Kansas committee hears testimony on bill to regulate pharmacy benefit managers

TOPEKA, Kan. — A Kansas House committee on Jan. 28 heard more than three hours of testimony on Senate Bill 360, the "Kansas Consumer Prescription Protection and Accountability Act," a measure that would license and regulate pharmacy benefit managers, require greater rebate pass-through and ban spread pricing.

Insurance Commissioner Vicki Schmidt, a pharmacist by training, testified the bill is intended to "lower drug costs and premiums for Kansans" by ensuring that rebates are passed on to consumers and health plans and by banning spread pricing, a practice she said reduces the amount health plans pay for drugs. "Today, the department has very limited authority to regulate PBMs," Schmidt said, urging the committee to give the Department of Insurance stronger oversight tools.

Supporters pointed to other states as examples. Joylyn Fixx of the West Virginia insurance office, who chairs the NAIC pharmacy benefit managers working group, described a suite of reforms adopted in West Virginia since 2017 — including pass-through rebating, a reimbursement floor tied to NADAC and a dispensing fee based on Medicaid practice — and said enforcement there yielded roughly $4 million in regulatory penalties and about $15 million in restitution returned to pharmacies. "Removing spread pricing and using methodologies such as NADAC can lower the ingredient cost of the drug tremendously," Fixx said.

Representatives of independent pharmacies and pharmacy associations said SB 360 would protect patient access and community pharmacies. Joel Kurzman of the National Community Pharmacists Association called the bill "pro patient, pro pharmacy and pro employer," and said the measure’s oversight and enforcement provisions are critical. Pharmacy owners who testified described specific harms they attribute to PBM practices: Michael Burns, president and CEO of Auburn Pharmacy, recounted that a PBM classified his cancer medication as "specialty," resulting in a plan charge he said was roughly $15,000 while his local pharmacy's cost was about $2,600. "Once I cut the middleman out, my health plan costs have remained flat," Burns said.

Jared Price, owner of Price Pharmacies and a co-owner of OreadRx (a pass-through PBM), stressed that transparent, competitive contracting can lower total drug spend while preserving fair pharmacy reimbursements. "Fair dispensing fees to pharmacies do not increase patient co-pays," Price said, and he cited local examples where employers who adopted pass-through models saw reduced drug spending.

Opponents — including PBM trade group the Pharmaceutical Care Management Association, insurers, employer groups and business associations — warned the bill could raise costs for employers and patients and could create legal uncertainty for self-funded ERISA plans. Whitney Damron of the PCMA said the bill would "essentially limit PBMs' ability to structure a program with our clients," and argued PBMs play a role in exerting downward pressure on health-care costs. Andrew Weins of Kansas Employers for Affordable Health Care called the $10.50 dispensing fee and NADAC-based reimbursement floor a form of price control that would amount to a "pill tax," transferring costs to payers and employees.

Insurers and employer representatives urged caution on scope. Sarah Furdig of Blue Cross and Blue Shield of Kansas said the proposed $10.50 dispensing fee "will be tacked on to the price of those drugs, and the patient has to pay it at the pharmacy counter," adding that low-cost generics would be most affected. A Kansas Bankers Association representative, whose name was not provided in the hearing record, estimated the association's ERISA plan could face roughly $1.8 million in additional annual costs if the bill becomes law.

Several witnesses raised legal and implementation concerns. Multiple opponents noted that many large employer health plans are self-funded and governed by ERISA; William Wilk of the Kansas Chamber warned the bill could expose ERISA plans to state regulation and litigation. Witnesses also pointed to pending federal attention to PBM practices and to court challenges in other states, including reference to litigation described in the hearing record (Mulready v. PCMA).

The committee did not take votes. Chair Dietrich kept the hearing open and scheduled further questioning for the committee’s next meeting, saying the panel would reconvene Thursday morning to continue with questions. Members were supplied with more than 60 pieces of written testimony for review.

The committee is expected to resume questioning and consideration of SB 360 at its next session, where lawmakers may press staff and conferees on fiscal impacts, ERISA scope and enforcement mechanisms.