy and therapeutics board established in section 346‑B and shall follow all applicable federal and state laws, rules, and guidelines.

(b) No later than July 1, 2012, the department shall remove prescription drugs that are to be administered in the home from the services included in medicaid contracts with managed care organizations. The department shall directly administer its medicaid drug plans through its fee-for-service program. This section applies only to drugs to be administered in the patient's home and does not include drugs administered in a provider setting such as a physician's office, hospital, clinic, dialysis center, or infusion center, which will continue to be covered by the managed care organizations.

§346‑B State pharmacy and therapeutics board. (a) There is established within the department of human services for administrative purposes the pharmacy and therapeutics board to be appointed by the governor as provided in section 26-34. The board shall consist of nine members as follows:

(1) The director of human services, or the director's designee, as an ex officio voting member;

(2) The director of health, or the director's designee, as an ex officio voting member;

(3) The insurance commissioner, or the commissioner's designee, as an ex officio voting member;

(4) Three licensed physicians who are currently practicing medicine in the state of Hawaii; provided that one shall be appointed from a list of nominees submitted by the speaker of the house of representatives, and one shall be appointed from a list of nominees submitted by the president of the senate; and

(5) Three licensed pharmacists who are currently practicing pharmacy in the state of Hawaii; provided that one shall be appointed from a list of nominees submitted by the speaker of the house of representatives and one shall be appointed from a list of nominees submitted by the president of the senate.

(b) The duties of the board shall include:

(1) Developing, determining, and updating a single statewide standardized pharmacy formulary for drugs and therapeutic devices pursuant to section 346‑A;

(2) Developing prior authorization policies; and

(3) Negotiating prices with drug manufacturers.

(c) The board shall select a chairperson by a majority vote of its members. A majority of the members serving on the board shall constitute a quorum to do business. The board may form workgroups and subcommittees, including individuals who are not board members, to:

(1) Obtain resource information from medical professionals, insurers, health care providers, community advocates, and other individuals as deemed necessary by the board;

(2) Make recommendations to the board; and

(3) Perform other functions as deemed necessary by the board to fulfill its duties and responsibilities.

Two or more board members, but less than a quorum, may discuss matters relating to official council business in the course of their participation in a workgroup or subcommittee, and discussion shall be a permitted interaction as provided for in section 92-2.5.

(d) Members of the board shall serve without compensation but shall be reimbursed for expenses, including travel expenses, necessary for the performance of their duties.

(e) The board may require reports as necessary in the form specified by the board, from state agencies, and program and service providers of any state health care program."

SECTION 3. The board shall submit to the governor, the legislature, the director of health, and the director of human services no later than twenty days prior to the convening of the regular session of 2012 a report detailing any and all criteria, standards, measurements, payment methodology, and other requirements of the formulary developed and determined by the board pursuant to this Act.

SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 5. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 6. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	645
TWENTY-SIXTH LEGISLATURE, 2011
STATE OF HAWAII