House committee hears bill to license pharmacy services administrative organizations

The House Insurance Committee on (date not specified) heard a presentation on House Bill 2551, the Kansas Pharmacy Services Administrative Organization Act, which would create a licensing and regulatory framework for pharmacy services administrative organizations, known as PSAOs.

Committee Revisor Eileen, who presented the bill, said, "This act authorizes and provides a regulatory framework for PSAOs," and walked members through provisions that would require licensure, ownership disclosure, timely provision of contracts to independent pharmacies, prohibitions on requiring pharmacies to buy specific amounts of drugs to access discounts, and limits on steering purchases to entities with ownership interests in a PSAO. She said the bill authorizes the Commissioner of Insurance to set application, fee, and renewal processes and gives the commissioner rulemaking and enforcement authority. "If approved the bill would take effect upon publication in the statute book," she added.

Why it matters: proponents of the proposal told the committee the measure aims to increase transparency around entities that provide back-office and contracting services to independent pharmacies. Eileen explained PSAOs generally contract with independent pharmacies for administrative functions and use aggregated buying power, whereas pharmacy benefit managers, or PBMs, focus on managing drug benefits and formularies for insurers and employers.

Department of Insurance remarks: Eric Turrick of the Kansas Department of Insurance told the committee that the department "does not have a position on this legislation" but cautioned members that the bill's definition of PSAO may overlap with definitions used in PBM licensure statutes. He warned the department may lack the necessary regulatory tools to fully implement oversight similar to PBM regulation, noting the bill's fiscal note includes hiring one staff member to handle eight PSAOs the department has identified as operating in Kansas.

Committee process: Representative Haskins asked whether a companion bill exists in the Senate; Eileen said this is the first and only version and that the bill was drafted at the committee chair's request. The chair closed testimony after noting there were no in-person proponents, two written-only opponent statements, and limited in-person participation. No committee vote on HB 2551 was recorded during the session.

What the bill would do: among other provisions, the bill would require PSAOs doing business in Kansas to be licensed; require disclosure of ownership interests prior to licensure and prior to entering contracts with independent pharmacies, PBMs, or third-party payers; require PSAOs to provide copies of contracts and amendments to independent pharmacies within 10 calendar days; prohibit requiring pharmacies to purchase specified amounts of drugs to receive discounts; and require PSAOs to forward notices of appeals and facilitate communication between parties in disputes.

Next steps: committee members were told to review written testimony and fiscal materials. The chair made no immediate motion to advance the bill; staff and members may pursue follow-up questions about definitions and regulatory capacity before any further action.

Ending: Testimony was closed and the committee proceeded to enter other bill requests and adjourn for the day.