PBM trade group warns HB 229 fiduciary mandate would raise costs and face federal preemption

Sean Stevenson testified to the House General Government Committee in opposition to House Bill 229 on behalf of PBM trade stakeholders, arguing the bill’s proposed fiduciary mandate would create legal conflicts with federal law, increase liability and insurance costs, and eliminate evidence-based tools that PBMs use to manage drug costs.

"PBMs are administrators, not price setters," Stevenson said, explaining that PBMs act at the direction of plan sponsors and do not control wholesale or manufacturer pricing. He said federal guidance and courts have found that entities who lack discretionary control over plan assets are not fiduciaries under federal law, and he warned that a state fiduciary duty could be preempted by the Employee Retirement Income Security Act (ERISA).

Stevenson testified that HB 229 could lead to higher prescription drug spending because it would curtail utilization-management tools such as prior authorization and step-therapy, and by increasing litigation and insurance costs. He provided an estimate—$2,800,000,000 over 10 years (roughly $280 million per year)—as the potential excess spending if the fiduciary mandate were enacted, and said part of that figure reflects loss of tools proven to generate savings as well as additional administrative and insurance expenses.

Committee members requested a breakdown of the calculation. Stevenson said the estimate included lost savings from utilization-management tools, additional administrative costs to comply with new legal duties, and higher insurance costs tied to increased litigation risk. He said PCMA remains willing to work with legislators on narrower transparency and reporting measures that could be workable.

The third hearing on HB 229 concluded after testimony and member questions; no committee action or vote occurred at the hearing.