Committee hears debate on bill to pass most PBM rebates to patients at point of sale

Sarah Wood, co-founder of Babbage and representing the Diabetes Patient Advocacy Coalition, presented House Bill 413 to the committee and described pharmacy benefit managers (PBMs) as intermediaries that negotiate manufacturer rebates to secure formulary placement. Wood said the bill would require PBMs and insurers to pass 85% of negotiated rebates through to patients at the point of sale during the deductible phase, immediately lowering out-of-pocket costs for many individuals with chronic illnesses such as diabetes.

Wood provided several numerical examples and statewide estimates cited in committee testimony: she said the average rebate on brand-name drugs is roughly 48 percent and that rebates for insulin sometimes exceed 80 percent; she said the measure would affect approximately 650,000 Kentuckians, including an estimated 351,979 individuals in the state insurance market and about 300,000 members of Kentucky employee health plans. Wood also cited research and implementation experiences from other states, saying New Mexico, Arkansas, Indiana and West Virginia have enacted point-of-sale rebate laws; she said West Virginia’s 100 percent pass-through had mitigated premium increases (she cited mitigation “up to 14 percent” in examples used during testimony).

Anthem Blue Cross Blue Shield of Kentucky’s Hope McLaughlin testified in opposition, telling the committee that many employers rely on rebates to lower premiums across all members and that forcing point-of-sale pass-through could remove employers’ ability to use rebates for premium reductions. McLaughlin referenced the Department of Insurance health-mandate statement and said the state employee health plan estimated an $18 million impact; she also mentioned an estimate of roughly $30 million for fully insured plans and expressed operational concerns about how the policy would be implemented. Anthem’s testimony argued that pass-through at the point of sale could disproportionately favor high utilizers of brand-name drugs and noted that several entities provided written opposition to the committee.

Committee discussion included technical questions about the committee substitute language, which, Wood said, amended reporting provisions to allow the insurance commissioner to receive protected information and to publish or disclose some PBM rebate information while preserving trade-secret protections in other respects. Representative Lockett, Representative Pollock and other members asked about outcomes in other states and about the choice of an 85 percent pass-through rather than 100 percent.

Chairman Meredith framed the hearing as discussion-only, noting federal attention to the issue and evolving health-mandate analyses from the Department of Insurance. Representative Pollock suggested forming a task force to pursue broader stakeholder discussions. No committee vote on House Bill 413 was recorded in the transcript; the item was presented for discussion and review rather than final action at this meeting.

Why it matters: proponents say the bill would immediately reduce out-of-pocket costs for patients, especially during deductible phases; opponents say it could raise or reallocate premium costs and complicate plan administration. Committee testimony cited state fiscal notes and industry estimates but also referenced early implementation data from other states.

Next steps: the committee held the bill for further consideration and discussion; members and witnesses noted interest in continued stakeholder engagement and federal activity on PBM reform.