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The Honolulu Advertiser
Posted on: Saturday, April 27, 2002

Lawmakers OK gas cap, prescription drug bills

 • Legislative scorecard

By Lynda Arakawa and Kevin Dayton
Advertiser Capitol Bureau

The state Public Utilities Commission would set the maximum wholesale and retail price of gasoline, under a bill tentatively approved by House and Senate negotiators late last night.

It was the second major business regulatory bill to gain approval in as many days. On Thursday, lawmakers gave preliminary approval to a bill that would have the state regulate health insurance rate increases.

The gas-cap agreement came as lawmakers worked to meet a midnight deadline to get bills in their final form for voting next week. The Legislature is scheduled to adjourn Thursday.

Lawmakers also approved bills last night to provide discounts on prescription drugs for patients without drug coverage, and to require drug treatment instead of prison for first-time, non-violent drug offenders.

Under the gasoline bill, the PUC would regulate and cap wholesale and retail gasoline prices in Hawai'i based on an index of West Coast prices. Price controls would take effect beginning in July 2003.

The state Department of Business, Economic Development and Tourism would monitor the oil industry's profit margins in Hawai'i and conduct audits of oil suppliers. The department also is charged with analyzing documents in the recently settled antitrust suit against Hawai'i's oil companies and other information and report to the next Legislature.

State Attorney General Earl Anzai has said there is no economic reason for Hawai'i consumers to be paying the highest gas prices in the nation before taxes. But critics of Senate Bill 2179 said capping gas prices would hurt retailers and put gas stations out of business, particularly on the Neighbor Islands.

Barnaby Robinson, owner of the Wai'alae and Nimitz Chevron stations, said: "The perceived problem of high gas prices are nonexistent and are unfounded."

He said it's futile to compare Mainland markets to Hawai'i's markets because the state is too unique. He added that other commodities like milk and cars are also more expensive in Hawai'i than on the Mainland.

"With the stroke of a pen, these guys are going to be putting almost immediately outer-island dealers out of business and compromising every O'ahu dealer," he said.

Senate conference committee negotiators who opposed the bill said lawmakers should study the issue more instead of rushing to push it through this year. Senate Minority Floor Leader Fred Hemmings, R-25th (Kailua, Waimanalo), called the bill "political gamesmanship at its worst" and attributed the push to pass the legislation to electioneering.

"This is called price-fixing," Hemmings said. "When the government does it it's called consumer advocacy. When the private sector does it it's called antitrust."

House Commerce and Consumer Protection Chairman Ken Hiraki, D-25th (Downtown, Ala Moana), responded: "This is not about doing what is politically expedient, this is really about doing what is right. We're taking our future out of the hands of a few."

House conference negotiator Hermina Morita, D-12th (E. Maui, N. Kaua'i), said the Legislature has time to make changes before the pricing regulations take effect next year.

House and Senate negotiators also passed a bill aimed at giving people with no prescription drug coverage discounts on medicine.

House Bill 2834 would establish the "Hawaii Rx" program, which supporters said would provide drug discounts of 25 to 40 percent. About 228,000 people in the state do not have drug insurance, state officials said.

The high cost of prescription drugs has emerged as one of the leading issues for state and national politicians. Rapidly rising drug costs are cited by insurers as one of the primary justifications for raising premiums and co-payments.

Under the bill, the state would create Hawaii Rx, a purchasing pool of people who do not have drug coverage. Under the program, the state would negotiate discounted prices with drug manufacturers. Hawaii Rx members would then be able to buy those drugs at local participating pharmacies at those discounted prices.

If the bill becomes law, Hawai'i would become the second state, after Maine, to establish such a program.

The Maine program, however, is on hold while the pharmaceutical industry is appealing to the U.S. Supreme Court. The high court has not decided whether to consider the appeal, said Rep. Roy Takumi, D-36th (Pearl City, Waipahu).

Takumi, who has fought for the bill, said his father-in-law does not have drug coverage and pays about $300 a month for medicine. Takumi said he has met others who spend hundreds or even more than $1,000 a month for prescription drugs.

But representatives of pharmaceutical companies have said that most pharmaceutical companies already have programs providing medicine free to the needy and that programs like Hawaii Rx would reduce the incentive for companies to develop new medicine.

They said the industry largely uses its profits for further research and development and that price controls would jeopardize further research.

All Hawai'i residents would be eligible to participate in the Hawaii Rx program, but it would likely only appeal to the uninsured because people with drug coverage would pay a lower price for medicine anyway, Takumi said. The program would begin in January 2005.

House and Senate negotiators also gave preliminary approval to a bill that would offer discounted prescription drugs to Hawai'i residents whose income is at or below 300 percent of the federal poverty level by 2003. That means it would apply to a single person who makes not more than $30,000 a year, or a family of three that makes not more than $62,000 a year.

The program, which initially costs $1.5 million to set up, would become self-sufficient and may be integrated into the Hawaii Rx program, Department of Human Services officials said.

Lawmakers also tentatively approved a measure last night to require drug treatment in lieu of prison for first-time, nonviolent drug offenders, a major policy shift that Gov. Ben Cayetano has been seeking for two years.

State Public Safety Director Ted Sakai said Senate Bill 1188 will help with the state's prison overcrowding problem almost immediately because it also requires treatment for parolees and probationers who fail drug tests or are arrested on drug charges.

Sakai estimates that 800 to 1,000 convicts on parole or probation are sent back to prison each year for drug-related problems. Lawmakers initially plan to provide about $2.1 million to pay for treatment.

Lawmakers also gave preliminary approval to a plan to offer up to $75 million in tax credits to jump-start development of an aquarium and a marine mammal research center at Ko Olina.

Supporters of the tax credits in Senate Bill 2907 said the aquarium has the potential to attract 750,000 visitors a year, and will create jobs by encouraging development of hotels and time-share projects on neighboring properties at Ko Olina.

The credits could be claimed in increments of $7.5 million a year starting in 2004, and would allow the developer to recoup most of the estimated $100 million it would cost to build the new facilities.

The bill would require the developers to pay the state half of the taxable income from the aquarium after 10 years.

Gov. Ben Cayetano has expressed doubts about the tax credits, an indication that he might veto the bill. Jeff Stone, manager of the Ko Olina Development Co. LLC, said: "We're confident that we can generate the revenue, and we're hopeful he'll give us a chance to explain it."

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