Employers, insurers and PBMs explain competing pressures; state insurance office outlines licensure work

TOPEKA, Kan. — Business representatives, benefits administrators and state insurance officials described a mixed picture to a legislative committee on Oct. 25: employers say PBMs help manage drug costs, while employers, pharmacies and the Kansas Department of Insurance warned that opaque terms and vertical integration can distort markets and harm community pharmacies.

PBMs’ role and employers’ view: Andrew Wiens, executive director of Kansas Employers for Affordable Health Care, told the committee that employers rely on PBMs to negotiate rebates, encourage use of generics and manage formularies. “Employers use pharmacy benefit managers because they save employers money,” he said, noting that PBMs produce measurable savings for many self‑funded plans.

“PBMs save payers and patients an average of $10.40 per person per year,” Wiens said, citing industry and independent studies. He warned that state measures that lock PBMs into specific contract terms or price floors could raise employer health‑care costs by reducing contractual choice.

Pharmacists and community owners: Pharmacy owners told a different part of the story. Independent pharmacists said low fees, auditing pressure and contract terms have forced many small pharmacies to close. “The single greatest threat to our profession and to patient care is the monopolistic and anti‑competitive practices of the PBMs,” said Brian Caswell, a multi‑store owner. Witnesses argued that price setting and secret contractual terms have left some local pharmacies dispensing at a loss.

State insurance oversight and licensure: Eric Turek, director of government affairs for the Kansas Department of Insurance, described the 2023 PBM licensure law, noting the department has licensed 53 PBMs. He outlined an issue the department flagged: a statutory loophole allowing entities that are registered third‑party administrators to avoid PBM licensure in some cases. The department said it has sought legislation to close the loophole and that it receives complaints about PBM practices including spread pricing and patient steering.

State employee plan and plan design: Mike Michael, deputy director for the State Employee Health Plan, explained how Kansas’ plan works across four plan designs, how prescription coverage differs by plan, and how specialty programs operate. He said the state’s plan offers tools such as a specialty pharmacy and a manufacturer co‑pay assistance program to reduce out‑of‑pocket costs for employees.

Employer implications: Andrew Wiens and other employers said PBM reforms should preserve competitive contracting options and avoid state‑mandated price floors or forced contractual disclosures that could limit plan sponsors’ ability to design benefits. Several employer witnesses argued that small employers and unions may lack the market leverage of large plan sponsors to demand different PBM terms.

Committee response: Committee members acknowledged competing priorities — protecting community pharmacies and ensuring plan sponsors control costs — and asked the Department of Insurance for more information about PBM complaints and possible fixes to the licensure loophole.

Ending: No legislative action was taken at the hearing. Committee members asked for agency follow‑up and said they expected to return to PBM questions as they consider options to balance transparency, competition and access for Kansas patients and employers.