Kansas House passes bill providing stricter regulation of prescription drug middlemen

TOPEKA — A contingent of House Republicans joined forces with Democrats Monday to pass a bill that reins in middlemen operating between drug companies and pharmacies, providing more transparency to a system that can drive up prescription drug costs.

Senate Bill 360 was the initial bill introduced to regulate pharmacy benefit managers, or PBMs. At the end of last week, he appeared House Speaker Dan Hawkins was going to make sure the bill didn’t advance this session, along with another bill that dealt with the federal 340B program controlling prescription costs for certain clinics and hospitals.

While the fate of Bill 340B is uncertain, the bill establishing stricter controls on PBMs has been inserted into Senate Bill 20 during a conference committee hearing.

The House passed the measure 104-17 after heated debate, with opponents attempting to insert an amendment that would have referred the bill to the conference committee over the $10.50 dispensing fee to pharmacies included in the bill.

They said prescription dispensing fees, which PBMs must pay to pharmacists for all prescriptions they fill, will increase insurance costs and ultimately cost consumers.

Rep. Barb Wasinger, a Republican from Hays, said she supported the transparent portions of the bill but disagreed with the dispensing fee. While she didn’t think consumers would consider it a fee for each prescription they pick up, she said it would show up on insurance costs.

Rep. Pat Proctor, a Republican from Leavenworth, said his constituents were concerned that the prescription fee would appear like a “tax on pills.”

“I like the fact that no one is going to pay the $10.50,” he said. “Apparently $10.50 is going to come out of nowhere. You know who’s going to pay that $10.50? It’s not going to be the unions because they’re exempt. It’s not going to be the multi-billion dollar corporations because they exempted themselves. The people who are going to pay this are all the small businesses that have to carry insurance policies.”

Other states have implemented similar PBM restrictions, as well as dispensing fees, including Arkansas and West Virginia. Booth Rand, general counsel for the Arkansas Insurance Department told the Arkansas Advocate that the savings from discounts improperly applied by PBMs covered prescription dispensing costs in West Virginia and he expected it would do the same in his state.

This part of the bill requires PBMs to disclose what rebates they receive and how they are paid. PBMs receive discounts from pharmaceutical companies in exchange for promoting their products, and they are supposed to be used to reduce the cost of medicines. However, one criticism of PBMs that has led to the passage of statewide laws – including recent proposals to control PBM activities at the federal level – is that they keep rebates in the form of profits.

Both Republicans and Democrats spoke in favor of SB 20, describing it as an opportunity to help all Kansans by reducing drug costs.

Augusta Republican Rep. Kristey Williams cited a federal oversight committee report examining the effects of PBMs on the market. They found evidence that PBMs steer patients to their pharmacies to reduce competition and that they use their position to artificially reduce the reimbursement rates of competing pharmacies.

Williams said the $10.50 distribution fee will be addressed by eliminating “spread pricing” in the bill. Spread pricing refers to a PBM that charges the insurance company or employer plan more than it pays the pharmacist, then pockets the difference, she said.

Williams also said a study from 2020 to 2023 of 9 million prescriptions revealed a “huge gap” between what pharmacists received for prescriptions – an amount that remained relatively stable – and the amount billed to health plans, which increased. The report says price differentials could be part of the difference.

“As our costs rise, both to your employers and to our public health plan, pharmacies are stagnant,” Williams said. “They didn’t get any more. They’re barely getting by. So the study found that employer costs went up 30 percent over those three years. Do you know what the reimbursement amount was for those pharmacies? Minus three.”

SB 20 moves to the Senate, which had already passed HB 360, the original bill.