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Kansas committee hears mixed evidence on PBM reform, NADAC plus $10.50 dispensing fee
Summary
Supporters pointed to West Virginia data showing NADAC plus a $10.49 dispensing fee and pass-through rebates narrowed rate requests; opponents including PBM trade groups warned of cost-shifts and legal risks. Committee questioned legal preemption, transparency, and employer-specific impacts.
The Senate committee heard competing testimony Tuesday on Senate Bill 360, a proposal to require pharmacy reimbursement based on NADAC (the National Average Drug Acquisition Cost) plus a $10.50 professional dispensing fee and to mandate pass-through of rebates.
Proponents and a West Virginia official said the state’s similar policy, with a $10.49 dispensing fee, produced smaller-than-expected rate increases and, in some filings, net decreases once rebates were passed through. “We have three years of data showing the pass-through rebate effect after changing to NADAC plus $10.49 does not cause the rate to go up,” a West Virginia official said, offering year-by-year carrier filing examples.
The bill’s legal footing drew sustained scrutiny. Steve Carr, general counsel for the Kansas Department of Insurance, told the committee that elements similar to the Kansas proposal survived legal challenge in Iowa and were not preempted by ERISA in federal court rulings; he said provisions limiting differential reimbursement to affiliated pharmacies, pass-through rebates, and a reimbursement-rate floor were upheld in the Iowa litigation’s contested parts.
Opponents disputed the fiscal effect and highlighted market complexity. Jonathan Buxton of the Pharmaceutical Care Management Association said competition yields efficiencies and cautioned states cannot change benefit design; he urged the committee to review the Rutledge decision and other precedent carefully. Industry representatives also cited a recent Federal Trade Commission number, saying the three largest PBMs retained roughly $7.3 billion from dispensing above acquisition costs in recent years.
Several plan sponsors and a pharmacy owner described sharply different on-the-ground effects. A Kansas Bankers plan representative said the cost scenarios in testimony applied only to that employer’s plan (roughly 10,000 covered lives) and might not generalize statewide. Derek Price, owner of Price Pharmacies and a pass-through PBM, said transparency is lacking under current spread-pricing and rebate retention models and that his PBM’s claimed processing cost is roughly $8 per claim.
Committee members pressed on multiple fronts: the potential for the fee to act as a burden targeted to one industry, whether self-funded ERISA plans would be swept in, and the empirical basis for cost estimates that ranged in testimony from substantial employer cost increases to actuarial washes in states that adopted similar rules. The committee received offers from both sides to provide additional actuarial and enforcement data.
The hearing closed with no vote. The chair invited committee members to follow up with conferees for further information.
