RELATING TO PHARMACY BENEFIT MANAGERS.

SB2208

THE SENATE

S.B. NO.

2208

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to pharmacy benefit managers
.

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

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SECTION 1.
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The
legislature finds that prescription drug costs continue to rise in the State
and across the nation, in part due to the opaque business practices of pharmacy
benefit managers (PBM), which are companies that manage prescription drug
benefits on behalf of health insurers and other payors.
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The legislature further finds that states such
as Kentucky and Ohio have implemented substantial reforms by creating a single,
state-controlled pharmacy benefit manager.
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These reforms were designed to replace
fragmented PBM contracts with a transparent, accountable model operating under
state oversight.

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The legislature also finds that Kentucky
and Ohio both initiated their statewide transition by adopting a state‑contracted
PBM model that limited the responsibility of the state PBM to administering the
pharmacy benefits for medicaid recipients enrolled with a managed care
organization contracted by the state.
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In
both states, these reforms served as pilot frameworks that exposed
spread-pricing, improved pharmacy reimbursements, and returned savings to medicaid
programs.
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Over time, the transparency
and data gained through these models informed broader legislative reforms
applicable to commercial PBMs and strengthened overall consumer protection.

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The legislature additionally finds that
establishing a state PBM in the State similar to Kentucky and Ohio's initial
model will promote transparency, consistent drug pricing, and fair pharmacy
reimbursement within the State's medicaid programs.
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This structure will also create a regulatory
foundation to guide future statewide PBM oversight for commercial markets.

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Accordingly, the purpose of this Act is to:

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(1)
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Require
the department of human services to establish or select and contract with a
third-party administrator to serve as the state PBM who shall be responsible
for administering all pharmacy benefits for medicaid beneficiaries enrolled with
a medicaid managed care organization;

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(2)
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Require
all medicaid managed care organizations to contract with and utilize the state
PBM;

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(3)
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Establish
requirements for the procurement of the state PBM in addition to the
requirements under chapter 103F, Hawaii Revised Statutes;

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(4)
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Establish
requirements and prohibitions to be included in the contract between the department
of human services and state PBM;

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(5)
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Require the department of human services to establish a
single-preferred drug list to be used by the state PBM; and

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(6)
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Require the department of human services to
consult with the med-QUEST healthcare advisory committee on the development, implementation,
and oversight of the state PBM program
.

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SECTION 2.
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The Hawaii Revised Statutes is amended by adding a new chapter to be
appropriately designated and to read as follows:

"
Chapter

state
pharmacy benefit manager program

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-1
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Definitions.
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As used in this chapter:

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"Department" means the department
of human services.

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"Medicaid managed care
organization" means an entity with which the department has contracted to
serve as a managed care organization as defined in title 42 Code of Federal Regulations
section 438.2.

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"Pharmacy benefit manager" has
the same meaning as defined in section 431S-1.

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"Spread pricing" means any
technique by which a pharmacy benefit manager or other administrator of
pharmacy benefits charges or claims an amount from an insurer or managed care
organization for pharmacy or pharmacist services, including payment for a
prescription drug, that is different than the amount the pharmacy benefit
manager or other administrator pays to the pharmacy or pharmacist that provided
the services.

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"State pharmacy benefit manager"
means the pharmacy benefit manager established or contracted by the department pursuant
to section -2 to administer pharmacy benefits for all medicaid
beneficiaries in the State.

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-2
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State pharmacy benefit manager; procurement;
master contract.
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(a)
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No later than December 31,
, the department shall establish or select and contract
with a third-party administrator pursuant to chapter 103F, to serve as the
state pharmacy benefit manager for every medicaid managed care organization.

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(b)
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The
state pharmacy benefit manager shall be responsible for administering all pharmacy
benefits for medicaid beneficiaries enrolled with a medicaid managed care organization.

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(c)
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Each contract entered into or renewed by the department with a managed
care organization to deliver medicaid services after the department has
established or selected and contracted with a third-party administrator to
serve as the state pharmacy benefit manager shall require the managed care
organization to contract with and utilize the state pharmacy benefit manager
for the purpose of administering all pharmacy benefits for medicaid beneficiaries
enrolled with the managed care organization.

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(d)
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In
coordination with the attorney general, the department shall establish a standard
contract form to be used when contracting with the state pharmacy benefit
manager.
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In addition to the contract
provisions required pursuant to chapter 103F, the standard contract form
shall include provisions that:

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(1)
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Establish
the state pharmacy benefit manager's fiduciary duty owed to the department;

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(2)
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Require
the state pharmacy benefit manager to comply with the provisions of section
-3, as applicable;

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(3)
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Require:

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(A)
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The
use of pass-through pricing; and

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(B)
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The
state pharmacy benefit manager to use the preferred drug list, reimbursement
methodologies, and dispensing fees established by the department pursuant to section
-3; and

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(4)
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Prohibit:

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(A)
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The
use of spread pricing; and

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(B)
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The
state pharmacy benefit manager from:

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(i)
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Reducing payment for pharmacy or pharmacist services, directly or
indirectly, under a reconciliation process to an effective rate of
reimbursement.
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This prohibition shall
include without limitation, creating, imposing, or establishing direct or
indirect remuneration fees, generic effective rates, dispensing effective
rates, brand effective rates, any other effective rates, in-network fees,
performance fees, pre-adjudication fees, post-adjudication fees, or any other
mechanism that reduces, or aggregately reduces, payment for pharmacy or
pharmacist services;

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(ii)
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Creating, modifying, implementing, or indirectly establishing any
fee on a pharmacy, pharmacist, or a medicaid beneficiary without first seeking
and obtaining written approval from the department to do so;

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(iii)
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Requiring a medicaid beneficiary to obtain a specialty drug from a
specialty pharmacy owned by or otherwise associated with the state pharmacy
benefit manager;

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(iv)
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Requiring or incentivizing a medicaid beneficiary to use a pharmacy
owned by or otherwise associated with the state pharmacy benefit manager; and

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(v)
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Requiring a medicaid beneficiary to use a mail-order pharmaceutical
distributor or mail-order pharmacy.

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(e)
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The
solicitation of proposals to serve as the state pharmacy benefit manager shall
include, in addition to the requirements pursuant to chapter 103F, a
requirement that all applicants disclose the following information as part of
their proposal:

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(1)
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Any
activity, policy, practice, contract including any national pharmacy contract,
or agreement of the applicant that may directly or indirectly present a
conflict of interest in the applicant's relationship with the department or a medicaid
managed care organization;

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(2)
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If
the applicant is conducting business as a pharmacy benefit manager:

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(A)
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Any direct or indirect fees, charges, or any
kind of assessments imposed by the applicant on pharmacies licensed in the
State:

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���������
(i)
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With which the applicant shares common
ownership, management, or control;

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(ii)
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Which are owned, managed, or controlled by any
of the applicant's management companies, parent companies, subsidiary
companies, jointly held companies, or companies otherwise affiliated by a
common owner, manager, or holding company;

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(iii)
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Which share any common members on the board of
directors; or

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(iv)
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Which share managers in common;

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(B)
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Any direct or indirect fees, charges, or any
kind of assessments imposed by the applicant on pharmacies licensed in the
State that operate:

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(i)
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More than ten locations in the State; or

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(ii)
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Ten
or fewer locations in the State; and

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(C)
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All common ownership, management, common
members of a board of directors, shared managers, or control of a pharmacy
benefit manager, or any of the applicant's management companies, parent
companies, subsidiary companies, jointly held companies, or companies otherwise
affiliated by a common owner, manager, or holding company with:

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(i)
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A managed care organization and its affiliated
companies;

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(ii)
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An entity that contracts on behalf of a
pharmacy or any pharmacy services administration organization and its
affiliated companies;

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(iii)
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A drug wholesaler or distributor and its
affiliated companies;

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(iv)
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A third-party payor and its affiliated
companies; and

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(v)
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A pharmacy and its affiliated companies.

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(f)
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Before
entering into a state pharmacy benefit manager contract with a third-party
administrator, the department shall submit a copy of the contract to the chief
procurement officer, attorney general, director of health, and insurance
commissioner for review and comment.

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-3
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Single preferred drug list; rules.
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(a)
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The state pharmacy benefit manager shall use a single preferred drug
list established by the department for each medicaid managed care organization.

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(b)
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The department shall adopt rules pursuant to chapter 91 for the
purposes of this chapter.
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The rules
shall establish at minimum:

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(1)
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Reimbursement
methodologies; provided that the methodologies shall not discriminate against
pharmacies owned or contracted by a health care facility that is registered as
a covered entity pursuant to title 42 United States Code section 256b, to the
extent allowable by the Centers for Medicare and Medicaid Services; and

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(2)
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Dispensing
fees that may take into account applicable guidance by the Centers for Medicare
and Medicaid Services and that may, to the extent permitted under federal law,
vary by pharmacy type, including rural and independently owned pharmacies,
chain pharmacies, and pharmacies owned or contracted by a health care facility
that is registered as a covered entity pursuant to title 42 United States Code section
256b.

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(c)
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The
state pharmacy benefit manager shall use the reimbursement methodologies and
dispensing fees established by the department pursuant to subsection (b) for
each medicaid managed care organization.

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(d)
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The state pharmacy benefit manager shall administer, adjudicate, and
reimburse pharmacy benefit claims submitted by pharmacies to the state pharmacy
benefit manager in accordance with:

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(1)
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The
terms of any contract between a health care facility that is registered as a
covered entity pursuant to title 42 United States Code section 256b and a medicaid
managed care organization;

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(2)
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The
terms and conditions of the contract between the state pharmacy benefit manager
and the State; and

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(3)
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The
reimbursement methodologies and dispensing fees established by the department
pursuant to subsection (b).

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(e)
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The following shall apply to the state pharmacy benefit manager, the
contract between the state pharmacy benefit manager and the department, and,
where applicable, any contract between the state pharmacy benefit manager and a
pharmacy:

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(1)
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The
department shall review and shall approve or deny any contract, any change in
the terms of a contract, or suspension or termination of a contract between the
state pharmacy benefit manager and:

���������
(A)
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A
pharmacy licensed under chapter 461; or

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(B)
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An entity that contacts on behalf of a
pharmacy licensed under chapter 461;

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(2)
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The
state pharmacy benefit manager shall comply with sections 431S-3 and 431S-4;

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(3)
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Upon
the establishment of or awarding of the contract to a third-party administrator
to serve as, the state pharmacy benefit manager, the state pharmacy benefit
manager shall not enter into, renew, extend, or amend a national contract with
any pharmacy that is inconsistent with:

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(A)
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The
terms and conditions of the contract between the state pharmacy benefit manager
and the State; or

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(B)
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The
reimbursement methodologies and dispensing fees established by the department
pursuant to subsection (b);

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(4)
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When
creating or establishing a pharmacy network for a managed care organization
with whom the department contracts for the delivery of medicaid services, the
state pharmacy benefit manager shall not discriminate against any pharmacy or
pharmacist that is:

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(A)
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Located
within the geographic coverage area of the managed care organization; and

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(B)
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Willing
to agree to or accept reasonable terms and conditions established by the state
pharmacy benefit manager, or other administrator for network participation,
including obtaining preferred participation status;

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Provided that discrimination
prohibited by this paragraph shall include denying a pharmacy the opportunity
to participate in a pharmacy network at preferred participation status; and

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(5)
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A
contract between the state pharmacy benefit manager and a pharmacy shall not
release the state pharmacy benefit manager from the obligation to make any
payments owed to the pharmacy for services rendered before the termination of
the contract between the state pharmacy benefit manager and the pharmacy or
removal of the pharmacy from the pharmacy network.

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-4
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Payment arrangements.
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(a)
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All payment arrangements between the department, a medicaid managed care
organization, and the state pharmacy benefit manager shall comply with state
and federal laws, regulations adopted by the Centers for Medicare and Medicaid
Services, and any other agreement between the department and the Centers for
Medicare and Medicaid Services.
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(b)
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The
department may change a payment arrangement to comply with state and federal laws,
regulations adopted by the Centers for Medicare and Medicaid Services, or any
other agreement between the department and the Centers for Medicare and Medicaid
Services.

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� -5

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Consultation.
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The
department shall consult with the
med-QUEST healthcare
advisory committee, established pursuant
to title 42 Code of Federal Regulations section 431.12, in the de
velopment,
implementation, and oversight of the
state pharmacy benefit manager program established
pursuant to this
chapter
.

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� -
6

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Annual Report.
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The
department shall submit a report
on the pharmacy benefit manager program established
pursuant to this chapter and
its
findings and recommendations, including any proposed legislation, to the
legislature no later than twenty days prior to the convening of
each
regular session
, beginning with
the regular session of
.
"

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SECTION
3
.
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Chapter
431S
, Hawaii Revised Statutes, is amended by
adding a new section to be appropriately designated and to read as follows:

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"
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431S-

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Medicaid
managed care organization
; medicaid benefits; administration; penalty.

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(a)
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Notwithstanding any law to the contrary,
a pharmacy benefit manager
contracted with a
medicaid
managed care organization to administer medicaid benefits shall
not:

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(1)
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Adjust, modify, change, or
amend reimbursement methodologies, dispensing fees, and any other fees paid by
the pharmacy benefit manager to pharmacies licensed in the State;

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(2)
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Create, modify, implement, or
indirectly establish any fee on a pharmacy, pharmacist, or a medicaid
beneficiary in the State;
or

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(3)
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Make any adjustments,
modifications, or changes to a pharmacy network for the managed care
organization with whom the pharmacy benefit manager has contracted to
administer medicaid benefits.

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(b)
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Notwithstanding any
other law to the contrary, a pharmacy benefit manager contracted with a
medicaid

managed
care organization to administer medicaid benefits shall:

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(1)
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Administer, adjudicate, and,
when appropriate, reimburse any pharmacy benefit claim submitted to the managed
care organization
before
the termination of the contract between the pharmacy benefit
manager and the managed care organization in accordance with the terms of the
contract between the pharmacy benefit manager and the managed care
organization; and

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(2)
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Not be released from its
obligation to make any payments owed to a pharmacy licensed in the State for
pharmacy services rendered
before
the termination of the contract between the pharmacy benefit
manager and the managed care organization.

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(c)
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Any pharmacy benefit
manager who violates
this section
shall be fined not more than $25,000 for each separate
offense.
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Each date of violation shall
constitute a separate offense.
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Any
action taken to impose or collect the penalty provided for in this subsection
shall be considered a civil action.

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(d)
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For
the purposes of this section
,
"
m
edicaid managed care
organization" means an entity with which the department
of
human services
has
contracted to serve as a managed care organization as defined in title 42 Code
of Federal Regulations section 438
.
2.
"

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SECTION 4.
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The department
of human services shall submit a report
relating to the status of the
establish
ment of or
selection of and contracting with a
third-party administrator to serve as the state pharmacy
benefit manager pursuant to this Act
and
its findings and recommendations,
including any proposed legislation, to the legislature no later than twenty
days prior to

the
convening of the regular session of
2027
.

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SECTION
5
.
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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 department of
human services to establish or select and contract with a third-party
administrator to serve as the state pharmacy benefit manager pursuant to this
Act
.

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The sum appropriated shall
be expended by the
department of human services
for
the purposes of this Act.

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SECTION
6.
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The department of human services
shall notify the legislature and the revisor of statutes immediately upon:

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(1)
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T
he
establishment of the state pharmacy benefit manager pursuant to this Act
; or

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(2)
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The
awarding of a contract to a third-party
administrator to serve as
the state pharmacy benefit manager and the execution
of a contract with a third‑party administrator to serve as the state
pharmacy benefit manager pursuant to this Act.

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SECTION

7
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New statutory material is underscored.

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SECTION
8
.
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This Act shall take effect on July 1, 20
50; provided
that:

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(1)
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Sections 2 and 3
shall take effect upon approval of the Hawaii Medicaid state plan by the
Centers of Medicare and Medicaid Services; and

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(2)
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Section 3 shall
be repealed upon the expiration of days
after the establishment of, or execution of a contract with a third-party
administrator to serve as, the state pharmacy benefit manager pursuant to this
Act.

INTRODUCED BY:

_____________________________

Report Title:

DHS;
Med-QUEST Division; State Pharmacy Benefit Manager Program; Medicaid Managed
Care Organization; Standard Contract Form; Spread-Pricing; Rules; Reports;
Appropriation

Description:

Requires the Department of Human Services to establish or select
and contract with a third-party administrator to serve as the State Pharmacy Benefit
Manager (PBM) who shall be responsible for administering all pharmacy benefits
for medicaid beneficiaries enrolled with medicaid managed care organization.
�
Requires medicaid managed care organizations
to contract with and utilize the State PBM.
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Establishes requirements to procure the State PBM in addition to the
requirements under state law governing purchases of health and human services.
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Establishes requirements and prohibitions for
the contract to be used by the DHS when contracting with the state PBM.
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Requires the DHS to establish a
single-preferred drug list to be used by the State PBM.
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Requires the DHS to consult with the
Med-QUEST Healthcare Advisory Committee on the development, implementation, and
oversight of the State PBM program.
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Requires reports to the Legislature.
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Appropriates funds.

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