Panel punts on PBM regulation bill; members seek funding structure and ERISA guidance before advancing

The Government Operations Division heard extensive discussion of House Bill 15‑84, a proposed regulatory framework for pharmacy benefit managers (PBMs). Committee members did not vote on the measure; instead they directed staff and sponsors to draft amendments addressing funding, staffing, and the potential for ERISA preemption and litigation.

Senator Sickler proposed creating a dedicated PBM enforcement fund to receive existing pharmacy board fee revenues (approximately $600,000 annually from wholesale licensure fees and an existing balance of about $1.7 million in the drug pricing/transparency fund) rather than relying on the insurance regulatory trust fund and a continuing appropriation. Deputy Insurance Commissioner John Arnold testified the bill’s fiscal note was approximately $2,250,000 and urged the committee to confirm whether available funds and fee transfers would cover the department’s estimated startup and operating costs.

Board of Pharmacy Executive Director Mark Hardy explained technical licensing categories such as “virtual wholesalers” (entities that take financial ownership of drugs without physical possession) and described how wholesale licensure fees have been structured historically. Pharmacy advocates and pharmacists told the committee they favor stronger PBM oversight; business and employer representatives warned that changes could increase insurance premiums and raise litigation risk.

Mike Schwab, speaking for business groups and some large employers, said ERISA and case law create uncertainty and that businesses fear higher premium costs if the bill affects self‑insured plans: “The concern from the business community is an increased cost of premiums,” he said. Several members and witnesses noted recent court rulings in federal circuits and a pending U.S. Supreme Court matter complicate the bill’s ERISA exposure; panel members acknowledged they may not have final legal clarity until later in the year.

Insurance department staff and board representatives discussed implementation logistics: whether FTEs and operating costs should be specified in statute, whether the insurance litigation pool or the Attorney General’s litigation resources would be available for defense, and whether the continuing appropriation language in the current draft should be replaced by a targeted fund language to ensure predictable revenue for enforcement. The committee concluded it needed specific amendment language clarifying (1) the funding source (a new PBM enforcement fund fed by existing pharmacy board fee transfers or other revenue), (2) a staffing/FTE plan tied to the fiscal note, and (3) careful statutory drafting to avoid language that could trigger ERISA preemption and immediate legal challenges.

Committee chairs and staff agreed to work with Senator Sickler, legislative staff (Brady) and agency partners to prepare amendments; no final committee action was taken and the measure remains before the committee for further drafting.

Members said they will reconvene and consider the amendment package once it clarifies the funding mechanism, staffing counts, and legal exposure.