Senate committee reviews PBM licensing rule, regulators seek stronger penalties for below‑cost pharmacy payments

The Senate Insurance & Commerce Committee reviewed proposed amendments to Rule 118 on pharmacy benefit manager (PBM) licensing and enforcement, as the Arkansas Insurance Department sought to align its rule with 2023 PBM licensure legislation and tighten penalties for PBM violations.

Booth Rand, general counsel for the Arkansas Insurance Department, told the committee the change would confirm the department’s jurisdiction over PBMs administering plans issued outside Arkansas that cover Arkansas residents and would increase penalties for paying pharmacies below acquisition cost. Rand said the department is revising the rule to reflect the legislature’s decision to remove a previous $50,000 aggregate cap and to apply a $5,000-per-violation penalty with no aggregate limit under the current draft. He also noted Rule 128 — a separate rule addressing fair and reasonable pharmacy reimbursement — will be considered by an executive subcommittee.

The department has set a public hearing on the Rule 118 amendments for next week and said the public comment period closes in October. Rand said the Insurance Department issued a bulletin in March warning PBMs of stricter enforcement and urged the committee to allow the department to use penalties to compel system fixes.

Legislators pressed officials on the fairness and precision of enforcement. Several members cited a high volume of complaints from independent pharmacies — Rand said the department receives roughly 1,500 NADAC‑related complaints per month and estimated about $300,000 in fines collected since 2020 with three or four cases pending. Committee members pointed to an instance where one underpayment of 68¢ led to a $5,000 enforcement action and asked whether the department had discretion to reduce fines for trivial underpayments. Rand said the statute defines a violation as payment below the National Average Drug Acquisition Cost (NADAC) and that, absent statutory direction, the department’s enforcement options are limited; he agreed to research whether the rule text could be drafted to restore an "up to" discretion and pledged to amend the rulemaking text accordingly.

Committee members proposed drafting changes to preserve enforcement discretion. Senator Hickey and others asked the department to add language such as “in the commissioner’s discretion, up to $5,000 per violation” during the formal rulemaking process; Rand agreed to make that change and said the department would show the revised language when it files the rule for consideration. The chair moved to mark Rule 118 as "reviewed," and the committee approved review with the understood contingency that the department would insert the "up to $5,000" language in the rulemaking record.

The department also described its complaint handling process: pharmacies submit spreadsheets documenting transactions paid below NADAC, the PBM is identified and notified, and the PBM must review and correct mistaken payments or face enforcement. Rand said typical complaint turnaround to secure an adjustment is about six to eight weeks. He acknowledged substantial administrative burdens on pharmacies that must prepare complaint packets and asked lawmakers for support if statutory tweaks were needed to provide the department more enforcement levers.

The committee asked follow-up data requests, including a breakdown of NADAC complaints by pharmacy type, the number of complaints that went through internal appeals before the Insurance Department, and the volume of unresolved insurance claims from recent tornado and wind events. Commissioner Alan McLean and department staff agreed to supply the requested details to committee staff.

The committee did not adopt a permanent rule at the hearing — it recorded the rule as reviewed and moved the matter along the rulemaking path after the department pledged to make the "up to $5,000" drafting change and complete the public‑comment process.

Ending: The Insurance Department staff thanked the committee for its review and agreed to provide requested follow‑up data; the public hearing on Rule 118 remains scheduled and the department will take public comment before filing the final rule.