SB 2751: Workers' Compensation; Benefits; Prescription Drugs; Compounded Prescription Drugs; Physician Dispensing Timeframe; Non-FDA-Approved Drugs; Identification; Statement of Medical Necessity

A BILL FOR AN ACT

RELATING TO WORKERS' COMPENSATION.

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

     SECTION 1.  The legislature finds that workers' compensation costs and transparency are critical to maintaining fair and predictable benefits for injured workers while controlling employer expenses.  The legislature further finds that compounded prescription drugs can provide essential therapeutic options for injured workers when commercially available Food and Drug Administration (FDA)-approved medications are unsuitable due to allergies, dosage requirements, or other clinical needs.  However, inconsistent definitions have led to confusion.  Federal law under section 503A of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353a) establishes clear standards for pharmacy compounding, including patient specific prescriptions, quality requirements for bulk substances, and exclusions for simple reconstitution.  Aligning state law with these standards will promote patient safety by ensuring compounded drugs meet recognized quality benchmarks and enhance regulatory consistency between state and federal oversight.

     Accordingly, the purpose of this Act is to ensure that injured workers in the State receive appropriate, individualized medical care that is necessary and reasonable for the specific injury by:

     (1)  Defining "compounded prescription drug" in the State's Workers' Compensation Law that references section 503A of the Federal Food, Drug, and Cosmetic Act;

     (2)  Limiting the dispensing of prescription drugs by physicians to thirty days following the industrial injury and requiring all prescription drugs to be obtained through the employer's pharmacy benefit manager thereafter; and

     (3)  Requiring prescription drugs not approved by the Food and Drug Administration, such as compounds, to be identified as compounds when listed on the treatment plan and when billed, and be supported by a statement of medical necessity documenting the case of medical need for a compound drug over an over-the-counter or prescription drug of similar therapeutic effect that is approved by the Food and Drug Administration.

     SECTION 2.  Section 386-21.7, Hawaii Revised Statutes, is amended to read as follows:

     "§386-21.7  Prescription drugs; pharmaceuticals.  (a)  Notwithstanding any other provision to the contrary, immediately after a work injury is sustained by an employee and so long as reasonably needed, the employer shall furnish to the employee all prescription drugs as the nature of the injury requires; provided that initial concurrent prescriptions for opioids and benzodiazepines shall meet the requirements of section 386-29.  The liability for the prescription drugs shall be subject to the deductible under section 386-100.

     (b)  Payment for all forms of prescription drugs including repackaged and relabeled drugs shall be one hundred forty per cent of the average wholesale price set by the original manufacturer of the dispensed prescription drug as identified by its National Drug Code and as published in the Red Book:  Pharmacy's Fundamental Reference as of the date of dispensing, except where the employer or carrier, or any entity acting on behalf of the employer or carrier, directly contracts with the provider or the provider's assignee for a lower amount.

     (c)  Payment for compounded prescription drugs shall be the sum of one hundred forty per cent of the average wholesale price by gram weight of each underlying prescription drug contained in the compounded prescription drug.  For compounded prescription drugs, the average wholesale price shall be that set by the original manufacturer of the underlying prescription drug as identified by its National Drug Code and as published in the Red Book:  Pharmacy's Fundamental Reference as of the date of compounding, except where the employer or carrier, or any entity acting on behalf of the employer or carrier, directly contracts with the provider or provider's assignee for a lower amount.

     (d)  All pharmaceutical claims submitted for repackaged, relabeled, or compounded prescription drugs shall include the National Drug Code of the original manufacturer.  If the original manufacturer of the underlying drug product used in repackaged, relabeled, or compounded prescription drugs is not provided or is unknown, then reimbursement shall be one hundred forty per cent of the average wholesale price for the original manufacturer's National Drug Code number as listed in the Red Book: Pharmacy's Fundamental Reference of the prescription drug that is most closely related to the underlying drug product.

     (e)  Notwithstanding any other provision in this section to the contrary, equivalent generic drug products shall be substituted for brand name pharmaceuticals unless the prescribing physician certifies that no substitution shall be prescribed because the injured employee's condition does not tolerate an equivalent generic drug product.

     (f)  Physician dispensing of prescription drugs shall be allowed for thirty days following the industrial injury.  Thereafter, all prescription drugs shall be obtained through the employer's pharmacy benefit manager.

     (g)  Prescription drugs not approved by the Food and Drug Administration, such as compounds, shall be identified as compounds when listed on the treatment plan and when billed, and be supported by a statement of medical necessity documenting the case of medical need for a compound drug over an over the counter or prescription drug of similar therapeutic effect approved by the Food and Drug Administration.  Failure to identify a compound on a treatment plan or when billed shall make the payment for the drug non‑reimbursable.

     [(f)] (h)  For purposes of this section[, "equivalent]:

     "Compounded prescription drug" means a drug product that is compounded in a compounding facility in compliance with 503A of the Food, Drug, and Cosmetic Act (21 U.S.C. 353a), or any other type of similar compounding facility approved by the Food and Drug Administration.

     "Equivalent generic drug product" has the same meaning as provided in section 328-91."

     SECTION 3.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on January 1, 2077.

Report Title:

Workers' Compensation; Benefits; Prescription Drugs; Compounded Prescription Drugs; Physician Dispensing Timeframe; Non-FDA-Approved Drugs; Identification; Statement of Medical Necessity

Description:

Defines compounded prescription drugs for the purposes of the State's Workers' Compensation Law.  Limits dispensing of prescription drugs by physician to 30 days after the industrial injury and requires all prescription drugs to be obtained through the employer's pharmacy benefit manager thereafter.  Requires prescription drugs not approved by the Food and Drug Administration (FDA), such as compounds, to be identified as compounds when listed on the treatment plan and when billed, and be supported by a statement of medical necessity documenting the case of medical need for a compound drug over an FDA-approved over-the-counter or prescription drug of similar therapeutic effect.  Effective 1/1/2077.  (SD1)

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

A BILL FOR AN ACT

relating to workers' compensation.

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

     SECTION 1.  The legislature finds that workers' compensation costs and transparency are critical to maintaining fair and predictable benefits for injured workers while controlling employer expenses.  The legislature further finds that compounded prescription drugs can provide essential therapeutic options for injured workers when commercially available FDA approved medications are unsuitable due to allergies, dosage requirements, or other clinical needs.  However, inconsistent definitions have led to confusion.  Federal law under section 503A of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353a) establishes clear standards for pharmacy compounding, including patient specific prescriptions, quality requirements for bulk substances, and exclusions for simple reconstitution.  Aligning state law with these standards will promote patient safety by ensuring compounded drugs meet recognized quality benchmarks, enhance regulatory consistency between state and federal oversight.

     Accordingly, the purpose of this Act is to align state law with federal standards for pharmacy compounding by codifying the federal definition of a "compounded drug", thereby promoting regulatory consistency, supporting patient safety, and ensuring access to individualized medications when an FDA approved drug is not medically appropriate for a particular patient.  This Act incorporates by reference section 503A of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353a) and clarifying federal guidance.

     SECTION 2.  Section 386-21.7, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

     "(f)  For purposes of this section[, "equivalent]:

     "Compounded prescription drug" means a drug product that is compounded by a licensed pharmacist in a state licensed pharmacy, or a licensed physician, for an identified individual patient based on the receipt of a valid prescription order or a notation, approved by the prescribing practitioner, on the prescription order that a compounded product is necessary for the identified patient, and otherwise meets the requirements of  title 21 United States Code section 353.

     "Equivalent generic drug product" has the same meaning as provided in section 328-91."

     SECTION 3.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 2026.

Report Title:

Workers' Compensation; Benefits; Compounded Prescription Drugs

Description:

Defines compounded prescription drugs for the purposes of workers' compensation law.

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

STAND. COM. REP. NO. 2217

Honolulu, Hawaii

RE:     S.B. No. 2751

        S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

     Your Committees on Labor and Technology and Health and Human Services, to which was referred S.B. No. 2751 entitled:

"A BILL FOR AN ACT RELATING TO WORKERS' COMPENSATION,"

beg leave to report as follows:

     The purpose and intent of this measure is to define compounded prescription drugs for the purposes of workers' compensation law.

     Your Committees received testimony in support of this measure from the Department of Labor and Industrial Relations, Work Injury Medical Association of Hawaii, Carol A Orr MD LLC, and six individuals.

     Your Committees received testimony in opposition to this measure from the Department of Human Resources Development and Solera Integrated Medical Solutions.

     Your Committees received comments on this measure from the Hawaii Insurers Council.

     Your Committees find that the fundamental intent of the State's Workers' Compensation Law is to ensure that injured workers receive appropriate, individualized medical care that promotes recovery and safe return to work.  Your Committees further find that prescription drugs are a critical component of this care, and in certain cases, compounded prescription drugs are essential when medications approved by the Food and Drug Administration are not suitable due to patient allergies, dosage requirements, or other clinical concerns.  Your Committees find, however, that the lack of a definition for compounded prescription drugs in state law has led to inconsistent interpretations and inflated billing practices, undermining the law's intent.  By adopting the definition used in section 503A of the Food, Drug, and Cosmetic Act into state law, this bill ensures that compounded drugs are prepared only for an identified individual patient based on a valid prescription, in accordance with the law's intent to provide care that is necessary and reasonable for the specific injury and patient.

     Your Committees acknowledge the concerns raised in testimony regarding the lack of a statutory time frame limiting physician dispensing of prescription drugs following an industrial injury, and the lack of preapproval and documentation requirements for non–FDA-approved prescription drugs.  Therefore, amendments to this measure are necessary to address these issues.

     Accordingly, your Committees have amended this measure by:

     (1)  Inserting language limiting the dispensing of prescription drugs by physicians to thirty days following the industrial injury and requiring all prescription drugs to be obtained through the employer's pharmacy benefit manager thereafter;

     (2)  Inserting language that:

          (A)  Requires non-FDA-approved prescription drugs, such as compounds, to be identified as compounds when listed on the treatment plan and when billed, and be supported by a statement of medical necessity documenting the case of medical need for a compound drug over an FDA-approved over-the-counter or prescription drug of similar therapeutic effect; and

          (B)  Establishes that failure to identify a compound on a treatment plan or when billed shall make the payment for the drug non-reimbursable;

     (3)  Changing the definition of "compound prescription drug" to be "a drug product that is compounded in a compounding facility in compliance with section 503A of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353a) or any other type of similar compounding facility approved by the Federal Drug Administration";

     (4)  Amending section 1 to reflect its amended purpose;

     (5)  Inserting an effective date of January 1, 2077, to encourage further discussion; and

     (6)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the records of votes of the members of your Committees on Labor and Technology and Health and Human Services that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2751, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2751, S.D. 1, and be referred to your Committee on Judiciary.

Respectfully submitted on behalf of the members of the Committees on Labor and Technology and Health and Human Services,