Hawaii Senate Health Committee hears testimony on a bill on prescription drug price transparency

The Hawaii Senate Health Committee heard testimony on SB 605 on Wednesday. This bill, titled “Relating to Prescription Drugs,” received supportive testimony from the American Association of Retired Persons (AARP) Hawaii and the Hawaii Primary Care Association (HPCA). The Pharmaceutical Research and Manufacturers of America (PhRMA) testified in opposition to the bill.



Senate Bill 605 would require drug manufacturers to notify prescription drug benefit plans and pharmacy benefit managers if a proposed increase in the wholesale price of certain drugs would result in a 16% or more price increase over a two year period. The bill would also require the manufacturers to identify and report to the insurance commissioner information on certain drugs whose wholesale acquisition cost (WAC) increases by a certain amount during a specified time frame.

This bill has a companion bill in the house, HB 17, and that bill has not been heard in committee yet. 

The committee heard testimony from Colin Hayashida, the insurance commissioner of the Department of Commerce and Consumer Affairs’ Insurance Division, and he offered comments on the bill in the department’s written testimony.

“The bill’s amendments to Hawaii Revised Statutes 431R would be difficult to enforce, as the Insurance Division has no regulatory oversight over drug manufacturers and lacks the requisite expertise to regulate wholesale prescription drugs. In addition, the Insurance Division would need sufficient funds and time to retain an outside expert consultant on prescription drug wholesale pricing and course of therapy to assist with implementing and enforcing this bill.”

William Goo, a spokesperson for PhRMA. Goo said in a written testimony:

“Discussions about the cost and affordability of medicines are important. No patient should have to worry about whether they can afford the health care they need. However, the notion that spending on medicines is the primary driver of health care cost growth is false and ignores cost savings that medicines provide to the health care system overall. Medicines lead to fewer physician visits, hospitalizations, surgeries and other preventable procedures, all of which translate to lower health care costs.”

Goo said PhRMA is in opposition to this bill because advanced notice of price increases raises concerns about constitutionality, could be harmful to consumers and could interfere with market competition. 

“The mandatory advance notification of the WAC of a prescription drug is not information that will be very meaningful to patients who are primarily concerned about the affordability and accessibility of medications to them. Patients want to know about what a prescription drug will cost them regardless of what the WAC is…

Advance notification of WAC price increases creates financial incentives for secondary distributors to enter the pharmaceutical supply chain thus creating a ‘gray’ market. Gray market distribution networks consist of a number of different companies — some doing business as pharmacies and some as distributors — that buy and resell medicines to each other before one of them finally sells the drugs to a hospital or other health care facility. As the medicines are sold from one secondary distributor to another, the possibility of counterfeit medicines infiltrating the supply of legitimate medicines increases, thereby threatening patient safety.”

Goo also said PhRMA has challenged the constitutionality of similar laws in California and Oregon under the First Amendment and the dormant Commerce Clause. However, the U.S. Court of Appeals for the Fourth Circuit recently overturned a Maryland drug pricing law on dormant Commerce Clause grounds because it regulated the price of transactions that occurred outside of the state.

Audrey Suga-Nakagawa, the advocacy director for AARP Hawaii, testified in support of the bill, saying that the bill will provide transparency into drug pricing.

“We support this measure. We always support policies that help reduce the price of medications for all consumers, but especially for seniors who really depend on them. So this bill provides more disclosure and transparency so that there’s more meaningful information for the state and then provides accountability from the manufacturers.”

The association also said this bill could provide scrutiny that could encourage drug manufacturers to reconsider their standard practice of setting high launch prices and then increasing them year after year.

The HPCA expressed their support for the bill:

“The HPCA supports any and all efforts to ensure that the cost of essential medications for patients are reasonable and affordable. Transparency and prior notification of large price increases help not only regulators to monitor the actions of pharmaceutical manufacturers, but also the health plans and pharmacy benefit managers.”

They offered an amendment that would integrate SB 602 into the current bill.  

Senate Bill 602 was created in order to prevent pharmacy benefit managers from favoring higher cost drugs in order to increase the rebates they receive from drug manufacturers. The bill would:

  • Prohibit certain contracts for managed care from containing a provision that authorizes a pharmacy benefit manager to reimburse a contracting pharmacy on a maximum allowable cost basis.
  • Prohibit pharmacy benefit managers from engaging in self-serving business practices, unfair methods of competition or practices.
  • Prohibit pharmacy benefit managers from retaining any portion of spread pricing, which is when they are reimbursed by health plans and employers at a higher price for generic drugs than what they actually pay pharmacies for the drugs, which allows them to keep the difference.

The committee deferred SB 605 and SB 602 to a future committee hearing, deciding they both needed further work.